U.S. Markets closed

Is Dynavax Technologies Corporation a Buy?

Keith Speights, The Motley Fool

You've probably heard the old investing phrase "buy the rumor, sell the news." The idea is that anticipation of a positive development will cause a stock price to move higher, but there's a good chance the stock will fall after the positive development is a sure thing. 

For Dynavax Technologies Corporation (NASDAQ: DVAX), this old adage was spot-on. Between Jan. 1 and Nov. 8, 2017, the biotech stock increased more than fivefold. Investors eagerly awaited FDA approval of Dynavax's Heplisav-B hepatitis B vaccine. After two unsuccessful attempts at approval, Heplisav-B finally won a green light from the FDA on Nov. 9. Since then, Dynavax's share price has dropped 37%. 

There aren't any rumors swirling about Dynavax now. But should investors consider buying the beaten-down biotech stock?  

Syringe with vaccine bottle on top of document with information about hepatitis B

Image source: Getty Images.

A slow process

Probably the biggest reason behind the significant drop in Dynavax's share price is that the commercial launch of Heplisav-B appears to be moving along as slow as molasses. The company launched the vaccine in January 2018. Dynavax reported Heplisav-B sales of around $200,000 in the first quarter and $1.3 million in Q2. 

The reality in the medical world, though, is that it takes time for a new vaccine to be accepted when other vaccines are already available. GlaxoSmithKline's Engerix B and Merck's Recombivax HB have been on the market for years, although Merck's vaccine shortage has worked to Glaxo's benefit in 2017 and 2018.

One challenge for Dynavax in launching Heplisav-B is that healthcare providers typically already have contracts in place to purchase these existing vaccines. An even bigger issue is that providers go through a multi-step process before going with a new product. They usually have a pharmacy and therapeutics (P&T) committee review, which often follows sub-committee reviews. To make the situation even more difficult, some providers greatly limit any contact between companies like Dynavax and the members of the P&T committee.

Another hurdle is securing reimbursement for a product. It doesn't mean a thing if a healthcare provider agrees to use a new vaccine but insurers and government agencies won't pay for it.

Dynavax did report good news on these fronts in its Q2 update, though. The company is targeting in the ballpark of 2,000 key potential customers and has established contact with 90% of them. Of these, 219 customers have completed their P&T committee reviews, with 91 ordering Heplisav-B already. Another 198 customers have P&T committee or sub-committee reviews scheduled. Dynavax CEO Eddie Gray said that so far very few customers have said "no" to using Heplisav-B. 

The company also gave a good report on reimbursement. All patients on Medicare are now covered for reimbursement of Heplisav-B. Ninety-four percent of individuals with commercial insurance are now covered. The lowest coverage rate is for state Medicaid plans, with 73% coverage.

Looking at the numbers

I think it's a matter of when, not if, most healthcare providers implement the use of Heplisav-B and most of the remaining state Medicaid plans provide coverage for the vaccine. In clinical studies, Dynavax's vaccine achieved higher rates of protection than market leader Engerix B with a similar safety profile. And it required only two doses instead of the three doses required for GlaxoSmithKline's hep-B vaccine. Healthcare providers know that many patients never take that third dose. 

My view is that over time Heplisav-B should become the standard of care, displacing Engerix B as well as Recombivax HB and likely expanding the market. If this happens as I expect it will, Dynavax should be able to rake in revenue in the neighborhood of $500 million annually from U.S. sales of its vaccine.  

Dynavax's market cap currently stands at close to $790 million. It definitely doesn't look like the full potential of Heplisav-B is being factored into the biotech stock's price, especially considering the prospects for Dynavax to eventually win regulatory approval for the vaccine in other countries. It's also important to remember that Dynavax has other pipeline candidates that don't appear to be fully baked into the stock valuation.

