What's Next for Dynavax?

Dynavax Technologies is down more than 30% in early trading today following a Food and Drug Administration rejection for its hepatitis B vaccine Heplisav. The FDA cited safety and manufacturing concerns but indicated a willingness to consider a more limited approval. What's next for Dynavax's lead drug candidate?

Rejection recalibration
Hepatitis B is an infectious disease that affects the liver. Acute patients may show few symptoms, but chronic cases can lead to cirrhosis and other potentially fatal conditions.

Heplisav was closely watched last year because it presented similar efficacy as GlaxoSmithKline's Engerix-B, but offered vast dosage improvement. Glaxo's drug includes up to four doses given over the span of six months; Dynavax's drug has two doses given in one month. The approval of Heplisav may significantly increase the lackluster rates of vaccine adherence.

But that time hasn't come... yet.

Heplisav's complete response letter from the FDA wasn't shocking. An advisory panel last fall voted against the drug's safety but in favor of efficacy. The panel's main problems were the lack of diversity in trial participants and the fact that the drug includes a novel adjuvant. Vaccines often include adjuvants, which improve the chances of an immune response, but the panel noted that Heplisav's might pose severe autoimmune risks.

The FDA's willingness to talk about a restricted approval indicates that Heplisav still has a shot at getting to market for at-risk patients, such as older patients with diabetes since the risks of hepatitis B could outweigh the possible side effects of the drug. A narrow approval would beat no approval, but Dynavax will need to seek broader indications further down the line.

What now?
Heplisav remains under review in the EU for the general adult population and those with chronic kidney disease -- a common comorbidity for hepatitis B.

Dynavax should meet with the FDA within the next six weeks to discuss Heplisav's future. If the company wants approval, it will take the narrower treatment population. But Dynavax should simultaneously circle back for further trials that include a more diverse population and better safety data.

While you can certainly try to make huge gains in biotechs like Dynavax, the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

The article What's Next for Dynavax? originally appeared on Fool.com.

Fool contributor Brandy Betz owns no shares of the companies mentioned. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.