Dendreon, DNDN, a biotechnology company based in Seattle, which has completed it's second clinical phase III trial of it's key drug, Provenge. Provenge is unique in that it's primary action is that of a vaccine targeting prostate cancer. It is the first clinically effective vaccine against a specific type of cancer. It's been shown to increase survival time 4.5 months in men who have metastatic terminal prostate cancer. This increased survival time met the study’s requirement and was announced at an annual meeting of the American Urologic Association. This was an important enough announcement that Mike Huckabee of CNBC, covered this presentation in person. The very fact that this drug works, works in truly ill men who are dying, and carries relatively minimal side effects (particularly when compared to chemotherapy, which is not as effective and has severe side effects) would seem to make this a shoe-in for approval.
However, this company and this drug, have a history that sounds like “The Perils of Pauline”. It initially presented positive results in 2007, completing a phase III trial. The scientific panel reviewing the drug for the FDA voted 14-0 on it’s safety and (I believe) 12-2 on it’s efficacy. In an astonishing move, the FDA voted against the overwhelming endorsement from it’s scientific panel and merely stated that the drug was “approvable”. It sited several reasons including the fact that the end-stage of the study was remission, not survival. It also sited problems with the size of the study, as well as questions regarding potential control and manufacturing safe guards. However many who had followed Dendreon closely, felt that this was a turf battle in the FDA, in which Dendreon was working through the Biological Section, rather than the Oncology Division. In addition, there was one primary member of the Oncologic Section who might have stood to gain financially, due to big pharma’s interest in maintaining chemotherapy as the primary option. After this ruling, both patients’ and stock holders were outraged, but to no avail.
In the two years since that time, the study has been re-done. The study is larger and has addressed all of the alleged concerns and made survival the end point of the study. Shortly before the results were released, the stock which had been approximately 5, began rapidly increasing and with the release of the data promptly rose to the mid to upper 20’s. An amazing occurrence then took place. A note on the Yahoo message board stated that there would be a bear raid at 12:30. A few minutes later, that was exactly what happened. Massive naked short-selling, obviously highly coordinated, drove the stock down to seven in seconds with no news. The trading was haulted. Later, after the market closed, trading was resumed for a brief amount of time, with the stock returning immediately to its previous price. Obviously all the people who had stops in place for protection, were taken out. In spite the obvious nature of this stock manipulation, with many letters demanding an investigation, Nasdaq declared the next day that they could not find no wrong doing. Obviously, it would be impossible to do an adequate evaluation of what occurred in a twenty four hour period. There was later a carefully detailed document entitled “Deep Capture” that outlined exactly who was involved and how it had been done.
At the present time, both patients’ with prostate cancer, Urologists and Oncologists, and long suffering stockholders are awaiting the next chapter. The company is having an analysts meeting on September 24th, which may or may not present data or events that are not public knowledge. The company has also agreed to submit the completed data of the study to the FDA in the fourth quarter of 2009. In addition, there is a question of if and when the company will announce a ROW (Rest Of the World) partner. The FDA then has six months in order to approve or disapprove the drug. Due to the much greater exposure of the company and the drug, the extremely surprising denial of approval two years previously, and the fact that the company has met the stated concerns of the FDA addressed in 2007, expectation is that it will be approved. The company seems to strongly believe this as it is building out production facilities in New Jersey, Atlanta and Los Angeles.
However, there are significant politics involving the FDA as well as powerful forces of individuals and companies who are more interested in profits than an effective drug that opens a whole new avenue for treating cancer and prolonging lives of patients’. So will it pass the FDA’s approval this time? If it does, it will not only be used to treat terminal prostatic cancer patients’, but almost certainly will be used off -label for patients with much earlier staged prostatic cancer. The market is estimated to be at a billion dollars for the patients with wide-spread metastatic disease and much more for the off-label use. In fact, the company has stated that, with approval, it does not expect to meet the full demand for Provenge, until all three production facilities are on-line.
For the investor what this means is fairly straightforward. If the FDA grants the approval for Provenge, the stock should soar. In addition, if there is an announced ROW partner, it will probably result in an additional hundred million dollars payment to DNDN with a highly profitable licensing agreement. So the potential for profit is great. However, it is balanced by a well-appreciated fear of the capricious nature of the FDA. There is no question that there would be a tremendous downside to the stock if this did occur. It’s all about regulatory risk.