Dynavax Technologies (DVAX) rose sharply on Friday after announcing that its Biologics License Application (BLA) for hep B vaccine HEPLISAV-B is headed for an Advisory Committee meeting on Nov. 16. The PDUFA date for HEPLISAV-B has been set on December 15th.
DVAX’s vaccine combines 1018, a proprietary TLR9 agonist adjuvant, and recombinant hep-B surface antigen. The vaccine has shown earlier protection with fewer doses than currently-licensed vaccines and a safety profile similar to licensed hep-B vaccine.
Dynavax has worldwide commercial rights to HEPLISAV-B. DVAX plans to focus its initial commercialization efforts on the U.S. market. I have valued DVAX based on HEPLISAV-B’s potential in the U.S. alone. The U.S. Hep B vaccine market is estimated at $270 million. GlobalData expects the global Hep B market to cross $1 billion by 2022. The market is estimated at $1.19 billion in 2022. The good news for DVAX though is that most of the growth in vaccine sales is expected to come from the U.S. While the CAGR or compounded annual growth rate for global Hep B market is seen at 2.2%, according to GlobalData, the CAGR for the U.S. market alone is seen at 3.4%. Further, GlobalData expects U.S.’s share of the global market to cross 60%, 61.7% to be precise. So by 2022, DVAX’s focus market i.e. the U.S. could be worth around $650 million.
To value, DVAX, I assumed that HEPLISV-B captures 75% of the market at peak. I calculated the terminal value in 2025. The discount rate was assumed at 8% and the continued growth rate to calculate the terminal value is assumed at 3%. I assumed that the addressable market for DVAX in 2016 in the U.S. is around $350 million and growing at a CAGR of 3%. I assumed a 90% probability of approval, which is the average for drugs under review with the FDA.
Based on these assumptions, I get a fair value for DVAX of $51.32. That is more than two times the current levels.