VALN - Dynavax Technologies Delivers

• We are revisiting Dynavax Technologies after this vaccine concern just posted robust quarterly results that easily exceeded expectations.
• The company continues to gain market share with its Hepatitis B vaccine and is seeing huge revenue growth from its Covid-19 efforts.
• What's next for the company?  An investment analysis follows in the paragraphs below.

Everybody gets so much information all day long that they lose their common sense ." - Gertrude Stein

Today, we put Dynavax Technologies ( DVAX ) back in the spotlight after its huge earnings beat after the bell on Thursday. An updated analysis follows below.

Company Overview:

California-based Dynavax Technologies has developed an adjuvant (CpG 1018) that has driven most of its growth as it has become a core part of several COVID-19 vaccine products outside of the United States primarily.

The company has also leveraged its toll-like receptor [TLR] immune modulation platform to produce HEPLISAV-B which is seeing consistent growth and continues to rapidly take market share from the long-term standard of care standard Engerix-B. HEPLISAV-B is a hepatitis B vaccine, which is superior in a couple of important ways to Engerix-B including effectiveness which can be achieved via two doses over a month rather than three doses over six months like Engerix-B. The company has a couple of other earlier-stage drug candidates in development. With today's post-earnings surge, DVAX trades near $16.00 a share and sports an approximate market capitalization of $1.9 billion

Second Quarter Results:

The company reported impressive second quarter numbers after the bell yesterday. The company had GAAP earnings of 87 cents a share as revenues rose over 380% on a year-over-year basis to just over $256 million. Both top and bottom line numbers smashed the consensus.

CpG 1018 adjuvant sales brought in $222.6 million for the quarter, a massive increase from the $39 million worth of CpG 1018 sales in 2Q2021. Leadership up its projection of full fiscal year CpG 1018 sales to a range of $550 million to $600 million from $550 million guided to in May.

The company also expects R&D expenses of $50 to $60 million in FY2022 and interest expenses of $7 million. Overall selling, general and administrative expenses are projected to be in the range of $130-140 million.

HEPLISAV-B sales more than doubled to $32.7 million from the same period a year ago as well. HEPLISAV-B is rapidly becoming the standard of care in the hepatitis B vaccine market and once again picked up impressive market share during the quarter.

Analyst Commentary & Balance Sheet:

Since earnings were posted, both Goldman Sachs ($24 price target, down from $25 previously) and H.C. Wainwright ($28 price target) have reissued Buy ratings. I would expect more analyst firms to do so over the next week or two given these stellar results.

Insiders have sold just under $2 million worth of stock in aggregate so far in 2022. Just over 15% of the overall float is currently held short. The company ended the second quarter of this year with just over $500 million worth of cash and marketable securities on its balance sheet. The company has just over $220 million worth of long-term debt.

Verdict:

The current analyst consensus has the company earning approximately $1.10 a share as revenues surge over 45% to over $640 million. These projections were made prior to second quarter results. I expect them to be revised up to reflect at least $1.75 a share of profits given the company made 87 cents a share in the second quarter and $1.32 a share so far in fiscal 2022.

FY2023 is much more murky as it hard to project how fast adjuvant sales may fall off as the pandemic continues to ebb. One of the vaccine makers Dynavax supplies, Valneva ( VALN ) , recently stated it would sharply reduce its COVID-19 vaccine deliveries to France this year. Currently, 70 cents a share of profit is the median estimate for FY2023 on a just over 20% decline in revenues. It should be noted there is a very wide range of projections for earnings and sales next fiscal year from the analyst community at this time.

Revenues from Dynavax's adjuvant are somewhat lumpy, which is why sales were about $14 million light from the consensus in the first quarter even as overall revenues exploded higher by nearly 900%. The company is hitting on all cylinders right now. It is stockpiling cash from its booming adjuvant sales, taking market share at a rapid clip with its HEPLISAV-B franchise and developing other compounds using its adjuvant.

The big question/challenge around Dynavax is how fast adjuvant sales fall once the pandemic is finally put into the rearview mirror? It is hard to get a handle on that and this is why analyst projections are all over the board for the next fiscal year. I still like Dynavax as a ' sum of the parts ' holding and it has a solid balance sheet. In addition, options on this equity are both lucrative and liquid. I have made a lot of money on this name buying the stock via covered call orders whenever the shares pull back. That is the strategy I will continue to employ around this unique vaccine concern.

Knowledge kills action; action requires the veils of illusion ." - Friedrich Nietzsche

For further details see: