Dendreon: Healthy Competition Will Boost Profits

Apr.10.12 | About: Dendreon Corporation (DNDN)

There are a lot of rumors floating around that could scare investors. Rumors that Dendreon (DNDN) could go under, rumors that its new 'miracle' drug Provenge is more of a monetary fiasco than a money-making tool, and rumors that Johnson & Johnson (JNJ) has the key to completely demolishing Dendreon: Zytiga.

However, rumors are only rumors for a reason. The CEO of Dendreon, John Johnson, believes that with Zytiga taking center stage, the demand for drugs such as Provenge and others like it will increase. He had this to say: "People have missed that there are a large number of patients sitting in urology offices today who don't know they have metastatic disease...there hasn't been an imperative to identify those patients. Now that we have new agents there is an imperative."

Both Zytiga and Provenge work to help patients with prostate cancer fight the disease, but in different ways. Zytiga is intended to work for patients after going through chemotherapy, while Provenge works for patients that have yet to undergo chemo. There are studies in progress to determine how the two drugs working together might further the fight against cancer, saving more lives and providing one of the first effective treatments to a deadly disease.

If this is the case, and Zytiga could work together with Provenge, then Dendreon isn't in as much danger as the rumors say. In fact, it would mean that Dendreon would partner with Johnson & Johnson in order to fight a larger threat than fluctuating stock price. With this in mind, investors can rest more at ease, and could invest their money in Dendreon for a potentially large payout, depending on the results of the test. It is a gamble, but a gamble with odds weighted more towards the investor.

A third company is in the play, as well. Sanofi (SNY) produces a drug known as Jevtana that works in much the same way as both Provenge and Zytiga, and can potentially work together with the two. Jevtana is also known as Cabazitaxel Injection, and works the same as Provenge - used after patients have been through chemotherapy. Sanofi is one of the big players in the industry alongside Johnson & Johnson, and Sanofi investors stand to benefit from the partnership, as do Johnson & Johnson investors.

To stray from the point just a bit, another company for investors to keep an eye on is Abbott Laboratories (ABT). This company is dedicated to producing new and unique treatments to fight deadly diseases such as cancer. The new method being considered, combining Provenge, Jevtana, and Zytiga, is certainly unique and groundbreaking. The various side effects of anti-cancer medication are usually terrible enough on their own, but three medications taken in unison may have further reaching, unforeseen effects. To that point, further research must be conducted before the positive or negative effects of all three drugs together will be known.

Another company in that same vein is Bristol-Myers Squibb (BMY). This company, much like Abbot Laboratories, is dedicated to creating innovative medicines to cure previously untreatable diseases. Another potentially big player in the market, Bristol-Myers has the chance to rise in the market to a large payoff. Potential investors should keep an eye out.

With all of this in mind, Dendreon is a very, very good company to invest in at the moment, for several reasons. The stock price is currently low, and if investors take advantage of this fact, the risk is even lower than before. The low price combined with the potential that the market holds makes it an almost irresistible investment. If investors spread out the investment among Dendreon, Johnson & Johnson, and Sanofi, then it is a win-win-win situation.

Dendreon has gone through a rough spot due to the initial cost of Provenge, which remains at $93 thousand over a three-treatment span. Compared to the lower cost of Zytiga (around $5 thousand), the difference caused Dendreon stock value to fall, and it has not completely recovered. The original rumor that Dendreon would go under had merit given the situation, but as new developments have come to light, the very drug that might have slayed the dragon, so to speak, is now benefiting it with a bit of healthy competition.

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