Dynavax (“DVAX” or the “Company”) is a clinical stage biotechnology company with a focus on infectious and inflammatory diseases. The investment case centers around one drug – Heplislav, a Hepatitis B adjuvant vaccine. The stock offers a binary outcome of a multi-bagger or a near zero investment value and at the outset we acknowledge that it is not a typical VIC submission. However, certain unique characteristics of the FDA process can give one comfort to the risk/reward dynamic.
DVAX has already completed a successful phase III trial that showed both positive efficacy and safety data. However, in November 2012, the FDA felt that the data set of 2,400 patients was not sufficiently large to assuage their safety concerns. The FDA panel did approve Hepislav on efficacy grounds by a vote of 13-1, but failed on safety by by an 8-5 vote. Many of the concerns raised by the FDA Adcom in 2012 have not been substantiated at the time and reflected theoretical concerns. In response, in April 2014 DVAX initiated a trial of 8,250 patients. The trial has completed enrollment. The trial is being monitored not only by DVAX, but also by the FDA. Every few months, an FDA panel reviews the trial process from a safety perspective and determines whether to continue. The trial has met the appropriate thresholds on two occasions with a final review scheduled for late July and trial completion in October. In addition, since 2012, the scientific literature has become more robust and reduced concerns surrounding the connection between adjuvants and autoimmune disease. In addition, the initial patients in the Phase III studies have not shown increased adverse events in the past few years. If approved (expected early 2016), Hepislav is expected to be approximately a $400 million peak sales drug.
Hepislav is an adult Hepatitis B TLR adjuvant vaccine that has demonstrated greater efficiency and has an easier administration schedule than existing alternatives. Given these attributes, it is expected that Hepislav will capture a significant share of the Hepatitis B market. In its Phase III trial, Heplisav showed that 95% of subjects who received 2 doses of Heplisav over one month developed the protective antibody to HBV versus 81% of subjects who received three doses of current market leader Engerix- B. The fact that Hepislav only requires two injections is a significant benefit as it helps ensure patient compliance with the vaccination protocol. Hepislav initial phase III trials reflected similar safety data to existing treatments.
Initial FDA Failure:
In November 2012, the FDA did not approve Heplisav. The committee voted 13-1 in favor of recommending Heplisav for efficacy and voted 8-5 against recommending Heplisav for safety. The major issues cited against approval fit into two categories. First, the panel had concern about the size of the phase III trial patient population. The initial phase III study only had 2,400 patients. The study currently underway has 8,250. Combined, the number of patients will be consistent with the guidance provided by some members of the FDA ADCOM hearing. Second, the FDA had concerns about the