Dynavax Technologies: Key Issues To Consider

| About: Dynavax Technologies (DVAX)
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Dynavax Technologies (DVAX) is a biotechnology company that has developed a diverse pipeline of toll-like receptor drug candidates for the treatment of infectious, respiratory, autoimmune, and inflammatory diseases.

On Monday morning, Dynavax announced that it has received a Complete Response Letter (CRL) for its lead product candidate, Heplisav, a Phase 3 investigational adult hepatitis B vaccine. The rejection of a full label in the overall adult population was expected by the Street. Recall that on November 15 the FDA's Vaccines and Biologic Products Advisory Committee (VRBPAC) voted 8 to 5, with one abstention, against the overall benefit/risk profile of Heplisav, suggesting that there was insufficient data to adequately support the safety of Heplisav.

The CRL stated that: 1. Heplisav cannot be approved for the full adult label of 18-70 year olds without additional safety data. 2. The FDA is willing to consider restricted populations where benefit-to-risk ratio is higher. 3. Additional data is required on the Chemistry, Manufacturing and Control (CMC) section of the BLA.

While the letter requests another study to support a label for the prevention of HBV infection in adults aged 18-70, it notes that the design of the study will be defined through discussions with CBER, and that the safety data required will depend on the indication sought, and the risk/benefit balance in that patient population. Therefore, the CRL does not specifically define what is necessary, and Dynavax management still must work with the FDA to hammer out the path forward.

The CRL leaves the possibility of a restricted label open, and starts a new review process. Dynavax will meet with the FDA within the next six weeks to discuss contents of the CRL and next steps. The key issues in the near term to consider with regard to Dynavax's shares are as follows:

  • Restricted indication - Dynavax proposed to the FDA various ways to define the higher-risk population that represent higher unmet need, such as: 1. adults aged 40-70, representing about two-thirds of the existing U.S. adult market plus the diabetic population, which was recommended by the CDC recently, and 2. the CKD population, representing 20% of the existing U.S. market. An optimal outcome of the review meeting would be that the FDA and Dynavax reach a clear agreement on what indications to pursue. The stock would be kept under pressure if the FDA continues to give vague guidance on this topic. However, the letter would seem in no way to promise such a path is possible. The stock would be kept under pressure if the FDA continues to give vague guidance on this topic.
  • New PDUFA date - If the CRL review meeting with the FDA occurs in the late March/early April time frame, and Dynavax obtains clear guidance from the FDA on which indications to pursue and what CMC data is required, it might take a few months for Dynavax to turn around with a response package. The company believes that if the reapplied indication is adults over 40, then resubmission and reformatting of data might not be required, as the FDA already has the data on hand. Moreover, if the reapplied indication is in the CKD population, the study 17 data is near its final form and could be submitted in the near future. Regarding the CMC issue, Dynavax believes that it has the data on hand to answer all of the issues, and that in fact that it has already submitted answers to several of the CMC questions to the Agency. Therefore, it would seem that the CMC issues will not be rate-limiting for Heplisav's approval. Once Dynavax submits the response package, the review clock will start again.
  • Approval decision in Europe - Heplisav's EU marketing authorization application is under review, and Dynavax is currently responding to the Day 120 Questions. If all goes well, an approval decision from Europe could come before year-end 2013.
  • Cash balance - Dynavax mentioned that the company ended 2012 with $125 million of cash, which could sustain operations for two years. Depending on the regulatory timelines in both the U.S. and Europe and associated news flow, the company might raise cash in late 2013.

Final Conclusions:

The negotiations between FDA and Dynavax should take several months, and therefore more clarity is unlikely before Q2 or mid 2013. The most rational path to market is for Heplisav to be approved in H1:2014 with a limited label after Dynavax supplements the current filing with the CKD Phase III. Looking forward, the next catalyst for the company is a potential favorable Europe outcome for Heplisav, which should support the current share price.

Disclosure: I 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.

Additional disclosure: Biomed Group is a group of investment professionals and writers. This article was written by Amit Cohen. We did not receive compensation for this article, and we have no business relationship with any company whose stock is mentioned in this article. This information is not to be construed as an offer to buy or sell any security mentioned on this article.