NEW YORK (
) -- My first column for
last September and was titled
"Dynavax: The BioRunUp Trade Into An FDA Panel."
Run-up traders experienced only mediocre gains.
(DVAX - Get Report)
shares at $3-plus only rose to $5 before pulling retrenching shortly before the FDA released briefing documents reviewing Dynavax's hepatitis B vaccine Heplisav.
The FDA panel, held in November, voted strongly in favor of Heplisav's efficacy, but turned negative on the vaccine's safety. The mixed vote caught many investors by surprise and caused Dynavax shares to tumble.
Since December, Dynavax's stock price has been hovering largely in the 2.50-$3 range, but slowly creeping up in anticipation of the upcoming FDA approval decision date for Heplisav on Feb. 24. Let's take a look at three factors that will fuel a more robust Dynavax run-up into the FDA approval decision date -- something the stock failed to do for the advisory panel.
1. I'm not always a fan of technical analysis when it comes to trading biotech stocks, but a few, basic indicators can be important. Dynavax shares have been in a steady upward pattern since the $2.50 lows in early December. There is a clear gap down created on the chart around the $4-per-share level. This gap in the chart is viewed as "open space" by many traders, as there is no recent history of resistance or support in this area. If a stock can gain positive momentum into this open space, it can quickly "fill the gap'" and trade back at levels where it left off.
2. Sentiment, particularly in the online trading community, is leaning strongly in favor of Heplisav approval. In my experience, when sentiment is positive, stocks tend to run up as the catalyst nears. The opposite is true when sentiment for a biotech event is negative -- these stocks tend to sell off.
3. The sell-off in Dynavax following the mixed FDA panel vote was overdone. The panel over-reached on safety, and if you paid attention to the FDA's view, you'd realize that the agency's more positive view wasn't likely swayed. Remember, too, that the
FDA could approve Heplisav with some restrictions
that alleviate panel members' concerns, as Adam Feuerstein pointed out last week.
These three factors, combined, make me confident that Dynavax will give run-up traders healthy percentage gains in the days ahead as we get closer to the Feb. 24 FDA approval decision. As always, make sure to exit trades before the FDA decision.
Messier is long Dynavax.