William Blair report on DVAX

1. Equity Research
Healthcare | Biotechnology
Dynavax Technologies Corporation
August 28, 2012
Heplisav VRBPAC Panel Set for November 14-15; Key Issues to Watch; Stock Rating: Outperform
Reiterate Outperform Company Profile: Aggressive Growth
Price Target: $9.00
On Tuesday, August 28, before the markets opened, Dynavax announced that the
FDA has set November 14-15 as the date for a Vaccines and Related Biological Symbol: DVAX (NASDAQ)
Products Advisory Committee (VRBPAC) panel to discuss Heplisav’s approvability. Price: $3.89 (52-Wk.: $2-$5)
A favorable vote could lead to potential approval and launch in the United States in Market Value (mil.): $660
first quarter 2013. We continue to assign 90% probability to eventual approval and Fiscal Year End: December
a full adult label (18-70 years as opposed to 40-70 years). We note that Dynavax Long-Term EPS Growth Rate:
submitted Heplisav’s biological license application (BLA) in April, pursuing an indication Dividend/Yield: None
for immunization against infection caused by all known subtypes of hepatitis B virus in 2011A 2012E 2013E
adults aged 18 through 70. On June 26, Dynavax announced that the U.S. Food and Drug Estimates
Administration (FDA) accepted the BLA and assigned the BLA a Standard Review, EPS FY $-0.39 $-0.40 $-0.18
establishing a PDUFA (Prescription Drug User Fee Act) date of February 24, 2013. CY $-0.40 $-0.18
Sales (mil.) 22 9 74
We summarize the key issues to watch for in the VRBPAC panel review as follows. Valuation
FY P/E NM NM NM
• Efficacy should be unequivocal. Heplisav has been shown to be superior to the
CY P/E NM NM
current standard of care Engerix-B in all populations tested to date, so the
discussions on efficacy should be unequivocal.
Trading Data (FactSet)
• Safety will be the focus of discussion, in our opinion. To date, the safety profile of Shares Outstanding (mil.) 125
Heplisav has been shown to be comparable to Engerix-B. Integrated safety analysis Float (mil.) 112
demonstrated that serious adverse event (SAE) rates for Heplisav and Engerix-B are Average Daily Volume 1,805,454
2.7% and 3.7%, respectively. Integrated autoimmune event rates are 0.23% for
Financial Data (FactSet)
Heplisav and 0.35% for Engerix-B. To our knowledge, no single category of adverse
Long-Term Debt/Total Capital (MRQ) 0.0
events stands out at a higher incidence than others in Heplisav-vaccinated subjects.
Book Value Per Share (MRQ) 0.8
• Discussions might also focus on the one case of Wegener’s granulomatosis that put Enterprise Value (mil.) 475.9
EBITDA (TTM) -49.5
Heplisav on clinical hold during 2008-2009. In March 2008, the FDA placed a clinical
Enterprise Value/EBITDA (TTM) -9.6x
hold on Heplisav after occurrence of a single SAE of Wegener’s granulomatosis, a rare Return on Equity (TTM) -63.9
form of autoimmune vasculitis that stains positive for c-ANCA, in a Heplisav-vaccinated
subject. A few months later, a vasculitis SAE was confirmed in a subject in the Engerix- Two-Year Price Performance Chart
B arm as well, stained positive for p-ANCA, demonstrating a more-balanced incidence
of systemic vasculitis between Heplisav and Engerix-B (3:1 randomization favoring $5
Heplisav). During the clinical hold, Dynavax re-tested more than 9,000 sera from $4
subjects vaccinated with Heplisav, and none of the sera, except for the one Wegener’s $3
case, was positive for c- or p-ANCA. Further, no presence of ds-DNA antibodies
(another indicator of potential autoimmune events) was detected either. After removal
$2
of the clinical hold in September 2009, Dynavax launched two Phase III studies $1
involving over 3,000 subjects and a data safety monitoring board (DSMB) was put in $0
12/31/10 12/30/11
place to detect and adjudicate SAEs and autoimmune-related SAEs. Heplisav passed
Sources: FactSet, William Blair & Company
every review by the DSMB, and the final integrated safety data, as discussed above, estimates
shows numerically lower adverse event rates than Engerix-B. Thus, we believe the
VRBPC panel might come to the conclusion that Heplisav is not likely associated with
Wegener’s (statistically, the p value for this event is 1.00, meaning a random event).
Dynavax Technologies (Berkeley, California) is a biotechnology company that has developed a
diverse pipeline of toll-like receptor (TLR) drug candidates for the treatment of infectious,
respiratory, autoimmune, and inflammatory diseases.
Y. Katherine Xu, Ph.D. Filippo Petti
+1 212 237 2758 +1 212 237 2741
kxu@williamblair.com fpetti@williamblair.com
Please consult the last page of this report for all disclosures.
William Blair & Company, L.L.C. receives or seeks to receive compensation for investment banking services from Dynavax
Technologies Corporation. Investors should consider this report as a single factor in making an investment decision.

