After privately vying for a change to Dynavax’s corporate strategy for months, life sciences investment firm Deep Track Capital is publicly launching a proxy fight in a bid to steer the company in a new direction.
Deep Track has nominated four directors to Dynavax’s board and sent a letter to other shareholders Feb. 19 announcing its intention to refocus the company’s efforts to its sole approved asset, hepatitis B vaccine Heplisav, rather than what Deep Track calls a “misguided empire-building exercise” of pursuing external asset acquisitions.
Deep Track’s senior members first invested in Dynavax about 15 years ago to support the development of Heplisav, according to the letter, and the firm currently owns about 13.5% of Dynavax’s shares.
Deep Track outlined several concerns about Dynavax’s current board, which now has 11 members but will drop back down to the previous head count of nine after the elections at the company’s upcoming 2025 annual meeting.
These concerns include the fact that none of the board members up for election, including Chairman Scott Myers, has ever purchased Dynavax stock on the open market; that Myers also serves as chairman of three other biotech companies; and that Dynavax staggers board elections rather than putting every member up for election at once.
Deep Track’s four proposed candidates include the firm’s managing director Brett Erkman as well as three independent biotech execs: Jeffrey Farrow, chief financial officer at Tarsus Pharmaceuticals; Michael Mullette, interim CEO at Lykos Therapeutics; and Donald Santel, former president and CEO of Hyperion Therapeutics.
“In our view, the board’s unwillingness to compromise, coupled with the urgency of addressing the risk that the company squanders its cash, warrants this level of change,” Deep Track wrote.
Since 2021, Dynavax’s board has instructed management to seek out external assets to purchase, Deep Track detailed in the letter. However, “these efforts have yielded nothing, and we believe continuing this effort will only further distract management from growing Heplisav,” the investment firm said.
Dynavax came out with a lengthy statement and attacked Deep Track Wednesday night. In the release, the biopharma said that the firm, "and in particular its founder, David Kroin, have become fixated on a strategy for Dynavax based on significantly flawed financial and strategic assumptions." It said that whilst it had been attempting to work with Deep Track, the firm had instead been "insistent on a value destructive plan," that included "abandoning portfolio diversification" and running what it called a "strip-mining plan."
That plan is being seen through, Dynavax argues, by this attempted change of board members. The company argues that it already has since August been seeking out new directors "as part of its ongoing refreshment program." The biopharma added that Deep Track initially proposed three new directors, but that Dynavax only saw one as being "additive to the Board."
Dynavax said its board sees the proxy contest as "unreasonable," but that it still "remains committed to constructive and reasonable engagement with Deep Track, while ensuring that the best interests of all stockholders—not only those of Mr. Kroin and his fund—are protected and represented."
Heplisav was approved in 2017 and is projected to generate more than $1 billion through 2030, according to Deep Track.
Dynavax has two other vaccines currently in development: a wholly owned vaccine for shingles and a Department of Defense-partnered vaccine for plague. Deep Track made no mention of either candidate in its letter.
Another early-stage asset, a combination vaccine for tetanus, diphtheria and acellular pertussis, was dropped in November 2024 after phase 1 data failed to impress.
Last month, Dynavax revealed changes to its board that it said were part of a "refreshment program." These include appointing Emilio Emini, Ph.D., and Lauren Silvernail to the board as well as seeking shareholder approval to phase out Dynavax's staggered board elections.
Deep Track called these changes "reactive," noting that Silvernail is connected to Myers through Harpoon Therapeutics just like the board member she is replacing, Julie Eastland. The firm also expressed concern that changes to the board's election structure, so that all board seats come up for election at the same time, won't be fully implemented until 2028.
Dynavax reports its full-year 2024 results Feb. 20.