Berkeley Drug Company Secures New Funding

A Berkeley biopharmaceutical company announced last week it has obtained a $30 million financing commitment from a private fund, safeguarding the development of its two flagship treatments.

The 18-month agreement guarantees Dynavax the ability to sell up to $30 million worth of stock to Azimuth Opportunity Ltd. at a discounted rate, said Deborah Smeltzer, the company's chief financial officer.

Money secured through the agreement will most likely support Tolamba, a treatment for ragweed allergy, and Heplisav, a vaccine for Hepatitis B, which are both still undergoing clinical trials, Smeltzer said.

Without the additional funding, Dynavax development would have risked running low on cash mid-2007, said Katherine Xu, a research analyst for Pacific Growth Equities.

The funds will help Dynavax reach critical development points for the two drugs, she said.

If clinical trials yield positive performance data, the company's stock price could rise by more than 100 percent, according to Xu.

The company could then seek further financing with better terms, she said.

"(The agreement) provides a safety net for them to get to where they want to safely," Xu said. "After that they can go out and raise money."

Founded in 1996, Dynavax currently has 10 treatments and vaccines in clinical trials or development, including flu and anthrax therapies funded by federal grants. Eighty employees staff its southwest Berkeley lab, Smeltzer said.

Dynavax is seeking to develop treatments in which patients will receive a series of injections and gain months to years of immunity, she said.

"It's a disease-modifying approach," Smeltzer said. "A lot of drugs just treat symptoms. What our drugs do is treat the underlying disease mechanism."

The new agreement provides Dynavax financing at better rates than a loan from an investment banking group would, Xu said.

Azimuth Opportunity Ltd., based in Toronto, will purchase stocks at a discount of between 4 and 7 percent under the financing arrangement, depending on the price of the stock, Smeltzer said.

On the other hand, the agreement poses several limitations. For example, Dynavax cannot sell a large portion of its shares at once and cannot sell shares below a minimum price level.

"The downside (to the agreement) is that there are lot of restrictions and if the stock really does not perform well the financing is not going to be there for them," Xu said.

The new arrangement adds to a $50 million agreement reached with Symphony Capital last April.

After Dynavax announced the deal, the company's stock price rose eight cents Friday to close up 2 percent, according to Yahoo! Finance.

The agreement will help the company reach new milestones for its stock price, Xu said.

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