Some thought this day would never arrive. After two prior failed attempts, Dynavax Technologies (NASDAQ: DVAX) finally won approval for hepatitis B vaccine Heplisav-B.
The company announced the great news after the market closed on Thursday. Dynavax stock jumped on Friday, adding to year-to-date gains of close to 470%. But with shares already soaring so much this year, is it too late to buy Dynavax stock now that Heplisav-B has won approval? I don't think so.
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A new standard of care
There's no question that the opportunities for Heplisav-B could be significant. Hepatitis B is a serious and sometimes deadly disease for which there is no cure. Infections are increasing -- in 2015, for example, new diagnoses of acute hepatitis B in the U.S. jumped more than 20% over the previous year.
Heplisav-B is the first new hepatitis B vaccine to gain approval in the U.S. in more than 25 years. GlaxoSmithKline's (NYSE: GSK) Engerix-B leads the market currently. Merck (NYSE: MRK) is another big player in the market, but its production of hepatitis B vaccines was disrupted earlier this year by a cyber attack.
Dynavax appears to be in a good position for Heplisav-B to become the new standard of care in hepatitis B vaccination, pushing GlaxoSmithKline and Merck to the side. In the company's late-stage studies, Heplisav-B showed a 95% rate of protections, compared to an 81% rate of protection for patients receiving Engerix-B. In patients with type 2 diabetes, Heplisav-B achieved a 90% rate of protection versus 65% for Engerix-B.
Perhaps even more important than its greater efficacy, though, is Heplisav-B's dosing. Current hepatitis B vaccines require three shots over a six-month period. The problem is that a large number of adults don't take all three shots as they should. Heplisav-B requires only two shots, which should greatly improve the likelihood that at-risk adults complete their vaccinations.
How big could Heplisav-B really be? William Blair analyst Katherine Xu thinks peak sales for the vaccine could reach $650 million. That estimate seems realistic considering the success that GlaxoSmithKline has had with Engerix-B.
Efficacy has never been a concern for Heplisav-B, but safety has. In Dynavax's second attempt to win approval for the vaccine, the Food and Drug Administration pushed back because of questions about the vaccine's safety profile, especially with regards to cardiac events. This summer, a review by FDA staff of Heplisav-B pointed out higher numbers of deaths and serious heart problems in patients taking Dynavax's vaccine versus Engerix-B.
Will safety concerns be an issue for Dynavax in marketing Heplisav-B? I don't think so. The FDA gave Heplisav-B the label that Dynavax wanted. There aren't any precautions or warnings related to cardiovascular issues with patients.
The other question that some investors might have is: Can Dynavax successfully commercialize Heplisav-B? It's too soon to know for sure, but my view is that the company will be successful. Dynavax has already begun ramping up its sales and marketing team and gearing up its manufacturing capacity to meet demand. It plans to launch Heplisav-B in the U.S. in the first quarter of 2018.
Funding commercialization of Heplisav-B shouldn't be a stumbling block for Dynavax. The company reported nearly $192 million in cash, cash equivalents, and marketable securities at the end of the third quarter.
After its second setback with the vaccine, Dynavax executives mentioned they might try to find a partner. That doesn't seem to be on the table now, though. Dynavax CEO Eddie Gray said in a conference call following the announcement of the FDA approval of Heplisav-B that "any partnership opportunity would need to be a highly attractive one to alter our course" of marketing the vaccine on its own.
Still room to run
In my view, Dynavax is all set for a successful launch of a solid winner with Heplisav-B. I also think the stock still has room to run.
Granted, investors who have stayed on the sidelines have missed out on the huge gains racked up so far this year. However, it wouldn't surprise me for Dynavax stock to increase another 20% or so in the coming months. Even though anticipation of FDA approval for Heplisav-B was largely baked into the stock price, there remained some uncertainty. As the launch moves forward in 2018, I think the stock will go even higher.
Also, Dynavax will look at regulatory approvals outside of the U.S. The potential for winning a green light for Heplisav-B in Europe should present another big catalyst for the stock down the road.
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