Dynavax reported first quarter 2014 financial results on Monday. Dynavax ended the quarter with $177.7 million in cash, which according to our model should sustain operations into 2016. Net loss for the quarter was $13.8 million with a per share loss of $0.05, compared with our estimates of net loss of $13.0 million and a per share loss of $0.05. In April, Dynavax announced the initiation of the Phase III HBV-23 study evaluating the company’s investigational hepatitis B (HepB) adult vaccine, Heplisav, against GlaxoSmithKline’s (GSK $55.29) HepB vaccine Engerix-B, the current standard of care.

The study targets to enroll 8,250 adults, randomized 2:1 to Heplisav or Engerix-B, respectively. The co-primary endpoints of the study are: 1) evaluate overall safety profile of Heplisav; and 2) demonstrate the noninferiority (and subsequently potential superiority) in peak seroprotection rate (SPR) induced by Heplisav compared with Engerix-B at week 28 in subjects with type 2 diabetes. The HBV-23 study is on track for top-line readout by year end 2015, and potential approval of Heplisav could come in second half 2016. Dynavax reiterated the planned completion of enrollment by year end 2014.

All subjects are expected to complete all study visits by year end 2015. This places the resubmission of the Heplisav biological license application (BLA) in early 2016 and a potential approval decision in second half 2016, assuming a six-month review. We believe the HBV-23 study could address the key issues raised by the regulatory authorities; further differentiate Heplisav from Engerix-B, especially in hyporesponsive populations; and demonstrate management’s ability to deliver on proposed timelines. The HBV-23 study, if successful, should satisfy the size requirement for Heplisav’s safety database (9,000 subjects in total, as negotiated with the U.S. FDA for approval). The study will also provide for the first time prospective data of Heplisav versus Engerix-B in a few subpopulations that are traditionally less responsive to Engerix-B, including the diabetic population, smokers, and people with high body-mass index.

We believe Heplisav will prove superior to Engerix-B in all these subpopulations, based on data generated previously. Now that the HBV-23 study has been initiated, we expect Dynavax to turn its focus to prioritizing its pipeline programs and communicate its strategy with the Street in the near future. We believe there could be meaningful value creation from the pipeline over the next two and half years before Heplisav gains market entry. The two leading programs are DV1179 in systemic lupus erythematosus (SLE) partnered with GSK, and AZD1419 in asthma partnered with AstraZeneca (AZN $79.87). We expect proof-of-concept Phase Ib data from the lupus program during 2014 and from the asthma program likely in 2015.

Dynavax’s other pipeline assets include SD-101, a proprietary second-generation tolllike receptor 9 agonist being evaluated in an investigator-sponsored trial in patients with relapsed lymphoma after allogeneic bone marrow transplant. Other potential programs for Dynavax could span infectious disease and vaccine areas. May 06, 2014 Stock Rating: Outperform Company Profile: Aggressive Growth Price Target: $4.00 Symbol: DVAX (NASDAQ) Price: $1.57 (52-Wk.: $1-$3) Market Value (mil.): $413 Fiscal Year End: December Long-Term EPS Growth Rate: Dividend/Yield: None 2013A 2014E 2015E Estimates EPS Q1 $-0.11 A$-0.05 NA Q2 $-0.09 $-0.07 NA Q3 $-0.09 $-0.08 NA Q4 $-0.09 -$0.09 NA FY $-0.38 $-0.29 $-0.31 CY $-0.29 $-0.31 Sales (mil.) 11 6 4 Valuation FY P/E NM NM NM CY P/E NM NM Trading Data (FactSet) Shares Outstanding (mil.) 236 Float (mil.) 197 Average Daily Volume 3,773,619 Financial Data (FactSet) Long-Term Debt/Total Capital (MRQ) 0.0 Book Value Per Share (MRQ) 0.7 Return on Equity (TTM) -44.3 Two-Year Price Performance Chart Sources: FactSet, William Blair & Company estimates 12/31/12 12/31/13 $0 $1 $2 $3 $4 $5 Dynavax Technologies (Berkeley, California) is a biotechnology company

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