Dynavax Technologies (NASDAQ:DVAX)

On Monday, Dynavax Technologies stock closed the day lower by 64.55% after the company announced that the FDA has rejected Hepislav-B, its lead vaccine product. This product is being used to treat patients with the Hepatitis B virus. Not many treatment options are available to those with the Hepatitis B virus, therefore a vaccine of this caliber is more severely wanted. The problem is that DVAX has had many problems in the past in bringing this vaccine to market. This has led many investors to doubt that the company is even capable of bringing this product to market on its own. This is evidenced by the fact that this is the second time in three years that the FDA has flat out rejected the vaccine with a Complete Response Letter -- CRL.

Rejection Continues

As soon as DVAX announced the rejection by the FDA, the stock traded lower for the day by as much as 72%, falling to $3.20 per share. This is the lowest trading level the stock has seen since 2008. The good news, if it can be construed as good news, is that the stock was able to close lower by 65.55% instead. That's still a steep drop, but for good reason. DVAX had the same issue back in 2013 when the FDA cited that Hepislav-B couldn't be approved in its current form because of safety issues. The same items have been indicated in this CRL - such issues as clarification with adverse events observed in clinical trials, cardiac events, and other safety issues. DVAX CEO Eddie Gray has given investors a positive outlook citing that approval of Hepislav-B is still doable. Unfortunately, that doesn't bring a whole lot of confidence to those investors who have been waiting for the approval of this vaccine for many years now. The problem is that the drug has proven to be effective, but the safety of patients taking the vaccine has always been a concern for the FDA. Yet again, safety played an important role in the FDA deciding to reject the vaccine again.

Safety Issues

The FDA has cited that, while Hepislav-B is very efficacious, it can't approve the vaccine without addressing a lot of the safety issues that it has. Adverse events are something that DVAX must address before going back to the FDA to seek approval for its product. The CEO claims that the safety issues can easily be addressed and that the vaccine can easily approved by the FDA pending certain clarification issues. There is just one major hurdle in the way, and that is that the company is not at all confident in bringing this product to market. The CEO stated in the press release that it will have to meet with the FDA to figure out how to better address the safety issues. In addition, the CEO stated that it will not be able to go the FDA route alone. This means that it will have to now bring a financial or pharmaceutical partner on board to help carry the Hepislav-B vaccine to the finish line. The problem with this is that there can be no assurance that such a partner will be able to achieve this goal.

Looking Forward

Things were not shaping up from September for DVAX anyway, because that is when the FDA cancelled a schedule advisory panel meeting. This was where the advisory committee was to review Hepislav-B for both efficacy and safety. Unfortunately, that never happened, since the FDA has completely cancelled the meeting. The ironic thing is that most believed that the cancelling of the meeting was highly bullish. In other words, the FDA would approve the vaccine. As can be seen, that's not how things played out, and now DVAX has about $109.9 million in cash left as of the end of the third-quarter. That gives DVAX enough cash for at least three more quarters, but, obviously, it will have to seek other options before then. It will have to either partner with a pharmaceutical company or find a new form of financing to continue operations. Considering that DVAX has yet to find a partner after so many years, this doesn't bring a lot of confidence to investors. All is now dependent upon management's actions over the course of this year. If there are positive signs that the company can turn things around, it will be great for investors; if not, then DVAX will fall into an bottomless pit with no end in sight.

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