Even if no one wants to hear or read about it anymore, the Corona virus still has a significant impact on the daily lives of people around the world. Although around 30% of the world's population has already been vaccinated, this is still far from enough to feel safe. On the contrary, more than 370,000 people have recently been infected with the virus every day, including a particularly high number in the USA. With a total of 41.8 million infections since the beginning of the pandemic, the country also occupies first place in the global Corona ranking.
As the virus continues to run rampant, the U.S. healthcare industry is scrambling like no other to develop suitable vaccines and drugs. Renowned companies such as Pfizer, Moderna and Novavax are at the top of the list, both from an operational and a stock market perspective. However, it is not only the big names that investors should focus on. A look at lesser-known companies could also be worthwhile.
One of these is Dynavax. Founded in 1996, Dynavax is active in vaccine research and also assists other developers with drug boosters. Dynavax has recently made a lot of headlines. Its active ingredient "CpG 1018" is used in the Corona vaccine "MVC-COV1901" from partner Medigen, which recently received emergency approval in Taiwan. The French company Valneva also contains CpG 1018. Although this vaccine is still awaiting approval, the only European vaccine candidate using killed corona viruses is already in the testing phase in the UK.
Even before this is complete, with approval expected by the end of the year, there has been a setback. The UK authorities cancelled a multi-billion dollar supply contract with Valneva. This does not remain without consequences for the supplier Dynavax, which caused a noticeable setback on the stock exchange. The share price fell by a double-digit percentage in response to the news. But all is not lost for the biotech company. According to Dynavax, the company has the right to retain "a portion of the purchase price for CpG 1018 that was prepaid by Valneva, as well as any CpG 1018 that has been manufactured but not yet delivered." In addition, the inventory could be made available to other Covid 19 collaborators. As a result, Dynavax remains positive and continues to believe that the CpG 1018 supply contracts offer a total revenue opportunity of around USD300m to USD400m in 2021.
The company is not just concerned with SARS-Cov-2, however; just this spring Dynavax shone with the approval of its hepatitis B vaccine "Heplisav-B" by the EU Commission. The first EU nation in which the vaccine is to be marketed will be Germany. Together with its partner Bavarian Nordic, the launch of Heplisav-B is scheduled for the first half of 2022. The U.S. Food and Drug Administration (FDA) has also long since given the green light for the immunization of adults against the pathogen. For the US alone, Dynavax estimates the market potential at USD 600 million per year. About 850,000 people are currently infected with hepatitis overseas, 250 million worldwide - and the number continues to rise. Infections have increased by an average of 18% p.a. over the past four years.
If the analyst consensus goes, the company will turn a profit this year. After the long series of losses, the average expects earnings per share of USD 0.70. This is to be followed by a further doubling of profits in 2022. If the experts are right, Dynavax shares would currently be valued at only ten times the results expected for the coming year, despite the months-long price rally. It's no surprise, then, that analysts' assessments are also consistently positive. The five research reports listed by CNN Business all result in a "buy" rating. The price targets range from a minimum of USD 19 to a maximum of USD 23.
However, the recent price setback in the wake of the order cancellation shows that an investment in the biotech stock is not without risk. Setbacks are not uncommon in the sector and sometimes cause share price fluctuations. In order to be able to participate in the opportunities offered by this innovative biotech stock and to sleep soundly at night, Leonteq has structured two Callable Barrier Reverse Convertibles on Dynavax. With the new BRCs, above-average returns are possible even in sideways trading. With a maximum term of 15 months and a risk buffer of a comfortable 45%, a return of 14.00% p.a. is possible with the CHF version. The USD-denominated product even offers a coupon of 15.00% p.a. with otherwise identical features.
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