Trade Alert: Revisiting Our Coronavirus Vaccine Platform Name

Over the last part of 2020, the investment community (including me in this case), decided that mRNA vaccines from Pfizer and Moderna were clearly going to be very effective and that Johnson & Johnson’s and other vaccines would likely supplement the mRNA supply to conquer The Coronavirus Crisis.

The virus had other ideas. And as we fast-forward to today, it’s clear that there are major production and distribution issues with the Pfizer and Moderna vaccines and that the new variants seem to be less threatened by the current batch of vaccines. And of course, the developing countries around the world don’t have the ability to pay for the very expensive mRNA vaccines, much less provide the deep freeze distribution chain that they require in order to deliver vaccine to their most vulnerable people. Unfortunately, I am increasingly concerned that the data and trends point to a longer timeline of getting the Coronavirus Crisis under control in most places around the world, probably including the US.

Meanwhile, help is on the way in the form of more vaccine programs in development, including more than one which use Dynavax adjuvant. Just today Dynavax made several announcements indicating significant progress, which we believe has been ignored by investors:

U.K. exercises option for 40M Dynavax/Valneva’s Covid-19 vaccine doses

Dynavax and Clover to commence Phase 2/3 trial of adjuvanted COVID-19 vaccine candidate

Dynavax secures $99M in CEPI funding to support supply of CpG 1018

The first two headlines are particularly compelling. In September 2020, Dynavax Technologies signed a deal with Valneva to supply its CpG 1018 adjuvant for use in Valneva’s SARS-CoV-2 vaccine candidate. Clover is a Chinese vaccine company which apparently is finding the data from its Dynavax-adjuvanted vaccine to be much more effective than the GlaxoSmithKline-adjuvanted they were simultaneously testing.

So, to remind you, this is a rare small cap stock that I’m making a small position in my portfolios. I’m not loading up the boat, as this is not my typical Revolution Investing stock where the company is about to change the world with its technology in a marketplace valued at trillions of dollars. Then again, it sort of is, as it is a platform play on several different vaccines in development and The Coronavirus Crisis is certainly a multi-trillion dollar event. To be clear, there are plenty of risks in this name, as these aforementioned Valneva and Clover vaccines are still just candidates and not proven. For more on Dynavax and adjuvants, here’s most of the write-up I did on Dynavax a few months ago when I’d bought the first time.

Trade Alert: A Coronavirus Vaccine Stock May 6, 2020 by Cody Willard

I have a new name for the portfolio, a platform-like play on potential COVID-19 vaccines. The company is called Dynavax, the symbol is DVAX, and it’s a small cap stock so don’t go nuts chasing it if it spikes here. (I collaborated on this write-up with a friend of mine who’s a biotech hedge fund investor.)

In order to understand Dynavax’s technology, it is worth taking a short detour into vaccines. Vaccines are designed to trick the body into believing it has been attacked with an infectious agent (such as measles, mumps, polio, etc.). An effective vaccine will trigger the body’s immune system in much the same way it reacts to a real viral infection, where the immune system ramps up to fight it off and also generates lasting immunity – priming the immune system to fight again the next time you are exposed. With a vaccine, you get the benefits of having had the infection without the discomfort and risk, and you are usually protected against a real infection if you are exposed in the future.

Classic vaccines have done this with either a killed or weakened (attenuated) version of the real virus which is unable to multiply and cause a real infection, but still looks enough like the real virus that the immunity it triggers will protect you in the future. Since a killed or weakened virus is not especially threatening to the immune system, usually an adjuvant is added to the mix.  An adjuvant is a non-specific immune stimulating agent, and when injected along with the killed or weakened virus it “wakes up” the immune system and helps the body mount a more rigorous immune reaction to the vaccine. For most of the modern medical history, the adjuvant used in vaccines was Alum or a derivative of Alum.  In recent years, a few new adjuvants have been developed – but only 5 adjuvants have ever been developed and used commercially.  Dynavax’s core technology is one of these, something called CpG 1018.

Dynavax’s adjuvant, CpG 1018, is made of certain short sequences of DNA that are common in bacteria but rare in humans.  These are known to be potent immune stimulators and in particular stimulators of something called Toll Like Receptor-9 (TLR-9), which trigger the release of a cascade of potent immune molecules (cytokines, chemokines, etc) and also trigger the growth of key immune cells such as B-cells and T-cells.  In theory, by triggering this powerful immune response when the vaccine is administered, the body will have a more effective reaction to the killed or weakened virus.

Getting FDA approval for a new vaccine adjuvant is a major undertaking. In addition to showing that it can generate a strong immune response and protective immunity, the safety hurdles are extremely high because vaccines are administered to large numbers of healthy individuals.  Dynavax’s CpG 1018 has been approved in a new Hepatitis B vaccine (Heplisav-B), and has been studied in nearly 15,000 individuals.  Not only is the vaccine considered safe, but it provided better immune protection than an existing Hepatitis B vaccine (Glaxo’s Energix-B), and only requires 2 doses over a period of 1 month vs Energix-B which requires 3 doses over a period of 6 months.

Since Dynavax has an approved and proven vaccine adjuvant, they have partnered up with several vaccine efforts related to COVID-19.  In particular, they have announced a collaboration with Sinovac, which has one of the most advanced COVID-19 vaccines in development – currently being dosed in humans.

The company  has a research collaboration with Clover Biopharmaceuticals; the University of Queensland and the Coalition for Epidemic Preparedness; and Sinovac Biotech Ltd. for the development of a vaccine candidate to prevent coronavirus (COVID-19). Dynavax Technologies Corporation has partnership with the Coalition for Epidemic Preparedness Innovations (CEPI) to create a vaccine against COVID-19 infection; and a collaboration with Valneva SE to initiate a vaccine program for the coronavirus, COVID-19.

In other words, DVAX gives us some exposure to several potential COVID-19 vaccines, along with its current growing business lines. Revenues have gone from $8 million to $35 million and should hit more than $50 million this year even without any COVID-19 revenues. Analysts are looking for revenues to hit nearly $90 next year. So there’s some good growth here. But let’s not ignore the risks.

The company’s not profitable yet and is burning more than $100 million a year right now. They might have to raise cash at some point, which is partly why the stock has traded down from $20 to $4 over the last two years here [Update February 1, 2021, it’s at $7 this morning]. The market cap is less than $400 million right now [Update February 1 2021, it’s a $800 million market cap], so it could be quite expensive to current shareholders if the company were to try to raise the money now (or at lower prices if the stock falls from here) [Update Feb 1, 2021, they did a secondary and raised $70 million at $5 a share]. You sort of have to consider yourself a venture capitalist investor in a situation like this.

So to be clear, this is a small cap stock and it could spike when all of you receive this report, so please don’t go wild plowing into it all at once here. I’ve built up a small position in the name at this point, but as usual, I’m leaving myself some room to buy more in coming days and weeks depending on how the news and stock prices change.

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Cody back in real-time Feb 2020. Be careful out there and don’t be greedy. I’m keeping this a small position and will add more later perhaps.