Dendreon's (DNDN) flagship drug Provenge has faced a rocky road, but it continues to fight back and overcome all of the doubters. It is the main reason I believe Dendreon is still a quality investment, but it is not the only reason I would put my money where my mouth is.
Dendreon is focused on something few others are: a cancer therapy that aims to do more good than harm. Unfortunately, common treatments for cancer, such as chemotherapy, come with a boatload of side effects. Do not get me wrong, the treatments are valuable and, in many cases, shrink a tumor and prolong a patient's life. However, this is accomplished at the cost of destroying healthy cells and creating other problems such as anemia and immunodeficiency problems.
The common "symptoms" of cancer are often caused by the treatment and not the disease, such as the loss of hair and the nausea and exhaustion. Some chemotherapy treatments are even carcinogenic themselves and lead to unhealthy cell growth in other parts of the body. Dendreon's goal is to create treatments that avoid all of these problems and its first effort in the "healthy" fight against cancer is its drug Provenge.
Provenge focuses on building the body's immune system to fight cancerous tumors and heal without introducing chemotherapy into the body. It is important for both patients and investors to understand that Provenge is not a cure for cancer, and Dendreon is not claiming that it is. It is a treatment intended to prolong the life of cancer patients and enable the body to better fight the growth of a tumor.
Provenge is not treated as a miracle development by investors, but it did see a profit in the final quarter of 2011. In addition to Provenge, Dendreon is also developing similar cancer treatments based on the same medical theories. Its goal is to create a better way to treat a variety of different cancers including ovarian, breast, and colorectal tumors. Its drug HER2/Neu is in phase two trials and the D-3263 HCI is in phase one trials for use on patients with solid tumors.
The main concern potential investors have is the way sales of Provenge are handled. Some are concerned the drug is too expensive, while others believe Dendreon inflated sales information. In the latter case, I believe Dendreon is capable of overcoming the bad press. In regard to the price of the drug, sales have already proven it is not a problem. Provenge is effective and it is covered by Medicare, so the expensive price tag is less of a problem than it could be. More importantly, the company has the right idea regarding cancer treatment. Instead of pumping patients full of the same old treatment, it is looking for new ways to deal with the disease and view it is as a chronic condition. I think more biotech companies involved in cancer research are going to head in this direction in the coming years.
Another stumbling block Dendreon faced was regarding Johnson & Johnson's (JNJ) drug Zytiga. The drug is different than Provenge, but the sales of Zytiga have exceeded Provenge, even though it was just recently approved and introduced to the market. The drugs can, in fact, be used in conjunction with one another, but many saw Zytiga as direct competition. Zytiga works by blocking the production of androgens, like testosterone, on which many prostate tumors are dependent. Sales of Provenge have increased steadily since the introduction of Zytiga, but unfortunately, the stock prices never quite recovered from the perceived hit.
Dendreon is selling for around $9, a steal compared to Johnson & Johnson, who at $64 a share is one of the monsters of the biotech industry. Dendreon has a strong pipeline that includes exploring active cellular immunotherapies and small molecules, all in an effort to treat a variety of cancers. Dendreon is also building its own "job security," by extending the life of patients. The longer someone with cancer survives, the longer the cancer drugs are needed. I believe Dendreon is a great buy, especially in its price range.
There are two other competitors in Dendreon's price range, both focused on cancer research, that I have had my eye on. However, I believe one of the two is a bad investment risk, even though it once had some promise. Keryx (KERX) is the developer of perifosine, which has recently been shown to not be nearly effective as the company had hoped. Stock prices plummeted based on the news and Keryx is now selling for less than $2 a share and dropping. Unfortunately, there is nothing in its pipeline and most believe the end of perifosine means the end of Keryx.
Spectrum Pharmaceuticals (SPPI), on the other hand, has a huge pipeline and is one of my favorite picks at the moment. One of my main concerns when investing is finding companies that give plenty of options for the future. I want to know that if one trial fails, there are plenty of other options waiting in the wings that could be the next big thing. Spectrum provides this with at least a dozen treatments being tested at the moment. The company is testing cancer treatments for a number of different forms of the disease including prostate, bladder cancer, lymphoma, lung cancer, brain cancer, and non-Hodgkin's lymphoma. There are also trials being conducted for treatments that would serve as an adjunct to chemotherapy and a drug intended to treat solid tumors orally. Spectrum is currently going for around $11 and I believe that price is going to soar in the coming years.
Investors are often intrigued by biotech companies focused on cancer research and I do not blame them. It can be a risky investment, but it can also be very profitable. I believe there is unlimited growth in the industry and Dendreon could be the tip of the iceberg when it comes to investing. I would highly recommend that those interested in sinking money into cancer research companies choose Dendreon or Spectrum.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.