Dendreon (DNDN) announced today that it had met with the FDA and received clarification on what would allow Provenge for prostate cancer to be marketed. It is good news for patients and investors alike. Unless the statistics on the ongoing clinical trial come in differently than the two prior trials, Provenge should go to market some time in 2008.
Because Dendreon's stock is in limited supply and much of it is held by long-term investors (including me) it has been subjected to dramatic price swings this year. First investors were surprised when an FDA advisory panel recommended approval of Provenge. Then some bulls were surprised when instead of approving the therapy, the FDA issued an "approvable letter" requiring further data.
Then some analysts and investors treated the approvable letter as if it were a outright rejection.
Now Dendreon has a clear path to market. There is significant risk involved, the risk that survival benefits to patients won't be as clear in the current study, or that some serious adverse events (like patients dying of something other than the cancer) will show up.
However, the likely bet is that the current study will confirm the past studies and that the drug will be approved in 2008.
The real question now is, how much will Dendreon spend on trying its novel technology on other types of cancers? Will it get the same or better results that it got for prostate cancer?
Should investors base the future value of Dendreon (discounted for risk of failure for Provenge) on being a one-therapy company, or is it an industry in the making? As management said, they are likely to be first to market for active cellular immunotherapy for cancer. That could be huge, or it could flop for reasons that are not yet apparent.
Anyway, in my view investors should hold onto their stock. It may take a year or more to go to the next phase. There may be buying opportunities during that year, and there may even be short squeezes were even a confident long-term investor should sell off a bit to hedge the bet.
Dendreon corporate Web site
My Dendreon page
Summary of today's conference