Dynavax ( DVAX ) crossed the finish line in early November with the first new hepatitis B vaccine in 25 years, a two-dose regimen that Chief Executive Eddie Gray expects to foster better compliance in adults.
[ibd-display-video id=2847150 width=50 float=left autostart=true] But shares crashed 3.8% the day of the announcement and tacked on another 9.4% pitfall two days later as investors awaited an acquisition or partnership to help the small-cap biotech launch the drug it named Heplisav-B.
"I think people were hoping Dynavax would announce a buyout or a large partnership because they're not capable of commercializing on their own," said Brad Loncar, portfolio manager for Loncar Investments. "They probably will find a deal like that."
"But people expected a big pop and ran for the exits when it didn't happen," Loncar said.
Gray told Investor's Business Daily the company will talk to anyone with an offer that "knocks our socks off," but until then the first priority is moving forward to launch the drug, expected sometime this quarter.
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Meanwhile, Dynavax also has an asthma drug in Phase 2 testing and three potential drugs for cancer in its pipeline. Among those, it has a checkpoint inhibitor with a mechanism similar to treatments from Dow component Merck ( MRK ) and Bristol-Myers Squibb ( BMY ).
Gray talked with IBD about Dynavax's approved hepatitis B vaccine and what it could mean for hepatitis B treatments from the likes of Gilead Sciences ( GILD ).
IBD: What makes Heplisav-B unique?
Gray: The first product to get to approval is an adult vaccine for hepatitis B . Traditionally, there have been vaccines around for 25 years and they work well in children but they don't work so well in adults. What we've been able to do is bring to the market a new vaccine which has significantly higher protective levels so more adults reach protection than do so on the traditional vaccines. We're also able to do that just using two doses. With Heplisav-B, the new product, you would have a vaccination today and you'd have your second dose one month from now. In the older vaccines, it's a three-dose schedule, which would be today, one month and then six months. One of the key problems in the adult market is adults are extremely poor at coming back and getting that third dose. What that means is it's a contributing factor to why so many adults are not adequately protected.
IBD: What does this mean for the hepatitis B market?
Gray: It is the only two-dose vaccine. Our timing is important from the point of view of public health because the CDC (Centers for Disease Control and Prevention) released the latest data on hepatitis B infection rates among the adult population in the United States. What those have shown is for the first time in 20-25 years, we're seeing an increase in the number of infections of hepatitis B among adults in the United States. The data show us essentially a 20% increase across the nation. In some parts of the country, it's higher than that. It is thought that the current opioid crisis - because obviously it involves needle use - might be contributing in some areas to that increased rate.
We do have a pretty uniform picture across the country of an emerging increase in hepatitis B infection. The fact that the traditional three-dose vaccines do not work as well in adults - they're simply not as protected as they need to be - and the fact the three-dose vaccine is a difficult schedule for people to follow, means the availability of a vaccine which inherently provides higher levels of protection specifically demonstrated in the trials. (It) does so on a two-dose schedule - which is a simpler regimen for people to follow - (and) we think it will be an important contributor to public health. Our expectation is it will become the dominant vaccine for adults in the market.
IBD: How are you positioned competitively?
Gray: We think we're extremely well positioned. I think not only is this the first prophylactic vaccine for 25 years, because of its profile it will also be the last. There isn't going to be another competitor. The larger companies, you mentioned Gilead, what they're concentrating on is can they find treatments for people who are already infected. We are vaccinating people who are not yet infected to stop them from becoming infected. So actually, Gilead should be more worried about me because I'm stopping people from getting hepatitis B infection. That's the split. It's important to keep those two apart. So I don't have any concerns about larger companies working on hepatitis B because if you've already got hepatitis B then it's too late for a vaccine anyway.
IBD: How big is the market?
Gray: At the moment the number of adults who get vaccinated every year is about 2 million. But what's happened, a couple of years ago, is that the CDC who manages all of these schedules also recommended that adults who have diabetes should also be vaccinated to protect them against hepatitis B. The number of people with diabetes in the United States is obviously very large. The number of people newly diagnosed every year is about 1.5 million, so just the newly diagnosed alone almost doubles the market opportunity. And that's not counting the bolus of people who are already diagnosed as diabetic and have not been vaccinated. We certainly see the potential for this vaccine growing to be in the $500 million-$600 million per year range.
IBD: Can you comment on the market reaction following Heplisav-B's approval?
Gray: We've seen market reactions to this sort of good news before. There's this sort of idea that there's a portion of the market which isn't terribly interested actually in the approval itself. It operates on the idea of sell on the news regardless of what the future picture looks like. I think it's fairly clear that we experienced some of that. But I think we're very encouraged by our conversations with large and long-holding investors and I think everybody sort of used this as a temporary phenomenon and we can expect the appropriate value for this type of approval to come back into the stock over time.
We have taken a position of not publicly commenting on where we are in any partnership discussions or debates. But I think we've been very clear in what we have said, which is when we look at the profile of this vaccine and we look at how that profile has been translated into the label and we recognize that the adult vaccine market is a very contained, well understood marketplace that's easily accessible, then we do believe that there's a strong story and commitment here to high levels of delivery to stockholders by Dynavax launching Heplisav-B and that's what we intend to do. Now, if somebody comes to us with an offer that recognizes all of that potential and sort of knocks our socks off with that offer, then of course we'll talk to them. But until such an event happens, we're putting together all of our plans to launch Heplisav-B.
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