Aspire breaks new ground with $30 million investment deal for Dynavax

Financing differs from typical equity line, ATM financing

By Stephanie N. Rotondo

Portland, Ore., Sept. 21 - Aspire Capital Fund LLC's new investment agreement with Dynavax Technologies Corp. is different from a typical equity line of credit - or even a typical at-the-market best efforts offering, according to Steven Martin, the managing member at Aspire.

On Monday, Dynavax said it had secured a $30 million 25-month investment from Aspire. The agreement allows for Dynavax to sell common stock to the investor in multiple tranches.

Aspire has already invested $2 million.

Unlike more commonly seen deals, Aspire is making a "meaningful initial investment and taking real investment risk throughout the deal," Martin explained.

Martin dubbed the deal an "at-the-market firm commitment investment," adding that the sales to Aspire will come from an existing shelf registration and are priced when a notice of sale is given by the company. That means that Aspire is not acting as an agent or broker, but as an investor and a principal.

The sale process differs from a typical ATM or equity line, in which a company would give a notice to sell shares to the investor who would then turn around and sell the stock into the open market during the pricing period without taking any investment risk.

"So we're immediately taking investment risk at day one and the company always knows the sale price before it decides to sell shares to us," he said.

The Dynavax deal, like all of Aspire's deals, does not contain forward or future pricing, Martin said. There are no limitations based on stock trading volume either, giving the company complete control of the pricing and timing.

"This is very much a new thing and very favorable for the company," Martin said. "We're the only ones that do it like this.

"Having been involved in different deal structures over the last 12 years, I've learned you have to align incentives," he continued.

"If the stock is going up, it's good for the company, it's also good for us," he said.

Typically, he continued, Aspire makes these sorts of deals with companies that have a "meaningful cash position."

"They are not in need of money right away, so they can use it correctly," he said.

And, as Dynavax has near $60 million in cash on its books as of June 30, Aspire saw the company as a good investment.

"We think they are an excellent company," Martin said. Along with a good management team, Dynavax also has "great, really impressive partnering relationships" and potentially more to come. "Their lead product is going to do very well, I think," he added.

In its news release announcing the deal, Dynavax's chief executive officer Dino Dina said: "The agreement with Aspire Capital provides us the ability to raise equity capital when we choose at opportunistic prices."

"The financing is designed to complement potential corporate partnership discussions and provide flexibility as we assess multiple value-enhancing strategic opportunities.

"Equally important, Aspire Capital's decision to make an equity investment in Dynavax at a premium to the current market price signals confidence in our prospects for market-oriented initiatives and our ability to deliver results, including the BLA for Heplisav that is targeted for the second half of 2011."

Heplisav is an investigational hepatitis B vaccine and is Dynavax's lead product.

Under the agreement, the company will sell the shares in tranches of 150,000 shares. The tranches may be increased to as much as 1 million shares.

The purchase price per share will be the lower of the lowest sale price for the stock on the sale date and the arithmetic average of the three lowest closing sale prices for the stock during the 12 consecutive business days ending on the business day immediately preceding the purchase date.

Dynavax paid a commitment fee by issuing 600,000 shares, valued at $2.00 per share.

Proceeds will be used for general corporate purposes and working capital.

Dynavax, based in Berkeley, Calif., develops treatments for cancer and allergies, and it is developing a vaccine for hepatitis B.

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