The biotech reported positive results earlier this year from a phase 1/2 study evaluating TLR agonist SD-101 in combination with Merck's Keytruda in treating advanced melanoma. Dynavax hopes to advance SD-101 to phase 3 in the near future. In addition, the company is evaluating DV281 in a phase 1 study targeting the treatment of non-small-cell lung cancer with a phase 2 study potentially starting up in early 2019. 

Buy the reality?

Yes, Heplisav-B has a long way to go to get to anywhere close to $500 million in annual U.S. sales. Maybe it won't even make the roughly $270 million that existing vaccines generate. But for that to happen, healthcare providers will have to choose to continue using older vaccines that aren't as effective and require an additional dose that many patients never take. Is that a good bet? I don't think so.

It could take a while, though. Wall Street projects Dynavax will make around $15 million in revenue this year and $84 million in 2019. However, I suspect the floodgates will open after that.  

I don't think you have to buy the rumor with Dynavax anymore. My view is that the reality looks like a good enough reason to buy this biotech stock.  

More From The Motley Fool

Keith Speights has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

  • Business
    CNBC

    Oil's best start ever signals more upside ahead, but expert Tom Kloza sees the big gains fizzling

    According to the Oil Price Information Service's Tom Kloza, there's not much that could derail the rally through the second quarter. "We're going to see higher prices than we see right now," the firm's co-founder and global head of energy analysis said Thursday on CNBC's " Futures Now ." However, Kloza, who's known for predicting the 2015 crude collapse, said his forecast comes with a caveat: It'll be a more temperate and gentle year despite the robust start.

  • Amazon invites Alexandria Ocasio-Cortez to 'see for yourself' after she alleges 'dehumanising conditions' for workers
    Politics
    The Independent

    Amazon invites Alexandria Ocasio-Cortez to 'see for yourself' after she alleges 'dehumanising conditions' for workers

    Amazon has thrown down the gauntlet to Alexandria Ocasio-Cortez, inviting the congresswoman to visit one of its facilities after she claimed the tech giant had created “dehumanising conditions” for its workers. The 29-year-old congresswoman was among those who celebrated after Amazon announced this week it was pulling out of plans to open what it termed a second headquarters in New York City. Ms Ocasio-Cortez, who represents the city's 14th district, which is close to the Long Island City neighborhood of Queens where the facility was to be based, had opposed the $3bn in tax incentives the state and city had offered the e-commerce giant, headed by Jeff Bezos.

  • AT&T Inc. (NYSE:T) Should Be In Your Dividend Portfolio, Here's Why
    Business
    Simply Wall St.

    AT&T Inc. (NYSE:T) Should Be In Your Dividend Portfolio, Here's Why

    It is a stock that pays a reliable and steady dividend over the past decade, at a rate that is competitive relative to the other dividend-paying companies on the market. More specifically: It is paying an annual yield above 75% of dividend payers It consistently pays out dividend without missing a payment or significantly cutting payout Its has increased its dividend per share amount over the past It can afford to pay the current rate of dividends from its earnings It is able to continue to payout at the current rate in the future High Yield And Dependable AT&T currently yields 6.8%, which is high for Telecom stocks.

  • Warren Buffett Just Sold These Stocks
    Business
    Motley Fool

    Warren Buffett Just Sold These Stocks

    Warren Buffett just tipped his hand. Berkshire Hathaway (NYSE: BRK-A)(NYSE: BRK-B) reveals what stocks it's recently sold in a filing with the Securities and Exchange Commission every quarter, and that filing was released on Thursday. The list includes an airline stock, an energy stock, and a surprising change of heart on a top technology stock. Investing in airlines has lost Buffett a lot of money in the past.

