Shares have traded between $3.57 and $25.25 over the last 52 weeks, and had more than tripled since the FDA panel decision on March 29. By the end of the day on Thursday, shares were resting at just over $5.00. A fall from a high place if ever there was one.
By their own account, Dendreon is at the forefront of introducing the first in a new class of therapy known as Active Cellular Immunotherapies [ACIs]. The goal of Active Cellular Immunotherapy is to turn the immune system "back on" to elicit a specific and long-lasting response against cancer. Dendreon's lead ACI candidate, sipuleucel-T, is for the treatment of aysmptomatic, metastatic, androgen-independent prostate cancer.
Quite different from other chemotherapies, this is not an outright “broad based attacker” that aims to rid cancer from the body by essentially destroying everything in its path. It is can be seen as the use of one’s own "healthy" cells to working to clear the "bad" cells. Think of it as taking some of your own cells out for a walk, providing them with ingredients to help fight your cancer and then putting them back in your body. Then they spread the news on how to combat the bad cells allowing for the body to heal itself.
It seems that if any of the claims being made are even 50% accurate, there is more here than meets the eye. First, let’s examine the fact that the FDA advisory committee found that the mortality claims and the toxicity attributes of Provenge were low. In fact, they voted 17-0 on the side of Dendreon in their March 29th announcement regarding this issue.
In addition, there was reasonable statistical evidence to show that the treatment was beneficial to the test groups that had been participating in the company’s ongoing clinical trails. In that same announcement they stated that there was "substantial evidence" that Provenge was efficacious. Panel members voted 13-4 in favor of its efficacy. With all of this, why did the stock lose the majority of its value, falling $11.41, or 64.3 percent, to close at $6.33 the day the FDA requested additional information?
Here are some of the facts:
We know that, Dendreon is running a 500-patient clinical trial looking to see if Provenge has the ability to help those live longer who have had prostate cancer spread within their bodies. There are no known successful treatments available today for this specific cancer and this is one of the reasons that so much hope has been put into this trial. A good outcome would surely cause the FDA to approve commercial use.
Now it is believed that the earliest the latest trial data will become available is sometime in 2008. Realize while this is later than was first hoped for, it is not that long away and full results should be seen by 2010. The problem is that this DNDN may need to receive cash infusions in order to keep the trials going for longer than was anticipated and this will happen without revenue from sales. This could eventually create a hardship for the company, dilution to investors and could keep the share price down.
There has been a question raised about the trial’s efficacy by a select few who have stated that there may have been flaws in the efficacy results. At the heart of the question is the basis for the results. In past studies, short-term results have been the desired outcome for cancer drugs. Those drugs that have been used to fight off and hinder progression are looked at from a standpoint of disease velocity. Almost all treatments have been looked at in terms of the speed at which the either halt or slow malignancy.
This is precisely why the 1, 2 or 5-month addition to survival is statistically important up until now. Yet one has to question the basis of the underlying mechanism the FDA uses to provide approval for the distribution and sale of cancer related drugs. By no means do I have anywhere near the understanding and the experience as they do in this regard, but here is a thought: What if the current paradigm that is being used for the approval process is somehow flawed? What if the treatment that is being tested needs to be reviewed from a very different vantage point? What if this particular type of treatment can possibly help to bring about a change in the body's own chemistry that will allow for an entirely different approach to the treatment of cancer?
Well, the truth is it still remains that the core benchmark is the extension of life. Even if Provenge is a remarkable medical breakthrough, in the end the patient must live long enough for it to work. If there is no significant increase, then the treatment will never be able to effectively work. That is of course there is some combination of life extension drug or treatment along with the new breed of Active Cellular Immunotherapies.
Obviously, it is a bit discouraging that the FDA is postponing their final decision from a shareholder’s standpoint. Realize that this is not the end of this story and there is likely to be much more to this story. From all of the information reviewed, it still seems to be a viable benefit to those who have participated in the trial. The company is down but not out by any means. With an aging population looking to find a cure, there is a good chance that there will be monies available to continue the research into this promising medical technology.
Sometimes we need to be in early with a Biotech company as the outcomes of a study can be suddenly beneficial to a shareholder, even when least expected. The current request by the FDA with regard to Dendreon seems to be a short-term distraction and it may just be the time to take a small position in the stock. Even after the announcement of a quarterly loss that was wider than anticipated and the scuttle that there may be upcoming layoffs, the stock managed to rally throughout the trading day on Friday.
The main attraction for the investor in DNDN is not this specific treatment. Provenge seems to be the tip of the iceberg that may become a sea-change in the biotech war against cancer. This particular treatment is the first of its kind and the possibilities are rather encouraging. This is the reason that this stock is seeing such interest. We need to look past the "noise" and wait until we see the statistically significant results before we abandon ship. This is just too important for too many people with a disease that until now is incurable.
Know this, there will be volatility. In the end, as this is right on the cutting edge of a medical breakthrough, it may be worth a bit of risk.
Disclosure: As of this writing, clients of Horowitz & Company own shares long of DNDN.
DNDN 1-yr chart