U.S. Markets closed

Why Dynavax Technologies' Stock Tanked in June

George Budwell, The Motley Fool

What happened

Dynavax Technologies (NASDAQ: DVAX), a small-cap vaccine company, saw its shares lose a noteworthy 17.2% of their value in June, according to data from S&P Global Market Intelligence. What went wrong for the biotech last month?

Dynavax's shares have been in free fall ever since the company announced a strategic restructuring designed to prioritize the commercialization of its FDA-approved hepatitis-B vaccine known as Heplisav-B, as well as the sudden retirement of CEO Eddie Gray slated to go into effect on Aug. 1, 2019. In fact, the biotech's shares have dropped by an eye-catching 30% since these two material events became public knowledge on May 23, 2019.

Black and white chalkboard chart showing a downward-trending arrow.

Image Source: Getty Images.

So what

Dynavax's restructuring effort effectively signals the end of the biotech's foray into immuno-oncology. Wall Street, in turn, rightfully frowned upon this disappointing development for two interrelated reasons. Namely, Heplisav's commercial launch has been painfully slow, leading investors to place a heavy emphasis on the company's immuno-oncology pipeline as a key source of future value creation. Driving this point home, Heplisav's annual sales are on track to fall well short of $50 million this year, which is a far cry from the company's peak sales estimate of $500 million per year.

Now what

On the bright side, Wall Street has Heplisav's sales picking up in a big way starting next year, perhaps making Dynavax a compelling bargain buy at these levels. As things stand now, the biotech's shares are trading at a fairly reasonable 3.1 times the company's projected 2020 revenue. That's not a ridiculously cheap valuation, but it is below average for a biotech with a fairly new product on the market. So while a lucrative immuno-oncology partnership no longer appears to be in the cards, Dynavax's stock might be worth considering after this steep drop-off due to the simple fact that Heplisav is slowly but surely gaining market share.

More From The Motley Fool

George Budwell 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.