  • Indian Oil signs first annual deal for U.S. oil
    Business
    Reuters

    Indian Oil signs first annual deal for U.S. oil

    NEW DELHI/SINGAPORE (Reuters) - Indian Oil Corp, the country's top refiner, has signed its first annual deal to buy U.S. oil, paying about $1.5 billion (£1.16 billion) for 60,000 barrels a day in the year to March 2020 to diversify its crude sources, its chairman said on Monday. IOC is the first Indian state refiner to buy U.S. oil under an annual contract, in a deal that will also help boost trade between New Delhi and Washington. The company has previously purchased U.S. oil from spot markets and signed a mini-term deal in August to buy 6 million barrels of U.S. oil between November and January.

  • What Aurora Cannabis' and Canopy Growth's Sky-High Results Tell Us About Marijuana Stocks
    Business
    Motley Fool

    What Aurora Cannabis' and Canopy Growth's Sky-High Results Tell Us About Marijuana Stocks

    Aurora Cannabis (NYSE: ACB) and Canopy Growth (NYSE: CGC) each reported the results for their quarters ended Dec. 31, which included 11 weeks of recreational-pot sales. While several other Canadian producers still have to provide their quarterly updates, what Aurora and Canopy had to say provides some big clues as to what investors can expect for other marijuana stocks. The sales growth that both Aurora Cannabis and Canopy Growth achieved in their latest quarters was impressive.

  • Microsoft Tries To Break Out
    Technology
    Investor's Business Daily Video

    Microsoft Tries To Break Out

    Microsoft Tries To Break Out

  • Huawei Crackdown Exposes Europe as Laggard in Global 5G Race
    World
    Bloomberg

    Huawei Crackdown Exposes Europe as Laggard in Global 5G Race

    A year later, the U.K. is among European nations weighing restrictions on the Chinese tech giant that phone carriers say could delay the fifth-generation mobile networks needed to connect driverless cars and automated factories. “The risk is that it puts Europe further behind the curve,” said Neil Campling, an analyst at Mirabaud Securities in London. A full ban is unlikely, a British official said last month, speaking on condition of anonymity, and the U.K.'s spy chief said on Friday that barring Huawei might not be right.

  • Business
    TheStreet.com

    This Bank Stock Yields 4% and Just Became a Dividend Aristocrat

    Of the 500 stocks that comprise the S&P 500 Index, only 57 -- barely more than 10% of the index -- qualify as Dividend Aristocrats. To be a Dividend Aristocrat, a company must have raised its dividends paid to shareholders for at least 25 years in a row. Recessions, competitive threats, and geopolitical strife are just a few of the potential risks that can easily derail even a strong company's dividend growth streak.

  • 2 Healthcare Stocks Ripe for a Takeover
    Business
    Motley Fool

    2 Healthcare Stocks Ripe for a Takeover

    That said, a buyout scenario should never be a primary reason to buy any healthcare stock, as there are far too many things that can go wrong before a deal is consummated. Buyout rumors, though, are often fueled by a company's improving fundamentals -- and that a solid reason to consider buying a stock. For instance, cardiovascular-care company Amarin (NASDAQ: AMRN) and the Canadian marijuana titan Aphria (NYSE: APHA) have both been percolating to the top of the buyout rumor mill this year because of their outstanding long-term growth prospects.

  • The Nasdaq escapes longest bear market — by one measure — in 28 years
    Business
    MarketWatch

    The Nasdaq escapes longest bear market — by one measure — in 28 years

    The Nasdaq Composite Index, often used as a proxy for the health of technology and internet-related stocks, on Friday was on the verge of ending one of its longest bear market, by one measure, since 1991. The Nasdaq closed on Friday at 7,472.41, eclipsing by a healthy margin the 7,431.50 for the Nasdaq (COMP) need to rise 20% from its recent low on Dec. 24 at 6,192.92. The Nasdaq entered the corrective phase on Dec. 21, closing more than 20% below its all-time high set on Aug. 29 at 8,109.69, meeting the widely accepted definition for entering a bear market.

  • Can CenturyLink Sustain Its New Dividend After Full-Year 2018 Results?
    Business
    Motley Fool

    Can CenturyLink Sustain Its New Dividend After Full-Year 2018 Results?

