Although the broad market saw a sharp buoyancy after the election, including even in the range bound and sluggish biotech sector, the positive note seems to be ending as soon as it began. Both the S&P 500 and the Dow Industrials are slightly down; incongruently, the IBB is carrying through the day in a positive note.
Hillary Clinton’s comments against price-gouging in the biotech sector last year has had a terrible impact on the entire sector, from which we still haven’t recovered. It was hoped that with the election now behind us - as well as the prospect of a Hillary presidency - that biotechs will rise from the depths of the last 12 months.
While that seems to be true of the broad sector as seen in the IBB, the market was hit by the Dynavax (NASDAQ:DVAX) complete response letter from the U.S. Food and Drug Administration today. As a result of the negative FDA response, the stock has slumped more than 70% in the bloodbath that followed.
A few weeks ago, DVAX fell 10% when the FDA’s advisory committee meeting was cancelled. Some investors believed this was rather harmless, while others thought the worst.
Today, the latter seemed to have been proven correct. The FDA issued a CRL - a Complete Response Letter - which basically rejects DVAX’ application for approval for Hepsilav-B the way it stands now. Hepsilav-B is a much-touted vaccine for Hepatitis B, a major unmet need. However, the CRL basically asks the same questions as before, and in fact it says that the FDA is yet to review some of the pending material.
However, what is disturbing is that with the delay, DVAX may not be able to carry things forward. As the CEO noted in a conference call today: ”The CRL is consistent with our opinion that Heplisav-B is approvable and we are seeking to meet with the FDA as soon as possible," said Dynavax CEO Eddie Gray, in a statement.
"However, the time and resources that will be required to gain approval leads us to consider that we may not be able to advance this program on our own and we are moving swiftly to identify a potential pharmaceutical or financial partner."
It’s anyone’s guess what will happen with this stock going forward, but the future doesn’t seem bright at this point as shares dive into 52-week-low ranges.
