Anemic Pipeline at Dynavax

Dynavax Technologies Corp. (DVAX) is a biopharmaceutical company focused on drug development for the treatment and prevention of various infectious and inflammatory diseases.

The company was recently hit hard by a couple of major negative events: the clinical hold and the subsequent termination of the partnership with Merck (MRK) for Heplisav, a late stage candidate for Hepatitis B vaccine, and the discontinuation of the Tolamba program for allergy. Currently, Dynavax is in active discussions with regulatory agencies to resolve the FDA's clinical hold on Heplisav and identify an appropriate path for its further development and approval in the United States, Europe, and the rest of the world.

The deal with Glaxo is a big positive

In 4Q08, Dynavax and GlaxoSmithKline (GSK) signed a worldwide strategic alliance to discover, develop and commercialize novel inhibitors of endosomal Toll-like Receptors (TLRs) for the treatment of immuno-inflammatory diseases. TLRs are key receptors of the innate immune system that can induce strong inflammatory responses.

The company believes that the alliance with GSK, which could be worth up to $800 million, provides an opportunity to develop an entirely new product franchise.

Flu vaccine program still in early stage

The universal flu vaccine which Dynavax is developing under a global supply and option agreement with Novartis (NVS) has the potential to be a prominent player in the market for seasonal influenza vaccines. Encouraging preclinical data have been presented at various medical conferences. However, since the candidate is in preclinical stage, it ceases to be a current option to deal with the global swine flu breakout.

No product on the horizon

Even though, we were pleased to hear about the company’s agreement with Glaxo, we remain concerned that the company has no visible drug candidate under development. We don’t think that DVAX can afford and/or has an immediate plan to acquire any late stage drug candidate under the current financial conditions. Therefore, we do not recommend the shares currently and have a Hold rating.

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