Questions Arise After Dynavax Offering

Does the Drug Work?

While Dynavax was thumping its chest like an NFL defensive lineman holding LaDainian Tomlinson to a three-yard gain, it's important to actually read the New England Journal of Medicine article that propelled the shares skyward.

The phase II placebo-controlled trial of Tolamba, a ragweed-pollen antigen vaccine, failed to meet its primary endpoint: a decrease in albumin in nasal fluid. Albumin is a protein that indicates vascular leakage and inflammation, and it is reduced by standard allergy immunotherapies.

The study did show a decrease in the number of sneezes and other rhinitis symptoms, many of which were reported by the patients themselves.

What is also surprising about the reaction to the study is that the data are five years old and that the trial consisted of just 25 patients, only 10 of whom actually received the drug and completed treatment. A follow-up a year later also showed fewer symptoms, although only six of the original 10 were still in the program.

Dynavax has already released more current data than what were published in the NEJM. In January, the company said patients benefited from Tolamba in phase II/III trials that took place in the 2004/05 ragweed seasons. Additionally, Dynavax expects to release new phase III data in the first quarter of 2007. The primary endpoints of the more recent trials are a reduction in the Total Nasal Symptom Scores (TNSS), which are a measure of mostly qualitative symptoms -- congestion, itchiness, runny nose and number of sneezes.

The company certainly can't control overzealous buyers who don't bother to read the results of the study. However, with a press release planned to trumpet the article, the company knew good news was about to hit the tape. Did it leave money on the table, enriching a few at the expense of its existing shareholder base? At best, the timing of the transaction appears irresponsible. Investors might want to think twice before casting their line into these waters.

Please note that due to factors including low market capitalization and/or insufficient public float, we consider Dynavax to be a small-cap stock. You should be aware that such stocks are subject to more risk than stocks of larger companies, including greater volatility, lower liquidity and less publicly available information, and that postings such as this one can have an effect on their stock prices.

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