Dendreon Likely to Jump Higher on Strong Pipeline

Jordo is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Dendreon (NASDAQ: DNDN) has fallen 73% since last year. This is due mainly to the fact that Dendreon only has one FDA approved drug on the market, Provenge, a prostate cancer vaccine treatment. The company was expecting $400 million in sales in 2011, but reported less than $350 million. Despite this, I predict that Provenge sales will increase slowly, and the pipeline drugs, though years away from the market, will eventually get FDA approval. My advice would be to continue investing in Dendreon, but keep a close eye on the company over the next few years once its pipeline moves through phase 3 trials and releases the research data. Remember that the FDA will only approve a drug if there is absolutely conclusive evidence of effectiveness. If the data is positive and fully conclusive, then expect a rise in share price.

Dendreon has a 52 week range of $6-$10 and a market cap is nearly $1.5 billion. Dendreon has a competitor in the prostate cancer drug PSMA ADC by Progenics Pharmaceuticals (NASDAQ: PGNX), which has a market capitalization of $329 million, a 52 week range of $5-$11, and a price to earnings ratio of 31.35. Dendreon has one last competitor in the cancer drug Zaltrap by Sanofi (NYSE: SNY), which has a 52 week range of $31-$41, a price to earnings ratio of 13.17 and a market cap of $98 billion.

Dendreon seems to have caught a break in the prostate cancer treatment market. The biggest competitor of Dendreon, Sanofi, has been moving its prostate/colon cancer drug, Zaltrap, through clinical trials and even applied for FDA fast track approval after a successful phase 3 trial in treating colon cancer. The drug is also being investigated for use in fighting metastatic colorectal cancer. This means the target date for FDA approval would be August 4 of 2012. Fortunately for Dendreon, Zaltrap's other phase 3 trial for prostate treatment just released results stating that the study did not meet the pre-specified requirements for increased patient survival. This means that most likely FDA fast track approval is out of the question for Zaltrap. Furthermore, a phase 3 trial that ends in no effect could possibly mean that Zaltrap may need to be taken back to development to make tweaks and improvements, meaning even more time before Dendreon's drug Provenge sees any competition from Sanofi.

Progenics provides more of a challenge to Dendreon. The share price for both companies is nearly identical while Progenics has been increasing in value for the past few weeks. Progenics is set to release a new drug, Methylnaltrexone, in the middle of 2012. This could lead to a greater cash flow and increased stock value that Progenics can use to fund its prostate cancer drug, PSMA ADC, through clinical trials and onto the market to compete with Provenge. Progenics is in very good position to move ahead of Dendreon and it would not be a bad idea to invest in Progenics over Dendreon.

Dendreon will see competition from Johnson & Johnson (NYSE: JNJ) and Medivation (NASDAQ: MDVN). Medivation recently released the phase 3 trial results on its prostate cancer drug MDV3100. Compared to placebo patients, the drug increased the average survival span by 4.8 months. Johnson & Johnson's prostate cancer drug Zytiga is FDA approved and has also shown to increase life expectancy by 4 months. Both of these drugs have similar efficacy and effectiveness. Due to the effectiveness and affordability of both drugs, Medivation and Johnson & Johnson will attempt to bottleneck Provenge sales.

Even though I think Dendreon is a risky investment at the moment, investors should still consider it. With Progenics poised to overtake Dendreon and all of the negative light on Provenge, I highly suggest watching Dendreon closely and investing accordingly until its pipeline is close to FDA approval over the next few years.

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