    Shares of internet service provider CenturyLink (NYSE: CTL) are plumbing fresh lows after reporting a solid conclusion to 2018 and slow but steadily improving profitability. The new yield is still a generous 7.7% as of this writing, and CenturyLink has new plans for that cash going forward. After CenturyLink's takeover of Level 3 Communications in 2017, investors may have been hoping for better sales results.

  • Smaller Refund? It's Not the Government's Fault -- It's Yours
    Finance
    Motley Fool

    Smaller Refund? It's Not the Government's Fault -- It's Yours

    But the changes to the tables are only half of what caused withholding amounts to change -- because it's always in your power to file Form W-4 with your employer. When major changes occur -- whether they're specific to your personal life or more general in nature -- forgetting to file a new W-4 runs the risk of exactly the kind of unexpected change to the amount of your refund that's happening now. The limitations of withholding tables -- and how Form W-4 can help Form W-4 is also known as the Employee's Withholding Allowance Certificate, and although it's short, it provides essential information to your employer and the IRS.

  • Is Amgen a Buy?
    Business
    Motley Fool

    Is Amgen a Buy?

    Amgen (NASDAQ: AMGN) ranks No. 1 among all biotech stocks when it comes to market cap. While the S&P 500 and many biotech stocks floundered in 2018, Amgen's share price jumped nearly 12%. Let's first start with the good news for Amgen: The biotech has seven blockbuster drugs in its lineup that continue to generate an impressive amount of cash flow.

  • If I Could Buy Only 1 Pure-Play Marijuana Stock, This Would Be It
    Business
    Motley Fool

    If I Could Buy Only 1 Pure-Play Marijuana Stock, This Would Be It

    My pick would be Constellation Brands (NYSE: STZ). Buying Constellation involves an investment in the company's alcoholic-beverage business even more than in the cannabis industry. If I could only buy one pure-play marijuana stock, it would be Constellation's partner, Canopy Growth (NYSE: CGC).

  • Baidu and iQiyi Have a Lot to Prove This Week
    Business
    Motley Fool

    Baidu and iQiyi Have a Lot to Prove This Week

    China's leading search engine and the fast-growing video-streaming site it spun off last year will be giving investors new numbers to mull over in a few days, as Baidu (NASDAQ: BIDU) and its iQiyi (NASDAQ: IQ) spinoff will report their fourth-quarter results after Thursday's market close. Baidu and iQiyi have plunged 40% and 53% since last year's springtime peaks. Baidu's guidance back in October was calling for revenue to climb 15% to 20% in the fourth quarter.

  • Could General Electric Be a Millionaire Maker Stock?
    Business
    Motley Fool

    Could General Electric Be a Millionaire Maker Stock?

    Like many industrial companies, GE has an in-house finance business that provides credit to customers so they can afford the often-huge costs of the industrial products GE makes. This is a good business practice, and not odd at all. However, the often-huge profits generated by the finance division led GE to expand its footprint into other areas, like home mortgages.

  • Opinion: The Green New Deal Gets a Senate Vote
    U.S.
    WSJ

    Opinion: The Green New Deal Gets a Senate Vote

    The publicly ridiculed Green New Deal gets a vote in the Senate. But what's in the Green New Deal and will Democrats—other than Kamala Harris, Corey Booker and Kirsten Gillibrand—vote for it? Video: Journal Editorial Report / Image: Getty

  • Will Dassault Systèmes SE's (EPA:DSY) Earnings Grow Over The Next Few Years?
    Business
    Simply Wall St.

    Will Dassault Systèmes SE's (EPA:DSY) Earnings Grow Over The Next Few Years?

    The most recent earnings update Dassault Systèmes SE's (EPA:DSY) released in December 2018 showed that the company gained from a slight tailwind, leading to a single-digit earnings growth of 9.6%. Below, I've laid out key numbers on how market analysts perceive Dassault Systèmes's earnings growth trajectory over the next couple of years and whether the future looks even brighter than the past. I will be using net income excluding extraordinary items in order to exclude one-off volatility which I am not interested in.

