Biotech Implosion: Dynavax (DVAX)

Dynavax Technologies Corp. (NASDAQ: DVAX) is the latest biotech implosion as shares are down some 75% today.  The company gave an update on an FDA clinical hold on its investigational vaccine HEPLISAV with partner Merck & Co. (NYSE: MRK).

The companies have received communication from the FDA regarding theirresponse to the agency’s request for safety information pertaining tothe clinical hold on the two Investigational New Drug Applications forHEPLISAV.  Obviously, it isn’t good.

The FDA advised that the balance of risk versus potential benefit nolonger favors continued clinical evaluation of HEPLISAV in healthyadults and children, which might as well be the kiss of death for atrial program.  The FDA did advise that there may be potential for anacceptable risk versus benefit profile for HEPLISAV in patients withrenal failure.  For that effort, the FDA has requested additionalinformation from the companies before considering furtherclinical studies in those patients.

Dynavax and Merck are going to evaluate the FDA’s response inconsidering the next steps, but the clinical hold on the two U.S. INDApplications for HEPLISAV remains in effect.

The reason this is so bad is that Merck has been reviewing all of itsclinical trial relationships to focus on those which will have thegreatest upside and the greatest chance for broad acceptance.  Even ifthis would be able to be a profitable product for Dynavax, the fear isthat Merck may determine it isn’t worth its efforts. 

At the last quarterly report, Dynavax had almost $64 million in cash andequivalents and its total assets were $96.9 million after adding in $5million for goodwill and intangibles.  Its total liabilities werelisted as $83.1 million.  It has also been burning about $15 million inR&D per quarter on average for the last year.

The new market cap here only $11.3 million after a 75% price drop downto $0.28.  Before today its 52-week trading range was $0.97 to $6.55.Traders are obviously coming to the conclusion that there will be closeto nothing left at this company.

Jon C. Ogg
October 22, 2008