2023-05-03 15:17:55 ET
Summary
- Today, we put Dynavax Technologies Corporation in the spotlight, as the vaccine concern reported first quarter earnings after the bell on Tuesday.
- While the company's Covid-related revenues have largely ended, its HEPLISAV-B franchise continues to take market share and other candidates are in development.
- A post-earnings investment analysis follows in the paragraphs below.
10 percent of any population is cruel, no matter what, and 10 percent is merciful, no matter what, and the remaining 80 percent can be moved in either direction. ”? Susan Sontag.
Today, we circle back on Dynavax Technologies Corporation ( DVAX ). This small biotech concern posted first quarter results after the bell on Tuesday. The company's lifeline seems to have expired. However, the company used revenues from its pandemic efforts to build a huge cash reserve and ramp-up sales from best of breed Heplisav-B. What is next for Dynavax Technologies and its shareholders? An updated analysis follows below.
Company Overview:
San Francisco-headquartered Dynavax Technologies core franchise is built around a product called HEPLISAV-B. This best of breed hepatitis B vaccine is rapidly taking market share as it is more effective (95% versus 81%) from the previous standard of care Entergis-B. Perhaps more importantly, HEPLISAV_B can be administered via two doses over a month rather than three doses over six months. This provided a much higher level of compliance. HEPLISAV-B was developed off Dynavax's toll-like receptor [TLR] immune modulation platform. The stock currently trades around ten bucks a share and sports an approximate market capitalization of $1.3 billion.
March 2022 Company Presentation
The company also has an adjuvant called CpG 1018. This adjuvant is a core part of several COVID-19 vaccine products, outside of the United States primarily. CpG 1018 sales over the past two years have been the majority of overall revenues. These sales allowed Dynavax to achieve temporary profitability and to amass a huge cash balance. However, as the pandemic has ebbed, the need for CpG 1018 has fallen off a cliff and Dynavax Technology will be almost wholly depended on HEPLISAV-B revenues until other products can be developed and commercialized.
November Company Presentation
in 2022, Dynavax completed a Phase 1 study evaluating an improved Tdap vaccine that utilizes CpG 1018 that demonstrated the vaccine candidate was well tolerated without observed safety concerns. The company is in the process of engaging the FDA to discuss the clinical and regulatory pathways forward for this Tdap vaccine candidate. An update will be forthcoming sometime later this year.
Earlier this year, Dynavax reported top-line results from a Phase 1 clinical trial designed to evaluate an investigational shingles vaccine. This candidate is utilizing different regimens of CpG 1018 adjuvant. The company will be presenting Phase 1 results at the upcoming 2023 Annual Conference on Vaccinology Research in early June.
A plague vaccine program in collaboration with Department of Defense is also in mid-stage development.
First Quarter Results:
After the bell Tuesday, Dynavax released its numbers from the first quarter. The company had a loss of 19 cents a share, compared to a 32 cent a share profit in the same period a year ago. This is wholly due to having no CpG 1018 sales booked in the quarter, compared to $91.5 million in 1Q2022. This is because Dynavax has now completed its obligations and product delivery under adjuvant COVID-19 collaboration agreements.
However, the company's revenues from HEPLISAV-B increased nearly 110% from the same period in 2022 to $44 million. Market share in Hepatitis B space increased to 37% from 26% in 1Q2022, even as the total Hepatitis B market grew 45% from a year ago. The growth in the overall market was due to a return to routine healthcare operations and market expansion as a result of the ACIP Universal Recommendation last year around Hepatitis B vaccinations for adults. This is a key reason that management believes the hepatitis B market in the U.S. could grow to over $800 million by 2027.
The company has made great strides penetrating two key markets, retail pharmacy, and integrated delivery networks or IDNs. Market share here increased to 49% in the quarter from just 20% in the year ago period. Leadership believes these two segments will account for 60% of the overall hepatitis B vaccine market by 2027, compared to 44% currently.
Management provided the following guidance for FY2023:
- HEPLISAV-B net product revenue of between $165 million to $185 million
- R&D expenses of between $55 million to $70 million.
- SG&A expenses of be between $135 million to $155 million.
Leadership also stated it expected the company to achieve positive free cash flow in fiscal 2023.
Analyst Commentary & Balance Sheet:
Since first quarter results posted yesterday, Goldman Sachs ($17 price target), JMP Securities ($24 price target) and H.C. Wainwright have all reissued Buy/Outperform ratings on DVAX.
Approximately 14% of the outstanding float is currently sold short. Insiders have been small sellers of the stock so far in 2023, which approximately $225,000 worth of sales collectively year to date. As of the end of the first quarter, Dynavax has some $652 million worth of cash and marketable securities on its balance sheet . This is a four percent increase from year-end 2022 despite no CpG 1018 sales during the first quarter.
Verdict:
Currently, the analyst firm consensus has Dynavax Technologies Corporation losing 50 cents a share in FY2023 on just over $180 million in overall sales. They see losses being cut to 30 cents a share in FY2024 on just over $280 million in sales.
Dynavax did a commendable job leveraging the pandemic to provide a needed adjuvant and build up a huge cash balance. Heplisav-B continues to take market share and the overall hepatitis B vaccine market is growing. The company is advancing other candidates in its pipeline. Management also alluded to the fact it is open to acquiring late-stage vaccine candidates with some of its cash hoard should opportunities prevent themselves.
Dynavax Technologies Corporation stock sells for far under analyst firm price targets and the company is executing well. I, therefore, will continue to have a decent stake in DVAX via primarily covered call holdings in front of revenue growth returning in 2024. Dynavax also would make a logical buyout candidate given its wholly owned portfolio. A possibility I am not counting on, but not discounting either for Dynavax Technologies Corporation.
Mercy without justice is the mother of dissolution; justice without mercy is cruelty. ”? Thomas Aquinas
For further details see:
Dynavax Technologies: The Covid Lifeline Expires