Good News for Dendreon's Provenge

Feb.18.11 | About: Dendreon Corporation (DNDN)

Dendreon (NASDAQ:DNDN) made a big splash this past year by getting FDA approval for the first active cellular immuno-therapy for cancer. Its lead product Provenge trains the immune systems of men with advanced prostate cancer to recognize cancer cells as foreign and kill them. This is a major cancer breakthrough and resulted in the shares briefly hitting 57 right after approval only to settle down into the 40's, and following a reimbursement scare last June, into the 30's, where it has stayed of late. Now there is news that should prove favorable to the company and the share price.

This just in from the American Society of Clinical Oncology conference: researchers at Duke University analyzed the patients in all three control arms from the three Phase III studies of Provenge, Dendreon's first-approved active cellular immunotherapy for advanced prostate cancer, and reported in an abstract submitted for publication to the Journal of Clinical Oncology that the salvage product given to 2/3 of the control arm patients after their disease progressed appears to confer its own survival benefit.

The big deal is that there has been much hooha in the press about the $93,000 course of treatment price tag for Provenge when it "only gives 4.1 extra months of life".

First, this "only 4.1 extra months of life" line is dead wrong. The treatment extended life by a MEDIAN of 4.1 months. For the statistics challenged media, this distinction evokes a blank stare, but it's pretty simple. In statistics, the median is the halfway point in a series of numbers. So half the men treated with Provenge survived less than an extra 4.1 months, and half survived more than an extra 4.1 months. In fact, many men survived extra years, and of course, any man who receives Provenge is hoping he will be in the extra years group. 32% of men in the treatment group were alive at three years.

Second, and the important news from the ASCO abstract, is that "Frovenge", the frozen Provenge product given in the control arm of the studies, may itself extend life.

This would mean that the "4.1 months of extra life" line, aside from being totally wrong from the start, is now probably what we might call "super totally wrong", since even the 4.1 month figure came from comparing Provenge not to a pure placebo, but to Frovenge in 2/3 of the men.

The bottom line is that the median life extension offered by Provenge is looking like it is actually much longer than 4.1 months.

Good news for those invested in Dendreon.

This should also be a big deal to Medicare in its review of coverage for Provenge. A national decision on Medicare reimbursement for Provenge is due by March 30. 15 of 15 regional Medicare contractors have already decided to cover Provenge, as have all the major private insurers.

Maybe there is also at least some chance that now the national media may get it right and start reporting the true survival benefit of Provenge.

The fundamentals of the company are impressive. Dendreon is fully ramping up for the Provenge launch with three new factories to produce the product scheduled to come online by the second half of this year. They have been meeting the initial massive demand for Provenge (there are more than 100,000 men in the US with the type of prostate cancer Provenge is approved to treat), with just 25% of the capacity of their initial New Jersey plant. Plants in Atlanta and Los Angeles and completion of the New Jersey plant will increase capacity ten-fold.

The company just raised $604 million dollars in an unique, non-dilutive convertible financing managed by JP Morgan, and now has close to a billion dollars in cash to support the Provenge launch in the US and expansion into Europe, where meetings with regulators have led the company to believe no additional trials will be required for the approval of Provenge by the EMA.

The company not only owns 100% of the rights to Provenge both in the US and worldwide, but the antigen delivery cassette technology on which Provenge is based is transferable to the treatment of other cancers. They just filed a New Drug Application with the FDA in December for permission to begin a phase II trial for their product Neuvenge for the treatment of advanced bladder cancer.

Analysts predict tremendous revenue growth from the Provenge launch: consensus estimates are for between $375 and 400 million dollars in revenue for 2011, and reaching an annual rate of $800 million in the fourth quarter 2011.

At the recent JP Morgan Healthcare Conference, Morgan reiterated its buy recommendation with a one year target price of 66.

Disclosure: I am long DNDN.