Dendreon: Key Catalysts in Play

Jun.27.11 | About: Dendreon Corporation (DNDN)

For quite some time, investors have been given guidance from Dendreon (NASDAQ:DNDN) that the company is looking to pull in $350-$400 million in revenue from sales of Provenge in 2011, with most of that coming in the third and fourth quarters.

In order to realize those lofty expectations, and I say "lofty" because first quarter numbers came in at $28 million, a few key events need to go Dendreon's way, most revolving around manufacturing capacity.

One of these events already took place earlier this year when the FDA approved the expansion of Dendreon's Provenge manufacturing capability at the existing New Jersey facility. That approval quadrupled the company's potential pace of producing Provenge - capacity jumped to 36 workstations from the 12 that already existed - indicating that an earnings number in the neighborhood of $100 million is possible for the second quarter.

In order to meet the increasing demand for Provenge, however, and to meet the sales expectations put out by company officials, Dendreon is counting on additional workstation and facilty approvals from the FDA.

Next in line is the Los Angeles facility.

It's expected that by the end of June the FDA will announce whether that facility has passed muster. If it turns out that the FDA rules positively, which many expect that it will, then Dendreon will be well in line to march towards the billion-dollar mark in annual sales (possibly as early as next year).

Later in the summer, the FDA is expected to rule on the company's Atlanta facility, as well.

Given the positive sentiment towards the FDA approving both sites, since the New Jersey expansion went off without a hitch, it's likely that the news will not effect the share price too much, but I wouldn't be surprised to see a push to back over the $40 mark on the news.

That said, any negative developments on the facility-approval front could do some damage to the DNDN share price.

Also keep an eye out for news from the U.S. Center for Medicare and Medicaid Services (CMS), who in March recommended that Provenge be covered in its entirety by the CMS. That recommendation should be turned into a final resolution this summer and that would solidify the already positive events unfolding for Dendreon.

Once these site approvals roll in, the future could come quick for this company and its prostate cancer immunotherapy. The share price could start to trek back towards the 52-week high, but it's likely that a move higher will come by 2012 when annual Provenge sales numbers in the billions become more likely.

Dendreon made history with the historic Provenge approval. Now the company is taking that history and running with it.

Always worth watching.

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