Dendreon's Provenge: Looking Past The Noise

Dendreon Corporation (DNDN) took a huge fall the past few days after the FDA released an update to their "Approvable Letter", asking for additional information regarding the efficacy of Provenge. This drug is, as most would say; "potentially revolutionary because it aims to teach the body's own immune system to attack tumor cells."

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

Comments

[H S:]

One "minor" point has been forgotten here. Could there be another reason for this decision?

One has to ask himself whether a 17-0 vote that the product is safe; a vote made by a panel organized by the FDA that consisted oncologists and immunologists - the same panel that voted 13-4 that the product is effective will result in a negative decision by this same FDA IN A "VACUUM"??? or, in other words, is there a chance that the FDA wouldn't had approved Provenge in a "pressure free" environment?

Heck ... just check the HUGE short position on DNDN and the HUGE open interest in the option market to imagine that ~others~, non-medical/scientific considerations "might" have been involved in this decision ...

--- please correct me if i am wrong ---

thank you very much, corrupted world

2007 May 14 02:08 PM

[eric.whitman:]

1. Active cellular immunotherapies have been around for decades--and have never been shown to work in humans. What do you think a "tumor vaccine" is (see Antigenics, Canvaxin)?
2. The statistics are very clearcut that Provenge does not necessarily provide ANY survival benefit. There are two parallel trials. One shows that there "may be" a 4 month benefit. The second trial, identical to the first, showed no survival benefit at all. The third trial, with 500 patients, won't have results for several years. There MAY be an interim report in mid-2008.
3.The 13-4 vote was not about efficacy. See Dr. Scher's letter at psa-rising.com/blog/in.... The question was changed mid-meeting by the Committee Chair from "establish the efficacy" to showing "substantial evidence."

FINALLY, the FDA has made a reasonable data-driven decision in the face of massive ill-informed emotional support for a drug that may or may not work. We do clinical trials to get answers, not to go back afterwards and look for better questions.

2007 May 14 02:52 PM

[H S:]

eric.whitman:

2. Does p=0.01 indicates "maybe"? It is 4.5 MEDIAN SURVIVAL ADVANTAGE. Taxotere showed ONLY 11 weeks survival advantage. The second trial DID SHOW over 3 months of SURVIVAL ADVANTAGE but unfortunately it was underpowered, hence, it wasn't stat-sig. Please explain why P=0.01 is not stat-sig?

3. The question was CORRECTED so that it will be EXACTLY THE SAME as the efficacy questions that are being asked on every AdCom. Want to talk about Scher? Why don't you check his COI (Conflict Of Interests) here???

Shame on the FDA that overturned a drug with NO safety issue that a vast majority of the panel member found it to be efficacious. SHAME SHAME SHAME.

This is all about money, money and more money!

2007 May 14 04:25 PM

[Andrew Hor...:]

Maybe there is some confusion with this, but it does seem rather odd that Dr. Sher is so outspoken on this, especially as this therapy seems to be safe. It does seems blatently obvious to all there are many conflicting parties that are lobbying for or against on this one and more odd that it was voted to be unanimously "safe".

According to most definitions, efficacy In a medical context it indicates that the therapeutic effect of a given intervention (e.g. intake of a medicine, an operation, or a public health measure) is acceptable. 'Acceptable' in that context refers to a consensus that it is at least as good as other available interventions to which it will have ideally been compared to in a clinical trial. For example, an efficacious vaccine has the ability to prevent or cure a specific illness in an acceptable proportion of exposed individuals. In strict epidemiological language, 'efficacy' refers to the impact of an intervention in a clinical trial, differing from 'effectiveness' which refers to the impact in real world situations.

Also let's tell the whole story, the wording was changed to substantial evidence of th EFFICACY, which is, as H.S. writes, the common phraseology. The FDA uses a vague language set to ensure that they will no be held liable for a failure of an approved drug. It is their way out...By the way, a 90% historical correlation on approvals with the FDA and Advisory Panel is rather impressive. What changed?

Finally, have you noticed that there have been times that the FDA has been wrong (Vioxx as an interesting example). There is plenty of evidence that Provenge does extend life, but the primary endpoint was not reached which was to slow the growth of PC. The endpoint miss was extraordinary slight and the initial endpoint of Study 9901 barely missed tolerance of p =.052

The study clearly showed that Provenge was effective in extending life. This in conjunction with other treatments that can slow progression are a good "cocktail" that may help to slow the progression of PC and to extend life, maybe long enmough for other, yet to be discovered restatements to work.

One more point, as HS writes, there were a few conflicts that are well documented about 2 of the 4 on th panel that voted against. Scher has requested a waiver as he has an interest with the direct competitor of DNDN. He receives grants and potential stock from the DIRECT COMPETITOR OF THE DRUG HE DID NOT WANT TO APPROVE! Isn't the a concern in that.
Take a look at the waiver letter (www.fda.gov/ohrms/dock... ) for yourselves.

What would you say if we had Larry Ellison voting on whether or not Microsoft's Access database should approved for use and sale to the public? <b>Of course there is a "Slight" conflict there.</b> I do not mean to trivialize the importance of the FDA and their difficult job of protecting humans from harmful drugs like Tysabri, Vioxx....etc)

This is a MESS!!!!!! And stinks to high Hell!

2007 May 14 06:24 PM

[hpski:]

H.S. makes an excellent point vis-a-vis "non-medical", AKA, "it's about the money", theoretical short seller pressure on FDA. FDA's decision is what it is, and I am not a conspiracy theorist by any means. However, when viewed within the context of the current WH residents; their criminal arrogance and contempt for anything interfering with wealth accumulation for themselves and a few cronies, the blatant, intelligence insulting lies and verbal shell games, makes me takes H.S.'s suggestion seriously. Had I connected these, "gray area', albeit theoretical dots, I would have sold my entire position into the post AC meeting run-up. Never underestimate this crew's sociopathy - whenever we do, "boom!", there's another malignancy rearing its ugly head, and, as will all neoplasms, it's only the tip of the iceberg. If a nouveau rich short seller needs to reply by calling me a, "whiner", go for it - I figure in the 80's you were long IBM and short Wang......

2007 May 15 12:34 PM