Oncology flirtation exposes Dynavax’s poor capital structure

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Long-term investors in Dynavax Technologies must be rolling their eyes. Two years after de-emphasising the hepatitis B vaccine Heplisav-B to focus on oncology the company is de-emphasising oncology to focus on Heplisav-B. Embarrassing though this U-turn undoubtedly is, it is nothing compared with the circumstances that led to it: a year ago Dynavax took out a $175m loan, and there is today a real risk that it might breach its covenants. At the first quarter the group had gross cash of $183m, but spent $18.3m to sell just $5.6m of Heplisav-B. The loan’s covenants will be breached if Heplisav-B sells less than $30m for the whole year, and if this happens Dynavax will have to repay it in full. Yesterday’s plan to seek buyers for oncology assets like the TLR9 agonist SD-101, and defenestrate Dynavax’s chief executive, could give the group a shot at focusing everything on achieving the sales target. SD-101 yielded promising data in combination with Keytruda at last year’s Esmo meeting, and last month was said to hold promise combined with 4SC’s HDAC inhibitor domatinostat in mouse studies. Over to 4SC.

Dynavax's first-quarter highlights
Operations
Heplisav-B sales $5.6m
Operating net cash outflow ($39.9m)
Balance sheet
Gross cash $183.2m
Gross debt ($175.7m)
Summary of term loan
Maturity date 31 Dec 2023
Principal amount ($177.3m)
Effective interest rate 10.2%
Key covenants Minimum $15m daily cash & investment balance
Minimum $30m of 2019 Heplisav-B sales

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