The biggest news at the end of last week in the biotechnology space came from development stage company Dynavax Technologies Corporation (NASDAQ:DVAX). Many reading might already be familiar with this one – the company has spent the last few years trying to pick up approval for its lead development asset, a hepatitis B drug called Heplisav B. It hasn’t had a particularly easy time of it, however. The drug has suffered numerous setbacks along its development pathway from the FDA, most recently in the form of a Complete Response Letter that the agency issued to Dynavax back in November last year. The company responded to the letter and the FDA accepted the response in February this year, but even with an accepted response in place, markets still weren’t particularly optimistic about the chances of the drug picking up approval as and when decision day hits.
As per the most recent announcement, however, sentiment looks to have turned somewhat. Dynavax has just reported that the outcome of a panel review meeting set up by the FDA in the US was overwhelmingly positive, with panel members voting in favor of a Heplisav B approval to the tune of 12 to 1. The primary concerns going into this panel meeting were rooted in the safety of the drug and how it – specifically – interacts with the immune system. With this positive meeting outcome, however, and especially as it relates to the safety data submitted as part of the Complete Response Letter resubmission, it seems as though these safety concerns are no longer in place.
Markets are responding positively, as might be expected, and the company is currently trading at a more than 80% premium to its pre-announcement capitalization. Chances are that we will see this one continue to appreciate as the company moves towards PDUFA, which is set to take place on August 10, 2017. If it does get approved, and the recent meeting outcome suggests that it will, there is a similar upside potential on decision day as we have just seen.
Keep in mind that the FDA doesn’t have to go with the decision of its panel meeting. Just because the outcome was positive doesn’t mean that the drug is guaranteed approval – the meeting is in place to advise the agency, not to make the decision for it. With that said, however, the FDA will normally go with the decision of its panel and especially when the outcome is as one-sided as we have seen here, so it’s not unreasonable to use this vote as a bellwether for the official outcome come August 10.
Another big mover at the end of last week was Tenax Therapeutics, Inc. (NASDAQ:TENX). Unfortunately for the company and its shareholders, however, this one hasn’t gone as favorably as the Dynavax decision did.
The company announced on Friday that the FDA has requested further data to support its lead development program (and application) for a drug called levosimendan. The data must be collected as part of the phase 3 trial, meaning it’s going to be expensive and take time, and for a company the size of Tenax, time and money are far from in abundance. Management is likely going to have to announce an equity raise over the coming few weeks if it is to conduct the trial as requested, and markets are selling off on the company in anticipation of said equity raise (and the dilution it will bring with it) right now. At last close, the company was down nearly 30% on its pre-announcement market capitalization. Exactly how the situation will play out remains to be seen. As per the latest release, Tenax noted that “given the size and scope of such a trial, the Company is reviewing clinical, regulatory and financial options with regard to the levosimendan program in the U.S. and Canada.”
To us, this suggests that management might have to raise on unfavorable terms and there is the potential for the company to offload the drug or seek a partner (and, in return, forgo certain licensing revenues) in order to avoid diluting shareholders to too high a degree.
We will be watching the situation closely as it plays out but expect further weakness in Tenax as this week gets kicked off.