Deep Track Capital Proposes Four Exceptional Candidates for Dynavax Technologies’ 2025 Board Election

by Ron Finklestien

Updated On: February 19, 2025 12:42 pm

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Investor Group Calls for Change at Dynavax to Protect Shareholder Interests

Issues Letter to Fellow Shareholders Highlighting the Need for Independent Voices on the Dynavax Board

Raises Concerns Over Company’s Acquisition Strategy and Its Impact on Shareholder Value

Deep Track Believes Heplisav Could Generate Nearly $2 Billion in Cash for Shareholders by 2030

Points Out Poor Governance and Lack of Constructive Dialogue from the Current Board

Proposes Nominees to Bring Shareholder Perspective and Expertise to the Dynavax Board

Deep Track Capital, LP, a leading shareholder in Dynavax Technologies Corporation DVAX (“Dynavax” or the “Company”), owning approximately 13.53% of Dynavax’s outstanding shares, has nominated four candidates for election to the Board of Directors during the 2025 Annual Meeting of Stockholders. Additionally, Deep Track released a letter addressing concerns to fellow shareholders.

The full text of the letter follows:

February 19, 2025

Dear Dynavax Shareholders,

Deep Track Capital, LP is one of Dynavax’s largest shareholders, possessing approximately 13.53% of the Company’s shares. We manage over $4 billion for our investors, which include healthcare organizations and non-profits, and our focus is exclusively in the life sciences sector. Since our founding in 2021, we have invested billions in over a hundred companies to support the development of innovative therapies. Notably, we first bought shares of Dynavax nearly 15 years ago to support the development of Heplisav, an advanced adult vaccine for hepatitis B. Our investment in Dynavax has steadily increased, illustrating our belief in the Company’s potential.

Heplisav is a highly valuable asset poised for years of growth, which will only improve as it gains market traction. Unfortunately, the Company has not focused on fully leveraging Heplisav’s potential. Instead, it has engaged in what we see as a misguided effort to expand through acquisitions led by the current Chairman of the Board, Scott Myers. We believe the Board is prioritizing cash-burning acquisitions over investing in the existing assets that hold excellent prospects for both shareholders and patients.

While Deep Track typically avoids active involvement in company matters, our significant investment in Dynavax compels us to point out several troubling developments.

Dynavax has seen nearly $1 billion in adjuvant sales during the pandemic, but as of now, the Company’s cash reserves stand at $714 million. Instead of wisely utilizing these funds, the Board has instructed management to invest in external assets, offering bonuses if successful acquisitions are completed.
The Board has failed to provide a logical basis for these aggressive demands on management to seek new acquisitions, leading us to believe the intention is more about expanding their influence than genuinely maximizing shareholder value.
We are immensely concerned that Dynavax risks wasting its significant financial resources on misguided acquisitions that may harm profitability and undermine the potential returns from Heplisav.

Challenges Faced During Attempts at Productive Engagement with the Board

We sought constructive engagement with Company leadership for many months. Upon filing a Form 13D with the SEC on September 16, 2024, we expressed our desire for the Company’s management and Board to openly discuss performance, operations, and effective use of excess cash. During these discussions, we urged the Board to consider four key actions to protect and enhance value for shareholders:

Cease the search for external assets, which has been ongoing for nearly four years;
Significantly expand the share repurchase program;
Implement a tax-efficient return of capital against the Company’s accumulated $910 million deficit; and
Focus solely on advancing Heplisav to become an essential asset for any major pharmaceutical company with vaccine offerings.

Despite our efforts in engaging the Board through numerous meetings, it has become evident that the Board is more focused on maintaining power and following its flawed strategy than on delivering value to the shareholders.

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Deep Track Calls for Meaningful Change at Dynavax Amid Governance Concerns

Recent actions by Dynavax have raised significant concerns among shareholders about governance practices. The company has adopted measures that limit shareholder rights while implementing minimal reforms that appear to follow industry standards rather than genuine engagement. Here are three notable instances highlighting these issues:

Poison Pill Strategy: Following an amendment to our 13D filing on October 24, 2024, which indicated our ownership at 13.6%, Dynavax’s Board swiftly adopted a poison pill strategy. This move restricts any shareholder’s stake to no more than 15%, hindering the ability of investors, including ourselves, to fully support the company’s growth prospects.

Share Buyback Announcement: Two weeks after our amended 13D filing, the Board revealed a $200 million share repurchase plan—something we had been advocating for a long time, but sentiment shifted only after our public engagement.