2. William Blair & Company, L.L.C.
• The mechanism of the novel adjuvant in Heplisav, a TLR9 agonist, might be discussed as well. Heplisav is the first
product containing the novel adjuvant TLR9 agonist that is up for approval. We note that GlaxoSmithKline’s (GSK
$45.79) Cervarix was the first vaccine approved in the United States that contained a novel adjuvant (a TLR4 agonist)
other than alum. The FDA approved Cervarix for preventing human papillomavirus (HPV) infection in October 2009,
two and a half years after the first submission of the BLA and one month after removing the clinical hold on Heplisav.
We understand the traditional cautious stance from the FDA on the safety profile of novel vaccine adjuvants, but
believe that should the Heplisav package demonstrate a satisfactory safety profile, it is highly likely that the FDA will
approve the vaccine, as it did Cervarix. We believe the FDA recognizes the high unmet need in the hyporesponsive
populations and desires to have these subjects adequately protected against potential HBV infection.
• The extent of the label: for adults over 40 or over 18. After the removal of the clinical hold, the FDA instructed that
further studies should be conducted in older adults who are less responsive to the currently licensed vaccines,
including adults over 40 years of age, and individuals with chronic kidney disease. In February 2012, the FDA agreed
in the pre-BLA meeting that Heplisav’s label could be expanded to include healthy adults between the age of 18 and
70, which is the full adult label. We believe the VRBPAC panel could discuss this topic as well and vote on it.
We maintain our Outperform rating and $9 price target. We continue to believe that if approved, Heplisav will become the
standard-of-care hepatitis B vaccine in six years after launch; we continue to assume 90% probability for Heplisav to reach the
market. We forecast peak sales of $330 million for Heplisav in 2018 for the CKD population and the HIV/HCV/liver disease
population, and Dynavax has a commercial organization of 150 people in total for the U.S. market. For the U.S. diabetic
opportunity, although Dynavax could cover this market itself, we continue to model a bell-shaped curve peaking at about $475
million in revenue, with 35% royalties (net of COGS) to Dynavax on total U.S. sales from a partner with an established diabetes
franchise, to be conservative. With such assumptions, we derive the fair value of the stock at $9 per share. We believe Dynavax
shares continue to represent a compelling risk/reward opportunity.
Risks to our Outperform thesis include regulatory risks and intellectual property risks associated with Dynavax’s lead
candidate Heplisav, as well as risks related to business development and clinical development activities.
2 | Y. Katherine Xu, Ph.D. +1 212 237 2758

3. William Blair & Company, L.L.C.
William Blair & Company, L.L.C. was a manager or co-manager of a public offering of equity securities for Dynavax Technologies Corporation
within the prior 12 months.
William Blair & Company, L.L.C. and its affiliates beneficially own or control (either directly or through its managed accounts) 1% or more of the
equity securities of Dynavax Technologies Corporation as of the end of the month ending not more than 40 days from the date herein.
William Blair & Company, L.L.C. is a market maker in the security of Dynavax Technologies Corporation and may have a long or short position.
Additional information is available upon request.
Dynavax Technologies Corp. (DVAX)
Current Rating: Outperform
Aug 27, 2009 - Aug 27, 2012 Previous Close: $3.71
6/2/11 - I-O
$5
11/14/11 - O - PT:$8
$4
11/18/11 - PT:$10
$3
5/9/12 - PT:$9
$2
6/15/11 - PT:$8
$1
11/3/11 - R - PT:$8
$0
12/31/09 12/31/10 12/30/11
Source: William Blair & Company, L.L.C. and FactSet Initiation, RI = Reinitiated, @ = Analyst Change PT = Price Target
Legend: I =
Current Rating Distribution (as of 07/31/12)
Coverage Universe Percent Inv. Banking Relationships* Percent
Outperform (Buy) 61 Outperform (Buy) 7
Market Perform (Hold) 34 Market Perform (Hold) 2
Underperform (Sell) 1 Underperform (Sell) 0
*Percentage of companies in each rating category that are investment banking clients, defined as companies for which William Blair has
received compensation for investment banking services within the past 12 months.
Y. Katherine Xu attests that 1) all of the views expressed in this research report accurately reflect his/her personal views about any and all of the
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4 | Y. Katherine Xu, Ph.D. +1 212 237 2758