Can Dynavax Survive In A Post-Merck World (DVAX, MRK)
Dynavax Technologies Corp. (NASDAQ: DVAX) is in serious trouble and is now just looking like the latest biotech implosion. The company gave an update on an FDA clinical hold on its investigational vaccine HEPLISAV for a Hepatitis B vaccine with partner Merck & Co. (NYSE: MRK), and the outlook is grim. There is also the belief here that the company doesn’t have the financial strength to survive or thrive.
Dynavax and Merck have received communication from the FDA regarding their response to the agency’s request for safety information pertaining to the clinical hold on the two Investigational New Drug Applications for HEPLISAV. The FDA advised that the balance of risk versus potential benefit no longer favors continued clinical evaluation of HEPLISAV in healthy adults and children, which might as well be the kiss of death for a trial program.
The FDA did advise that there may be potential for an acceptable risk versus benefit profile for HEPLISAV in patients with renal failure. For that effort the FDA has requested additional information from the companies before considering further pursuit of clinical studies in those patients.
Dynavax and Merck are going to evaluate the FDA’s response in considering the next steps, but the clinical hold on the two U.S. IND Applications for HEPLISAV remains in effect.
At the last quarter-end, Dynavax had almost $64 milion in cash and equivalents and its total assets were $96.9 million after adding in $5 million for goodwill and intangibles. Its total liabilities were listed as $83.1 million. It has also been burning about $15 million in R&D per quarter on average for the last year. Remove the liabilities and deduct the cash and the intangible assets. What is left?
One major reason this looks so bad is that Merck has been reviewing all of its clinical trial relationships to focus on those which will have the greatest upside and the greatest chance for broad acceptance. Even if this would be able to be a profitable product for Dynavax, the fear is that Merck may determine it isn’t worth its efforts.
Oppenheimer downgraded the rating here to “Perform” from “Outperform” but you wonder if that is even a fair rating after tallying everything up.
At the start of 2007 this was above $8.00 in share price. That appears to be ancient history at this point.
Jon C. Ogg
October 22, 2008