Board Changes Without Substance: Recently, Dynavax announced the replacement of two directors as a reaction to our discussions, claiming these changes would “enhance [their] governance profile.” While these additions check some boxes, it remains unclear how they genuinely address governance issues. This appears to be a calculated move to keep independent voices at bay, as both new directors have past ties to Harpoon Therapeutics.

Despite these setbacks, Deep Track has persistently sought constructive discussions aimed at real change. We proposed three candidates for the Board and suggested a compromise: one nominee alongside three shareholder-friendly initiatives. These included eliminating the poison pill, increasing the share repurchase to $400 million, and declassifying the Board after the 2025 Annual Meeting of Stockholders. Unfortunately, these proposals were rejected, leading us to conclude that achieving substantial change may require appealing directly to all shareholders.

Board’s Strategy Fails to Benefit Shareholders

Under the current leadership, shares of DVAX have struggled. The performance metrics indicate poor returns over time, as demonstrated in the table below:

Event	Date	DVAX Then	DVAX Since*
IPO	2/18/2004	$75.00	-82.7%
Heplisav approval	11/9/2017	$20.05	-35.5%
Board chair appointed	10/21/2021	$18.85	-31.4%

*As of market close on February 18, 2025

Total shareholder returns (TSR) have also shown a lackluster performance compared to the Nasdaq Biotechnology Index.

DVAX Total Shareholder Return

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Dynavax’s Struggling Share Performance Raises Investor Concerns

Despite strong annual sales growth, Dynavax is facing serious scrutiny from investors regarding its future strategies and financial choices.

	1-Year Through Unaffected Date**	Chairman Tenure* Through Unaffected Date**	Chairman Tenure Through Present
DVAX	-24.6%	-42.9%	-31.4%
Nasdaq Biotechnology Index	24.6%	-2.9%	-5.9%
Relative TSR:
DVAX vs. Nasdaq Biotechnology Index	-49.3%	-40.0%	-25.5%
Source: Bloomberg
* Scott Myers was elected Chairman on Oct. 21, 2021
**Deep Track filed its amended Schedule 13D on Oct. 24, 2024

This disappointing performance comes despite Dynavax’s impressive 26% annual sales growth. Investor concerns about future value and questionable financial choices have seeped into discussions surrounding the company. In an attempt to address perceived weaknesses, the management team and Board argue that acquiring external assets is crucial, citing expectations that revenue from Heplisav will plateau after 2030. However, this reasoning raises several red flags for analysts.

Underestimating Heplisav’s Potential: Relying on acquisitions diminishes confidence in Heplisav, considered a top-tier vaccine destined to avoid generic competition. Investors seek the full commitment of management and the Board to maximize this asset. Even with potential revenue flattening, profit margins are likely to grow as Heplisav gains traction in the market.
Results of Acquisition Strategy: Despite years of pursuing external programs, Dynavax has little to show for its efforts. The Board set acquisition goals in 2021 and tasked management with creating a growth strategy by 2022. To date, these initiatives have led to no successful acquisitions, diverting focus from the company’s core product, Heplisav.
The Need for Clear Direction:

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Dynavax Faces Pressure for Change as Heplisav Shows Promise

Concerns Over Current Board’s Direction

The primary emphasis of Dynavax’s commercial strategy lies within the retail pharmacy sector. There are limited complementary vaccines that would strategically align with Heplisav, and Dynavax lacks the financial capacity to obtain them. Management has expressed hesitance to engage in clinical risks when acquiring external assets, significantly narrowing the options available. None of these options can compete with the return potential offered by Heplisav and DVAX shares at present.

Heplisav: A Key Asset for Dynavax

Dynavax is behind Heplisav, a top-tier adult vaccine for hepatitis B, a viral infection that can lead to severe outcomes such as liver cancer. With the Centers for Disease Control and Prevention (CDC) endorsing increased vaccinations for adults in 2022, we anticipate steady growth in Heplisav’s sales. This vaccine is immensely valuable, especially as Dynavax does not face a looming patent expiration. Heplisav could serve as a lasting source of revenue for decades, offering substantial profitability.

According to Dynavax’s long-term sales projections and consensus estimates, we predict Heplisav will generate over $1 billion in cash through 2030. When factoring in the $714 million in cash projected by the end of 2024, this suggests approximately $2 billion could potentially be returned to shareholders by 2030. This figure exceeds the current market capitalization of the company, including the convertible note due in May 2026. Renewed focus on Heplisav has the potential to unlock more value, with options including monetizing royalties, borrowing at favorable rates to increase shareholder returns, or possibly selling Heplisav to integrate it into a larger vaccine portfolio.

