Shingles Vaccine Development Will Unlock Multibillion-Dollar Market

Key Takeaways

• Growth in the hepatitis B vaccine sector and strategic moves in accessibility could drive future market share and revenue for Dynavax.
  
• Strategic partnerships and share repurchase plans may enhance market reach and shareholder value, reflecting management's confidence in future earnings.
  
• Dynavax's dependence on the U.S. hepatitis B vaccine market and development pipeline introduces risks of revenue limitation and uncertainty from market saturation and clinical hurdles.

Catalysts

A commercial stage biopharmaceutical company, focuses on developing and commercializing vaccines in the United States and internationally.

• Dynavax projects continued top-line growth for HEPLISAV-B with expected net product sales between $305 million and $325 million in 2025, driven by the expanding adult hepatitis B vaccine market in the U.S. and expected market share gains, likely impacting future revenue growth.
  
• The shingles vaccine program offers significant opportunity in the multibillion-dollar market dominated by a single product. Successful development could provide a differentiated best-in-class vaccine, potentially impacting future revenue and market share.
  
• Developments such as Medicare access changes for hepatitis B vaccines at retail pharmacies and inclusion in health care effectiveness data measures are anticipated to improve accessibility and focus, potentially increasing revenue and enabling market share gains for HEPLISAV-B.
  
• Dynavax plans to pursue future strategic partnerships related to its CpG 1018 adjuvant, expanding potential applications beyond current uses, likely impacting future earnings and market reach.
  
• Share repurchase plans reflect an overall strategy to return capital to shareholders, which could impact earnings per share (EPS) positively by reducing outstanding shares and signaling management's confidence in future cash flow and profitability.

Dynavax Technologies Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Dynavax Technologies's revenue will grow by 17.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 9.9% today to 25.3% in 3 years time.
• Analysts expect earnings to reach $113.1 million (and earnings per share of $0.79) by about March 2028, up from $27.3 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $129.5 million in earnings, and the most bearish expecting $97.6 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 27.7x on those 2028 earnings, down from 63.2x today. This future PE is greater than the current PE for the US Biotechs industry at 19.6x.
• Analysts expect the number of shares outstanding to decline by 5.21% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.48%, as per the Simply Wall St company report.

Dynavax Technologies Future Earnings Per Share Growth

Risks

• Dynavax relies heavily on the U.S. adult hepatitis B vaccine market for HEPLISAV-B's success, which exposes it to market saturation risks and could limit its revenue growth if the market does not expand as expected.
  
• The company's profitability and financial projections are heavily dependent on maintaining its high market share against well-established competitors, and any falter in their commercial execution could impact net margins.
  
• The new shingles vaccine, Z-1018, still faces significant clinical and regulatory hurdles; any delays or challenges in demonstrating noninferiority or a favourable safety profile compared to existing products could postpone revenue generation.
  
• Dynavax's substantial reliance on advancement and approvals in their development pipeline for future growth introduces significant uncertainty, which may affect earnings if clinical outcomes do not meet expectations.
  
• The success of partnerships, like the Plague Vaccine program with the Department of Defense, is contingent on external demand and threat assessments, which could impact revenue forecasts if perceived needs shift.

Valuation

• The analysts have a consensus price target of $24.75 for Dynavax Technologies based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $33.0, and the most bearish reporting a price target of just $12.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $447.7 million, earnings will come to $113.1 million, and it would be trading on a PE ratio of 27.7x, assuming you use a discount rate of 6.5%.
• Given the current share price of $13.9, the analyst price target of $24.75 is 43.8% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.