We’re off to a fresh start in the biotech space, and the end of last week brought with it plenty of catalysts that are likely to spill over into valuation of the companies in question early this week. Here’s a look at some of the key movers, what’s happened, and where we expect things to go next.
The companies we are looking at are Dynavax Technologies Corporation (NASDAQ:DVAX) and Bioline RX Ltd (NASDAQ:BLRX).
Kicking things off, Dynavax.
This one’s a little bit complex, but stick with us. Many reading will likely already be familiar with the name. Dynavax is a vaccine play that ahs spent the better part of the last decade trying to bring a hepatitis B vaccine to market called Heplisav-B. There’s a huge unmet need in the hepatitis B space right now, based on the drawbacks of the current standard of care vaccines in the sector – lead by a brand called Engerix. Basically, people aren’t using the vaccine properly, and so aren’t becoming immune to the HBV virus. Dosing requires a three dose intake spread across a period of months, and studies show that up to 50% of people who take the first dose aren’t completing through to dose end, and as such, and receiving the degree of immunogenic impact need to qualify as immunity.
Dynavax is trying to get its drug approved and in the market based on an advantage that should see it induce immunity off two doses, administered close together.
It’s not that simple, however.
The drug picked up two complete response letters in the past few years from the FDA, with the agency citing safety concerns and manufacturing issues, as well as a number of other submission deficiencies, as drivers behind the CRLs. Markets pretty much worte off the drug, and Dynavax has struggled to pick up any sort of strength.
Just recently, however, the company reported that the FDA has accepted the latest iteration of its Heplisav-B submission for review, and set a PDUFA for this coming August. Finally some good news, and sentiment towards the company (and the vaccine in question) has eased a little.
So what’s making the company move now?
The FDA just reported that it wants an advisory panel to discuss the drug and advise the agency ahead of decision day, and has set said meeting to take place on July 28 – two weeks ahead of the August 10 PDUFA. In response, Dynavax spiked just shy of 10%, before settling to below-open pricing.
For us, the spike is counterintuitive. It means the FDA has some doubts about certain aspects of the application, and that it wants the advice of a panel to clarify these doubts – be that positively or negatively.
So what’s next?
Well, if anything, the spike shows that the company is subject to intense market scrutiny ahead of PDUFA, and that we may see some further volatility near term. We expect markets will load up in anticipation of a positive advisory panel meeting, but this doesn’t mean we’re going to see strength when the agency finally makes its decision.
Moving on, let’s look at Bioline.
This one’s a little less complex.
At the end of the week last week, the company announced that it was pricing a $25 million public offering, and took a hit on the back of the news. Having traded in and around the $1.17 mark mid week, Bioline closed out on Friday for less than $1 a share, and currently trades at $0.93.
Those familiar with the space will no doubt be familiar with this sort of move. Basically, a company issuing shares to raise money translates to dilution of the current shareholder base (as the added shares mean the current shares are representative of a smaller portion of the company’s total value). Markets then sell off on the company to reflect this dilutive impact.
That’s what we’ve seen here – so the question now becomes, can the company recover? The answer to that question is rooted in proceed use – if the company can use the cash to get it to a catalyst, and boost PPS on the back of said catalyst, the dilution will generally negate. Specifically, here, BioLine is looking to use the cash to fund trials, including for two of its lead assets, BL-8040 and AGI-134.
If the cash gets these trials underway, and is enough to carry them through to a data release (interim will do, topline is of course better) then there’s no reason the stock won’t recover – assuming said release is positive.