3 Reasons To Buy Dendreon

Mar.24.14 | About: Dendreon Corporation (DNDN)


Availability of Provenge in Europe will drive Dendreon’s sales higher.

The approval of the automation process will help Dendreon improve margins and grow sales.

The market for prostate cancer is expected to grow at a good pace, giving Dendreon room for growth.

Biotechnology company Dendreon's (NASDAQ:DNDN) performance this year hasn't been up to the mark as shares have remained flat so far. This doesn't come as a surprise since Dendreon's recent fourth-quarter results were weak with the company posting a net loss of $296.8 million in the last fiscal year, and quarterly revenue declining 12% year over year. However, this net loss was better than the loss of $393.6 million posted in the prior fiscal period, signifying that Dendreon is making progress, even though it didn't meet analyst expectations.

Europe should help sales

Dendreon is looking to boost sales of its cancer drug Provenge going forward, as it is going to launch it in Europe. Dendreon is focusing on various segments to improve profitability. The company is focusing on improving performance of Provenge, and entry into Europe will be a good move in this direction.

Europe is a potentially big market for Dendreon and the availability of Provenge to urologists and oncologists and their prostate patients in potential markets will enhance the company's sales and profitability. Further, since Provenge is a new therapeutic option for advanced prostate cancer patients, as it works on a different mechanism of action than other therapies, it is expected to perform outstandingly well in these markets and will surely contribute to Dendreon's robust performance in the future.

Dendreon is making Provenge available to physicians and patients through Centers of Excellence, using its contract manufacturing organization, PharmaCell, beginning with Germany and the United Kingdom. Centers of Excellence are institutions where a high volume of prostate cancer patients are treated by leading prostate cancer experts.

Hence, Dendreon has made the right move by moving into this market, and since it is going through Centers of Excellence, it should be able to attract a good number of patients initially. Moreover, Dendreon is planning further expansion in Europe once its automation process is approved as this will help the company reduce its cost of goods sold.

Dendreon has also made a host of management changes in recent times to improve execution and target more markets. The appointments of a chief marketing and a chief customer officer should help Dendreon build invaluable relationships with the customers and patients, and also contribute toward the development of more sound strategies that should enhance its prospects.

Automation and improving accounts

Moving on, Dendreon is working closely with the FDA on automation processes. Automation will allow the company to move into new and existing markets more quickly and efficiently, allowing Provenge to be more broadly available in Europe and other markets across the world. The approval of automation should lead to market share gains for Dendreon as it will be able to manufacture its drug at a lower cost and at a faster space.

Also, Dendreon saw improvements in its oncology and urology accounts by 19% and 2%, respectively. In the next quarter, the company is expecting the positioning of Provenge as a frontline therapy in metastatic castrate-resistant prostate cancer to gain momentum. Lastly, Dendreon is also making improvements to its immuno-oncology pipeline.

Market opportunity

Dendreon's results might have been poor, but the company's strategies and improvements in its immuno-oncology pipeline look promising. The foray into Europe is a good move while progress in the automation approval is expected to lower costs and increase production. So, Dendreon is looking like a good turnaround candidate for the future.

Even analysts are upbeat about the company's prospects as they expect earnings to grow at a rate of 85% in the next five years. This looks achievable since the prostate cancer drug market is expected to grow at a CAGR of 10% till 2022, reaching a size of $8.6 billion in major markets. With Provenge, Dendreon is well-positioned to attack this opportunity and investors should continue to believe in its prospects.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.