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[DewDiligence]

DVAX Tolamba Fails Again; Program Discontinued

[The company’s remaining program, the Heplisav vaccine for HBV, is on FDA clinical hold.]

http://www.reuters.com/article/marketsNews/idINBNG22949720080516

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Fri May 16, 2008 12:58pm EDT
By Esha Dey

BANGALORE, May 16 (Reuters) - Dynavax Technologies Corp (DVAX) said it would stop developing its experimental ragweed allergy drug, Tolamba, after it failed to meet the main goal of a mid-stage clinical trial, sending its shares down as much as 32 percent.

Tolamba did not show a significant improvement over a dummy drug in reducing nasal symptoms, the biopharmaceutical company said in a statement. The company, however, backed its 2008 revenue outlook.

"This is a negative surprise," Pacific Growth Equities analyst Gregory Wade said. Wade, who has a "buy" rating on the stock, was expecting the drug to show positive data.

Tolamba, which suffered a setback in January last year after a study of its effectiveness was found to be inconclusive, got a fresh lease of life when Dynavax received a $30 million financing commitment from Deerfield Management for the allergy program.

However, the latest trial displayed a high degree of variability in the data set that was also observed in the previous Tolamba clinical trials, Dynavax said.

The company said it was discontinuing the development of the drug as it concluded that the problem may be difficult to overcome in future studies.

"We have to discuss with Deerfield how they want to proceed; whether they want to continue to work with us in cat and peanut allergies," Dynavax spokeswoman Shari Annes said by phone.

The company is conducting preclinical studies of its product candidate, TLR9, to treat allergy from peanuts and cats. The company had planned to initiate clinical studies in 2009, supported by the Deerfield funds.

"We owe them a very small, nominal amount," Annes added. She, however, refused to specify the amount.

Shares of the company were down about 22 percent at $1.95 in afternoon trade on Nasdaq. They touched a low of $1.70 earlier.

CHANGING PRIORITY

The Berkeley, California-based company said it now wants to focus on its hepatitis B vaccine, Heplisav, which it is jointly developing with Merck & Co.

"Our highest priority is the re-start of Heplisav's clinical development with our partner Merck," Chief Executive Dino Dina said in a statement.

The U.S. health regulators had put a hold on further studies of Heplisav in March after a patient receiving the vaccine was preliminarily diagnosed with Wegener's granulomatosis, a disease in which the blood vessels become inflamed.

The company does not have a timeline on when it expects the clinical hold to be taken off, company spokesperson Annes said.

Dynavax still expects 2008 total pro forma revenue of $42 million to $46 million. Analysts expect revenue of $33.6 million, according to Reuters Estimates.

Total pro forma operating expenses for 2008 are expected to be in the range of $70 million to $78 million, down from its prior view of $80 million to $88 million.
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