We expect investors’ focus to be on the progress of Dynavax Technologies Corporation’s DVAX coronavirus programs when the company reports second-quarter 2020 results. In the last reported quarter, the company delivered a negative earnings surprise of 12.9%.

Notably, Dynavax’s earnings history is dismal. This biotech company missed estimates in each of the last four quarters, with the average negative surprise being 10.8%.

Shares of Dynavax have gained 55.3% so far this year compared with the industry’s increase of 5.3%.

Let’s see how things have shaped up for this announcement.

Factors to Note

Dynavax has one marketed product in its portfolio, Heplisav-B — its hepatitis B vaccine. The company, on its first-quarter earnings call, had stated that it expects uncertainty due to the pandemic to remain during the second quarter. Although the company has almost a year’s supply of Heplisav-B available in its inventory, adverse impact of the pandemic is likely to have dented sales. We expect the company to provide its guidance for the vaccine’s sales in 2020 on its second-quarter earnings call. Product sales were up 87.5% year over year to $10.5 million in the first quarter.

Dynavax has collaborated with several companies and universities to support development of coronavirus vaccine by leveraging its vaccine adjuvant CpG 1018. These developments may have contributed to increase in research and development (R&D) costs. Moreover, ongoing clinical studies on Heplisav-B are likely to have further added to R&D expenses. However, significant reductions in R&D headcount and the winding down of immuno-oncology programs following its restructuring initiative announced in May 2019 may have offered some respite.

Investors are likely to ask questions on the progress of coronavirus vaccine programs by Dynavax’s partners on the second-quarter earnings call.

Key Development

Dynavax continued to collaborate with other companies during the second quarter and beyond for the development of a COVID-19 vaccine using its CpG 1018 adjuvant. The company had signed a collaboration agreement with the Coalition for Epidemic Preparedness Innovations, the University of Queensland, and Clover Biopharmaceuticals for the same.

The company signed a collaboration agreement with China-based Sinovac Biotech, France-based Valneva, Canada’s Medicago and Taiwan-based Medigen Vaccine Biologics Corporation during the quarter and in July.

In June, Dynavax announced that Clover has dosed first patients in phase I coronavirus vaccine study while Medicago started a phase I study in July. Rest of its partner’s coronavirus vaccine programs are likely to be in pre-clinical stage.

In April, the company announced preliminary data from an open-label study — HBV-24 — on Heplisav-B in patients undergoing hemodialysis. Data showed seroprotection rate of 86.4% at week 20 after four standard doses of the vaccine. Moreover, the company completed enrollment in the study in June. Top-line data from the study is expected in the fourth quarter of 2020.

Why a Likely Positive Surprise?

Our proven model predicts an earnings beat for Dynavax this time around.  The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Earnings ESP, which represents the difference between the Most Accurate Estimate (loss of 22 cents per share) and the Zacks Consensus Estimate (loss of 24 cents per share) is +7.04%.

Zacks Rank: Dynavax currently carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Other Stocks That Warrant a Look

Here are a few pharma/biotech stocks you may want to consider, as our model shows that these also have the right combination of elements to post an earnings beat in their upcoming release.

Pfizer Inc. PFE has an Earnings ESP of +7.03% and a Zacks Rank #3.

Incyte Corporation INCY has an Earnings ESP of +4.62% and a Zacks Rank #3.

Arena Pharmaceuticals, Inc. ARNA has an Earnings ESP of +12.88% and a Zacks Rank #3.

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