Time for Shareholder-Led Change

Shareholders of Dynavax deserve a Board and management team committed to Heplisav and attuned to their interests. Our ongoing discussions with the Board have revealed a disconnect in this regard. We have developed notable concerns about the current leadership:

Not a single Board member up for election this year, including the chairman, has purchased DVAX stock in the open market.
Mr. Myers, Chairman of Dynavax, also chairs three other companies (Zentalis ZNTL, Umoja, and Convergent Therapeutics). We are worried his multiple roles may compromise his effectiveness. Despite earning an average of $440,226 annually over the past three years, this level of pay does not align with a -31% drop in DVAX share value since he joined Dynavax.
Dynavax employs a staggered Board structure, which complicates shareholder voting. Although the Company recently proposed to declassify the Board structure, changes would not take effect fully until 2028.

A Call for a Refreshed Board

To spur meaningful improvements at Dynavax, we are nominating four qualified candidates for the upcoming Annual Meeting. These nominees will provide the necessary experience, passion for shareholder interests, and skills to enhance the long-term value of Dynavax while pursuing the mission of eliminating hepatitis B. Given the current Board structure and the unevenness of board member elections, it is crucial for shareholders to have real options in selecting candidates.

The director candidates from Deep Track include:

Brett Erkman: A Managing Director at Deep Track Capital, Mr. Erkman brings two decades of biotechnology investment experience. His long-standing involvement with Dynavax since 2010 provides invaluable insight into Heplisav’s potential.
Jeffrey Farrow: Currently Chief Financial Officer at Tarsus Pharmaceuticals TARS, Mr. Farrow also served as CFO at Global Blood Therapeutics, which Pfizer acquired for $5.4 billion. He has a proven track record in driving financial performance.

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AstraZeneca and Horizon Pharma Make Noteworthy Acquisitions

Major Sales in Biotech: ZSPH and HPTX Transactions

ZSPH was sold to AstraZeneca for $2.7 billion, while HPTX was acquired by Horizon Pharma plc for $1.1 billion.

Leadership Changes at Lykos Therapeutics

Michael Mullette is currently the interim Chief Executive Officer at Lykos Therapeutics. Previously, he was the Vice President of North American Commercial Operations at Moderna, Inc. MRNA. With nearly twenty years at Sanofi SNY, he held various senior roles in global commercial operations.

Donald Santel’s Career Highlights

Donald Santel, the former President and Chief Executive Officer of Hyperion Therapeutics HPTX, successfully launched Ravicti for urea cycle disorders before Hyperion was acquired by Horizon Pharma in 2015. Before that, he served as CEO of CoTherix CTRX, which developed Ventavis for pulmonary arterial hypertension, later sold to Actelion in 2006.

Shareholder Engagement Opportunities

Shareholders will have a chance to voice their opinions in the upcoming Annual Meeting. Dynavax stands to benefit from a change, and shareholders can take confidence that our nominees are committed to prioritizing shareholder interests. Historically, we have always aligned our goals with those of all shareholders and look forward to further discussions in the coming weeks.

Regards,

David Kroin
Founder and Chief Investment Officer, Deep Track Capital LP

APPENDIX: NOMINEE BIOGRAPHIES

Brett Erkman

Brett Erkman has been a Managing Director of Deep Track Capital since October 2022, an investment firm focused on life sciences. Before this, he invested in biotechnology at Great Point Partners from October 2006 until April 2022. He also worked as a sell-side associate at ThinkEquity Partners and as a financial analyst at Abbott Laboratories. He holds a B.S. in Finance from DePaul University.

Jeffrey Farrow

Jeffrey Farrow has been the Chief Financial Officer and Chief Strategy Officer of Tarsus Pharmaceuticals, Inc. since April 2023. Additionally, he has been a board member of Clover Biotherapeutics since September 2021. He served as CFO of Global Blood Therapeutics, Inc. from April 2016 to December 2022, playing a key role in the launch of Oxbryta for sickle cell disease. Prior to that, Farrow was CFO of ZS Pharma, acquired by AstraZeneca in December 2015, and previously held various leadership finance roles across biotechnology firms, including Hyperion Therapeutics and Evotec AG. He earned a B.A. in Business Administration from California State University at Fullerton and is a certified public accountant (inactive).

