Waiting for the FDA, with Dendreon

Patience has proven to be a virtue for Dendreon investors. On the other hand, you might want to invest in some valium, because no matter how confident Dr. Gold and the rest of Dendreon's management is, we won't have an FDA approval of Provenge for prostate cancer until we actually have it.

We should have it by May 1 (called the PDUFA date; don't ask), but we could get an earlier response, and you can't truly exclude a delay. The working presumption is that Provenge will be approved, based on the data from the IMPACT study that shows it prolongs time of survival in men with bad cases of prostate cancer, with no significant side effects.

Meanwhile, Dendreon has bet big with investors' money. They will be ready to start manufacturing Provenge for paying patients on May 1. Each patient has blood taken out, then treated to create Provenge, then reinjected. The first facility is in New Jersey, and even as we speak it is being expanded. Additional facilities in Orange County and Atlanta are in the works and should be online by mid 2011. If they are, and the demand is there, Dendreon could be showing a profit by the end of 2011. After that profits could be considerable as operating costs should be far less than setup costs.

In Q4 2009, Dendreon spent $36.4 million. Some of that is R&D for other therapies beyond Provenge, but most of it is in anticipation of the launch.

Getting started quickly is important because if active cellular immunotherapy (ACI) works for Dendreon, it is going to work for other companies as well. That is the nature of nature. Each cancer type, or even subtype, treated needs to be studied in clinical trials in order to get FDA approval. The failure to success ratio will probably continue to be high. The company that gets the most approvals becomes the new cancer king, say by 2020. People who own that company will be like the Microsoft Millionaires of 1990. But that company is not necessarilly Dendreon. Bigger companies will compete, or buy up successful startups. Lots of money is going to be spent in this race, so I guess I should be looking into equipment suppliers for this space, too. But certainly Dendreon, if Provenge is approved, will have a good headstart.

I would not assume that FDA approval will automatically result in a Dendreon price spike. It may be factored into the current price; when a spike fails to materialize, short-termers will probably sell on the news. At this point Dendreon is a play for long-term investors, those who can wait five to ten years for outsized returns.

And remember that in medicine, things can go wrong even after FDA approval, as we have learned from quite a number of companies these past few years.

I have owned Dendreon stock since August 2004. It has been a roller coaster.

See also:
my Dendreon 2/22/2010 analyst conference summary
my Dendreon main page . Talk about Provenge like you actually know something about it!
Dendreon web site

Keep diversified!