  • Dow Stocks Microsoft, Cisco, Walmart Just Entered Buy Range; Take A Closer Look
    Business
    Investor's Business Daily

    Dow Stocks Microsoft, Cisco, Walmart Just Entered Buy Range; Take A Closer Look

    Dow Jones giants Microsoft, Cisco Systems and Walmart all moved into buy range in Friday's stock market. Meanwhile, the relative strength lines for these Dow stocks are not particularly impressive in the current stock market rally, though Cisco's RS line isn't too far off highs.

  • Surprise! The Biggest Marijuana ETF Just Made a Massive Move
    Business
    Motley Fool

    Surprise! The Biggest Marijuana ETF Just Made a Massive Move

    A closer look at the ETF's investing materials, however, makes it clear that Alternative Harvest's decision was completely in line with what it's disclosed to investors -- even if most of those investors haven't read about it. A big change in weightings for Alternative Harvest Earlier this month, I noticed that shares of a single marijuana stock represented almost 20% of Alternative Harvest's assets. That seemed surprising at first glance, as the index that the ETF tracks purports to use a modified market-cap weighting methodology that would typically have given the biggest companies in the space the greatest weighting.

  • Danger Lurks for These 3 Dividend Stocks
    Business
    Motley Fool

    Danger Lurks for These 3 Dividend Stocks

    As its name indicates, BP Prudhoe Bay is a royalty trust, and the distributions that it makes are based on the production from its assets as well as the prevailing market prices at which the royalty trust is able to sell those products. The $5.06 per share in dividends represents the total of what BP Prudhoe Bay has paid out over the past 12 months, but the most recent payout of just over $1 per share suggests a more modest yield of around 16%. More importantly, royalty trusts in general have characteristics that are different from those of most other companies.

  • Could The Pernix Therapeutics Holdings, Inc. (NASDAQ:PTX) Ownership Structure Tell Us Something Useful?
    Business
    Simply Wall St.

    Could The Pernix Therapeutics Holdings, Inc. (NASDAQ:PTX) Ownership Structure Tell Us Something Useful?

    Every investor in Pernix Therapeutics Holdings, Inc. (NASDAQ:PTX) should be aware of the most powerful shareholder groups. Large companies usually have institutions as shareholders, and we usually see insiders owning shares in smaller companies. With a market capitalization of US$26m, Pernix Therapeutics Holdings is a small cap stock, so it might not be well known by many institutional investors.

  • Qatar Petroleum signs initial deals to boost local energy industry
    Business
    Reuters

    Qatar Petroleum signs initial deals to boost local energy industry

    Qatar Petroleum signed preliminary deals worth more than 9 billion Qatari riyals ($2.47 billion) on Monday with oil services firms Schlumberger and Baker Hughes to boost the local energy industry. Qatar, the world's top liquefied natural gas (LNG) exporter which is facing a trade boycott by some Arab states, wants to reduce reliance on imports and lift domestic production. "As part of our national duty to develop the industry in Qatar and to promote self-reliance, we saw the need to localise many of the supporting industries in the sector," QP Chief Executive Officer Saad al-Kaabi said at an event to sign memorandums of understanding with Schlumberger and Baker Hughes.

  • Berkshire's Charlie Munger has a very blunt response to those 'driving rich people away' as Amazon scraps HQ2
    Business
    MarketWatch

    Berkshire's Charlie Munger has a very blunt response to those 'driving rich people away' as Amazon scraps HQ2

    The nonagenarian's comments come as Amazon.com Inc. (AMZN) announced on Thursday that it was canceling plans to build its New York City headquarters in Long Island City, and wouldn't be seeking a replacement venue. Munger also is chairman of the Daily Journal Corp. (DJCO) which just held its annual meeting on Feb. 14.