Michael Mullette

Michael Mullette has extensive experience in drug development and commercialization, currently serving as the interim CEO of Lykos Therapeutics since September 2024 and COO since March 2022. He led commercialization efforts for Moderna’s COVID-19 vaccine as the North America commercial operations VP from July 2020 to March 2022. Mullette spent nearly twenty years at Sanofi in various capacities and earned a B.B.A. from Villanova University and an M.B.A. from Lehigh University.

Donald Santel

Donald Santel is the chairman of Tentarix Biotherapeutics and serves on several boards including Aerovate Therapeutics, a public biotechnology company AVTE. He was CEO of Hyperion Therapeutics from June 2008 until its sale to Horizon Pharma for $1.1 billion in May 2015. His earlier roles include leading CoTherix, which was sold to Actelion for $419 million in January 2007. His background includes tenures at various medical device companies, enhancing his expertise in the biotechnology field.

Deep Track Capital Moves Ahead with Proxy Solicitation for Dynavax Technologies

Mr. Santel holds an M.S. in electrical engineering from the University of Minnesota and a B.S.E. in biomedical engineering from Purdue University.

About Deep Track Capital

Deep Track Capital, headquartered in Greenwich, Connecticut, specializes in investments within the life sciences sector. The firm aims to form lasting partnerships with the management teams of prominent public and pre-IPO biotechnology companies. Beyond providing capital, Deep Track commits time and expertise, utilizing its extensive network to support its partners. The firm seeks to lead transactions and participate in rounds led by other qualified investors.

Understanding Forward-Looking Statements

This information includes “forward-looking statements,” which can be identified by words such as “may,” “will,” “expects,” and “believes.” These statements indicate anticipated plans or goals and are subject to risks, uncertainties, and assumptions. There is no guarantee that any ideas or assumptions will prove correct. If certain risks materialize or assumptions fail, actual results may differ significantly from those projected. Therefore, these statements should not be seen as confirmations from Deep Track regarding the achievement of future plans or expectations.

Third Party Statements

Some statements and information included herein may derive from third parties. Deep Track does not guarantee the accuracy, completeness, or timeliness of such information. Unless specifically mentioned, authorization to reference these statements has not been requested or obtained. Readers should not interpret these statements as endorsements by third parties of the views expressed here.

Updates on Information

Deep Track disclaims any responsibility to update the information presented or to disclose the outcomes of any revisions made to forward-looking statements. Changes reflecting events after the date of the information or for anticipated occurrences will not be published.

Participants in the Proxy Solicitation

Deep Track and other participants plan to file a preliminary proxy statement along with a WHITE universal proxy card with the Securities and Exchange Commission (SEC). This filing will be for the solicitation of proxies regarding the election of director nominees at the 2025 annual stockholders meeting of Dynavax Technologies Corporation (DVAX). Following the filing of the definitive proxy statement with the SEC, Deep Track will distribute this document to eligible stockholders.

The participants include Deep Track, Deep Track Biotechnology Master Fund, Ltd. (the “Record Stockholder”), David Kroin, and individuals Brett A. Erkman, Jeffrey S. Farrow, Michael Mullette, and Donald J. Santel (collectively referred to as the “Participants”).

As of today, the Deep Track Parties own a total of 17,791,486 shares of common stock, which represent approximately 13.53% of the total shares outstanding. This figure is based on 131,454,561 shares as reported in DVAX’s Quarterly Report for the third quarter of 2024. Each of the Deep Track Parties is considered to have shared power over the votes of all Deep Track Shares. Currently, the other Participants do not hold any shares of common stock.

Important Information and Accessibility

Deep Track advises all DVAX stockholders to review the preliminary proxy statement and any amendments or supplements filed with the SEC. These documents will contain essential information and will be available at no cost on the SEC’s website at www.sec.gov. The definitive proxy statement will also be accessible by contacting the Participants’ proxy solicitor, Innisfree M&A Incorporated, at 501 Madison Avenue, 20th Floor, New York, NY 10022 (stockholders can call toll-free at: (877)-687-1865).

¹ Press Release, Dynavax Raises $44 Million Through Public Offering of Common Stock and Warrants
² Press Release, Dynavax Announces Preliminary Unaudited Fourth Quarter and Full Year 2024 Financial Highlights
³ Page 42, DVAX 2024 Proxy Statement
⁴ Press Release, Harpoon Therapeutics Appoints Lauren Silvernail to Board of Directors
⁵ Page 40, DVAX 2022 Proxy Statement
⁶ Page 26, DVAX 2023 Proxy Statement
⁷ Page 42, DVAX 2024 Proxy Statement

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