Biopharma Dynavax Technologies (DVAX +0.00%) is one of many companies racing to develop a COVID-19 vaccine. Like many coronavirus-focused companies, Dynavax has seen its shares rise on the ongoing concern related to the pandemic -- in its case, by 50% year to date.
While investors may consider these biotech stocks as potential paths to riches, they are also prone to see their share prices fluctuate based on recent headlines. There are plenty of companies in this space racing for a potential coronavirus treatment, and it is equally important for investors to understand the dynamics of each company. Dynavax offers more for investors than the typical coronavirus-focused company, however. It has an approved vaccine with huge commercial opportunity, and the potential to develop a platform that could bolster the treatment of a coronavirus vaccine.
Let's take a closer look.
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Huge growth opportunity in hepatitis B
Dynavax's Heplisav-B is the only two-dose hepatitis B (HBV) vaccine approved for adults in the United States. Its clinical studies demonstrated a significantly higher rate of protection over GlaxoSmithKline's Energix-B (which requires three doses), offering an encouraging long-term sales outlook.
In the first quarter of 2020, Dynavax generated $10.5 million in net product sales of Heplisav-B, an increase of 87.5% year over year. The company has seen tremendous sales growth since the drug's approval by the U.S. Food and Drug Administration (FDA) in January 2018. In 2019, Dynavax had sales growth of 330%, though that number was a slightly more modest 3.30% in the first quarter due to the impact from the pandemic.
Even more exciting is the commercial opportunity available in this space. Total gross sales in the U.S. for adult hepatitis B treatments are estimated to be $400 million annually, and this is expected to grow to $700 million over the coming years. The growth is expected to come from including patients with diabetes and pricing adjustments.
While there are three other vaccines (including GlaxoSmithKline's and Merck's) on the market, Dynavax has set the bar high, targeting 60% of HBV sales in the U.S. It plans to focus on large segments, including independent hospitals and clinics, integrated delivery networks, dialysis centers, public health clinics and prisons, the Departments of Defense and Veterans Affairs, and retail pharmacies. By focusing its promotional activity on these segments, Dynavax has a chance to prevail in capturing the market.
The dialysis market presents a huge opportunity for the company, which is currently evaluating a four-dose regimen of Heplisav-B in patients with end-stage renal disease (ESRD) who are beginning or undergoing dialysis. A win in this segment could increase its target U.S. market coverage to 75%, boosting the company's potential for top-line growth.
Early results from the trial show promise, with Heplisav-B demonstrating an 86.4% rate of seroprotection (the antibody response after a vaccine that prevents infection) and a well-tolerated safety profile. Dynavax anticipates full data to be reported in the second half of 2020.
Emerging CpG 1018 platform
Dynavax's CpG 1018 platform was developed as a vaccine adjuvant for Heplisav-B to stimulate the immune systems response to an antigen. When combined with a vaccine, this platform targets and activates an important protein called "toll-like receptor 9" (TLR9) to stimulate the immune system's T-cells to provide a long-lasting protective response against infection.
The CpG 1018 vaccine adjuvant, in combination with a coronavirus treatment, could enhance the immune response and accelerate the development of a safe and effective product. Throughout the course of the pandemic, Dynavax has established multiple research collaborations with the University of Queensland (Australia), Clover Biopharmaceuticals (China), Sinovac Biotech (China), and Valneva (France) to begin development of a potential coronavirus vaccine.
On June 19, preclinical results of the CpG 1018 platform with the Clover Biopharmaceuticals S-Trimer Vaccine (SCB-2019) showed an ability to produce neutralizing antibodies in multiple animal species. The companies are working toward enrolling 150 healthy adult and elderly patients to begin Phase 1 trials. The initial results regarding safety and immunogenicity are expected in August.
Financials and Valuation
In the first quarter, Dynavax reported total revenue of $10.9 million and posted a net loss of $12.6 million, or $0.25 per share, beating the consensus estimates of an $0.31 loss. While the effects of COVID-19 have resulted in reduced use and sales of vaccines such as Heplisav-B, this trend may be temporary, and sales could return as soon as the U.S. returns to more manageable conditions.
Financially, Dynavax is in a stable cash position, with $129.5 million in the first quarter. Its assets exceed its liabilities, although its debt ratio of 0.95 suggests that further debt could add financial risk to the company.
Its stock may be in an ideal position to run higher in the next 12 months. Dynavax's current price-to-sales ratio is 6.8, which is undervalued compared to those of peers such as Omeros Corporation (8.5) and Progenics Pharmaceuticals (9.6). The stock could run higher with positive news from the coronavirus treatment and top-line growth of Heplisav-B.
Although Dynavax stock is trading near its 52-week high of $9.74, Wall Street analysts believe that this stock could reach new highs with positive news. Institutional investors such as Bain Capital, Blackrock, and Vanguard hold large positions in this stock, suggesting that investors are optimistic about Dynavax's outlook.
Ready to reach new highs
Dynavax may be the coronavirus-focused stock that investors are looking for, as it possesses a huge opportunity with Heplisav-B, a promising platform with CpG 1018, and in an ideal position to run higher with positive news. Investors should consider adding shares of Dynavax Technologies for the long run during the next dip.
