Dynavax Technologies Corp

Dynavax Technologies Corp (NASDAQ: DVAX) is a Pharmaceuticals & Biotechnology Company. The Company is focused on the development and commercializing of innovative vaccines that improve the immune system to prevent disease.

Investment Highlights - Dynavax Technologies Corp – Buy at USD 9.60

• The Company has shown strong operational performance in the third quarter of FY2020 and has a strong product pipeline.
• In the last three months, the Company delivered a significant return of ~128.57% and delivered higher returns compared to the benchmark Index.
• As per valuation metrics, the EV/Sales multiple of Dynavax Technologies Corp is currently lower as compared to the corresponding multiple of the Biotechnology & Medical Research industry. It reflects, shares are undervalued as compared to the industry.
• From the technical standpoint, shares were trading well above the support level of 20-day simple moving average prices (USD 8.95), which reflects an uptrend in the stock and can move up further.

Key Risks

• Any change in regulations and government policies could affect the overall business of the Company.
• The covid-19 outbreak has resulted in supply chain and clinical trials disruptions which will have a negative impact on the Company’s performance.

Recent News

On 19 February 2021, Dynavax Technologies announced that it had received Marketing Authorization from European Commission for HEPLISAV B.

Financial Highlights – Q3 and 9M FY2020 (30 September 2020) (released on 5 November 2020)

(Source: Quarterly Report, Company Website) 

• In the third quarter and nine months period of the financial year 2020, driven by higher product revenue, the total revenue increased to $13,414 thousand and $27,001 thousand, respectively.
• Driven by higher revenue and lower operating expenses, the profitability for the period improved.
• The cash balance as on 30 September 2020 declined to $32,688 thousand (31 December 2019: $39,884 thousand).

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: EV/Sales Approach (NTM) (Illustrative)

Conclusion

The Company has shown an increase in financial performance in the third quarter and nine months period of the financial year 2020. Both the top-line and the bottom-line performance improved, with higher profitability margins. Despite a decline in liquidity position, DVAX has reported a well-positioned balance sheet. The Company has a strong future product pipeline, and it’s HEPLISAV B has received approvals from FDA in the US and from the European Commission, which will further help in revenue growth in the near future. Dynavax Technologies’ operational performance was not materially impacted by the impact of the covid-19 pandemic, while it resulted in the delay in clinical trials, increased costs and disruption in the supply chain. The stock made a 52-week low and high of USD 1.80 and USD 12.44, respectively.

Based on the above rationale, we have given a “Buy” recommendation on Dynavax Technologies Corp at the closing price of USD 9.60 (as on 22 February 2021), with a lower double-digit upside potential based on 0.73x EV/NTM Sales (approx.) on FY20E sales (approx.).

*Dividend Yield may vary as per the stock price movement.

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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