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Dendreon (NASDAQ:DNDN) introduced the first proven immunotherapy, Provenge for metastatic, minimally symptomatic, castrate-resistant prostate cancer, in the United States after FDA approval in 2010. After a spike in the stock price to over $50 per share, it became apparent that sales were not meeting expectations. Profits have never materialized despite restructuring. Dendreon hit a 52-week low of $3.69 on October 31, 2012.

The two events that would mark a turnaround are approval to commercialize Provenge in Europe and increased sales in the United States.

Today Dendreon announced the European CHMP (Committee for Medicinal Products for Human Use) recommended that Provenge be granted marketing authorization in cases where chemotherapy is not yet indicated (see press release: Dendreon Receives Positive Opinion for Provenge in European Union).

While this makes it very likely that the EMA (European Medicines Agency) will approve Provenge later this year, it should be emphasized that it is no guarantee.

If the EMA does grant approval, there is still the question of what pricing Dendreon will be allowed in Europe, where this is more of an issue than in the United States. Pricing is particularly important because of the high cost of manufacturing Provenge. That high cost has been one of the key factors in Dendreon's lack of profitability to date.

Dendreon has not announced whether it will market Provenge itself in Europe or will work with a partner.

While there is still considerable risk going forward, I believe Dendreon is now clearly undervalued and increased my long position on reading the news.

At a price of $4.31 per share, Dendreon's market capitalization is just $679 million.

Actual revenues in Europe are not likely to materialize until 2014, and Provenge will be subject to the same competitive pressures it has seen in the U.S. On the up side, having been approved in the U.S. and Europe it should be possible to gain approvals in many other nations without further clinical trials.

For further background see my prior article, Dendreon's Provenge Revenue Trends.

Disclosure: I am long DNDN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.