Is Dynavax About To Dominate The Hepatitis-B Market?

| About: Dynavax Technologies (DVAX)

Summary

Recently completed trial helps to assuage any safety concerns over Heplisav-B.

Heplisav-B's impressive efficacy could be an improvement over the current medical standard.

Potential 2016 launch for Heplisav-B makes Dynavax a Compelling Buy.

The last few years have been a rollercoaster ride for shareholders in Dynavax Technologies (NASDAQ:DVAX). The company has had good times, and has had setbacks regarding its lead drug candidate Heplisav-B. For investors new to Dynavax, the company has spent years developing Heplisav-B, a vaccine for Hepatitis B. The company has always maintained that Heplisav-B could potentially be a best in class drug should it ultimately gain approval. However, the road has not been simple, the company was issued a complete response letter in 2013, asking for more information on Heplisav-B. The company finally seems to be well poised to gain FDA approval, and recent studies indicate that it may actually be a best in class drug.

Heplisav-B

Heplisav-B has the potential to be a meaningful improvement for caregivers and for patients. Heplisav-B's dosing regiment is much better than the current market leader Engerix-B, which is sold by GlaxoSmithKline (NYSE:GSK). Heplisav-B only requires two doses, while Engerix-B requires three doses. Through eliminating one dose, Heplisav-B helps to limit the amount of times that a patient has to come back to the healthcare provider's office in order to receive the vaccine, and should help to free up doctors' offices to be able to focus on other more pressing mattters.

Heplisav-B also appears to be better from a protective standpoint as well. In a recent study comparing Heplisav-B and Engenerix-B head to head, it was shown that Heplisav-B had a higher peak seroprotection rate at 95.4% versus Engerix-B's 81.3%. For investors not familiar with a seroprotection rate, it is a measure of the number of antibodies that are capable of preventing a virus (in this case Hepatitis-B). The higher the seroprotection rate, the better that the vaccine is considered to be. Therefore, through having a statistically significant seroprotection rate, Heplisav-B should provide a much better protection rate for patients than Engerix-B. This is likely to be very important to healthcare providers, as they want to make sure that their patients have the best clinical outcomes and Heplisav-B appears to provide a statistically significant better outcome in terms of the ability to prevent Hepatitis-B versus the current standard of care.

Heplisav-B has a strong chance of obtaining FDA approval. It also beat Engerix-B in a vulnerable patient population. In patients withType II diabetes, in the recent HBV-23 trial, Heplisav-B showed a 90% response rate versus Engerix-B's 65.1%. This helps to show that Heplisav-B continues to have improved clinical outcomes versus Engerix-B. More importantly, however, is the fact that if Dynavax continues defeating Engerix-B in vulnerable patient populations, it could signal that doctors are going to switch to trying to use Heplisav-B first versus Engerix-B. Having people with diabetes receive protection from Hepatitis B is important, as the CDC has shown that patients with type I and type II diabetes have a higher incident rate of Hepatitis B than the general population. This means that doctors are particularly concerned about making sure that these patients have protection from Hepatitis B, and Heplisav-B appears to provide a higher chance of responding to the vaccine and gaining protection from the Hepatitis B virus versus Engerix-B.

Addressing CRL Concerns

The news for Heplisav-B hasn't been completely rosy. As mentioned previously, Heplisav-B received a complete response letter in 2013. (which is a letter that the FDA issues when they don't want to approve a drug, and lists the steps that the company must take in order to be able to receive FDA approval). The FDA expressed concern that there was an insufficient amount of safety data to be able to approve Heplisav-B. At the time this was not wholly unexpected, as an FDA advisory committee had previously expressed concern over the amount of safety data available for Heplisav-B. In the FDA complete response letter, the FDA also demonstrated concern over rare autoimmune events in the Dynavax population. It is important before moving forward to address these concerns and make sure that Dynavax has taken significant steps to be able to address the FDA's concerns.

In a recent clinical trial that was designed to meet the concerns of the FDA called HBV-23, Dynavax seems to have addressed these safety concerns. Dynavax through completing this study has now created a patient database of over 10,000 people who have been provided with Heplisav-B. It is likely that this database will be large enough for the FDA to provide approval. In the trial Heplisav-B met both of the co-primary endpoints of safety and immunogenicity. The FDA did not seem to have any major concern about immunogenicity (which is essentially the questions of whether or not the vaccine actually works). It should be noted, however, that in the immunogenicity trial that not only did Heplisav-B demonstrate a statistically significant higher Seroprotection rate than Engerix-B, but that the company also beat Engerix-B in every age decile, as well as in patients with type II diabetes. This is significant as it would seem to demonstrate that Heplisav-B represents a significant improvement over the current standard of care. When looking at the safety of the vaccine (which is the main area where investors were concerned), it appears as though Heplisav-B once again did very well.

When looking at safety, Heplisav-B met its co-primary endpoint by showing a similar rate of adverse events to the Engerix-B. This is important as it would help to show that Heplisav-B should be approved if there are not any significant concerns for the health of patients. It appears as though this trial should help to add to the mounting evidence that Heplisav-B is safe for patients and can provide a compelling option for patients. One of the main areas of concern, as I previously noted, is also the rate of adverse events of special interest. In this area, Heplisav-B also showed that it was no different that Engerix-B. There were 21 autoimmune events across the entire trial, with 11 attributed to Dynavax and 10 attributed to Engerix-B. This shows that there should not be any significant concern for autoimmune events over the current standard of care. This was important as it should help to further assuage FDA fears expressed in the CRL that Heplisav-B could carry a higher rate of autoimmune events.

These safety results should help to further bolster the case for Heplisav-B approval. The fears over the number of autoimmune events should be assuaged, and it appears as though Dynavax now has a sufficiently large database of patients to be able to receive FDA approval for the vaccine. This brings us to our next critical point in the article.

Approval Timeline

Along with the trial results, Dynavax announced that it plans on refiling its Biologic License Application to the FDA by the end of March. This could put the company on a track to gain FDA approval within six months, as it is classified as a response and not an entirely new application. This means that investors should have a substantial catalytic event in late September or early October, which should meaningfully impact the future for Dynavax. This could lead to a launch before the end of the calendar year

Heplisav-B is extremely important to the long term investment thesis at Dynavax. Heplisav-B is the company's furthest progressed drug candidate and will help to determine the market's perception of Dynavax for years to come. The future looks bright for Dynavax, as peak US sales of Heplisav-B are projected to come in at over $600 million. The peak sales estimate is from William Blair analyst Y. Katherine Xu's recent research note. Should these estimates be met, it appears as though Dynavax is substantially undervalued by its current marketcap.

Conclusion

The future for Dynavax looks bright. With the completion of the recent phase III trial, investors should be confident in Heplisav-B's future and in the ability of the company's management to move products through the development pipeline. With a potential upcoming launch by the end of this year and a high peak sales estimate, Dynavax should be a compelling addition to any portfolio.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.