Proxy Battle at Dynavax: Deep Track Seeks to Redirect Focus on Heplisav’s Growth

In a high-stakes proxy battle, activist investor Deep Track Capital has formally nominated four independent directors to the board of Dynavax Technologies, challenging the biotech firm’s strategic direction and governance. The move underscores a growing rift between long-term shareholders and the board led by Chairman Scott Myers, who has prioritized acquisitions over capitalizing on the company’s core hepatitis B vaccine, Heplisav. The outcome could determine whether Dynavax becomes a value creator or remains mired in underperformance.

The Case Against Acquisitions

Deep Track argues that Dynavax’s relentless pursuit of acquisitions—none of which have materialized—has diverted management’s focus and resources from Heplisav’s growth. The firm highlights that compensation tied to sourcing external assets for CEO David Taylor has tripled over four years, even as Heplisav’s market share has stagnated at 44% since 2023. “The board’s obsession with empire-building is a costly distraction,” the proxy statement asserts, noting that the company’s enterprise value of $1.8 billion is dwarfed by Heplisav’s potential to generate over $1 billion in cash by 2030.

Heplisav’s Growth Potential—and Pitfalls

Heplisav’s sales have surged fourfold since 2021, yet its market share plateau has raised concerns. Deep Track attributes this to strategic missteps, including the FDA’s rejection of an expanded label for hemodialysis patients in May 2024 and the discontinuation of Tdap-10183, a promising adjuvant-based vaccine, in November 2024. These setbacks, the firm argues, expose the board’s inability to execute complex development programs—a flaw that undermines its push for acquisitions.

The numbers are stark: Dynavax’s TSR has fallen -24.6% since 2022, while the Nasdaq Biotechnology Index rose +24.6%, creating a -49.3% relative deficit. “Investors are voting with their feet,” says Brett Erkman of Deep Track, “but the board has ignored their concerns.”

Governance and Capital Allocation Failures

Deep Track also criticizes Dynavax’s handling of its $714 million cash hoard. Instead of returning capital to shareholders, the company refinanced convertible debt—a decision Deep Track calls “inexplicable.” Only after the activist’s public pressure did Dynavax announce a $200 million buyback program, which Erkman dismisses as “too little, too late.”

The board’s governance reforms, such as de-staggering director terms over three years, are portrayed as a delaying tactic. “This is entrenchment,” the proxy statement argues, noting that three of the four nominees are independent and bring critical expertise in biotech finance and operations.

The Nominees: A New Direction?

Deep Track’s slate includes:
- Brett Erkman: Deep Track’s managing director with 20 years in biotech investing.
- Jeffrey Farrow: A CFO with experience in billion-dollar M&A deals.
- Michael Mullette: Ex-Moderna executive with vaccine commercialization expertise.
- Donald Santel: Former CEO of two acquired biotechs, emphasizing exit strategies.

While Dynavax claims the nominees seek control, Deep Track insists four seats out of nine do not constitute dominance—especially with three independents. The firm also offered to settle by adding two nominees now in exchange for dropping future challenges, but the board refused.

Risks and Uncertainties

Deep Track’s projections—such as the $1 billion cash target—are forward-looking and hinge on factors like FDA approvals and market adoption. The proxy statement cautions that these are not guarantees, though Heplisav’s position as the leading adult hepatitis B vaccine provides a solid foundation.

Conclusion: A Crossroads for Dynavax Shareholders

The proxy battle at Dynavax is a microcosm of broader debates in biotech: Should companies chase growth through acquisitions or double down on their core assets? For now, the data favors Deep Track’s stance. With Heplisav’s sales growing 25% in 2024 and its potential as a standard-of-care treatment, the vaccine’s value far exceeds the company’s current valuation.

The board’s -49.3% relative TSR deficit and misallocation of capital have eroded investor confidence. Deep Track’s nominees—backed by 14.5% of shares—represent a credible alternative. If elected, they could redirect Dynavax toward Heplisav’s full potential, improve governance, and unlock trapped value. Shareholders must decide: Will they cling to a strategy that has failed, or embrace change? The answer lies in the proxy card.