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Saul Kerpelman
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I am an attorney in Baltimore, Md., representing children with lead poisoning. I have been investing in biotech for over a decade. I have an A.B. from Vassar College '76, Phi Beta Kappa; J.D. from Duke Law School '79; M.S. from Johns Hopkins University '08.
  • Dendreon: Fear is Our Friend 45 comments
    Jul 7, 2010 1:18 PM | about stocks: DNDN
    Shares of biotech Dendreon (DNDN) have been battered down recently because of an announcement by CMS, the review board for Medicare coverage, that it was going to look at Dendreon's lead product, Provenge, to make a national determination whether it should be covered by Medicare.

    This announcement, without explanation of the process involved in CMS review and without any explanation of the limitations of CMS review, caused virtual panic selling of Dendreon shares--down more than 20% within one after-hours session.  Shares have rebounded from that low, but are still more than 50% below the high attained after FDA approval of Provenge.

    The thesis of this article is that Dendreon is at this point a screaming buy--that the ill-informed panic has created an unbelievable buying opportunity in the company that has every chance to become the fabled "Next Amgen". 

    Some background is necessary:  Dendreon, a Seattle based oncology biotech, has spent the last fifteen years getting its lead product, Provenge, to market.  Provenge is a treatment for prostate cancer that uses the company's patented antigen delivery cassette technology to train a patient's immune system to recognize cancer cells as foreign invaders and attack them.  The treatment uses the patient's own immune cells--separated out after a simple blood draw--and mixes them with the proprietary cassette, a combination of an antigen that appears on almost all prostate cancer cells and an immune stimulating fusion protein, and activates the immune cells.  The activated mixture is then infused back into the patient and causes a massive immune response against the patient's cancer.  In clinical trials Provenge has shown the greatest survival advantage EVER in late stage prostate cancer.

    This is the Holy Grail of cancer research!  For over a century cancer researchers have been attempting to get the human body to attack cancer and kill it--and Dendreon has succeeded with Provenge.  Even though the men in the pivotal study were the sickest of the sick--late stage cancer trials are the only hope for an expeditious study since the FDA only accepts survival as an endpoint and in earlier stage men the study would take decades--Provenge produced the largest survival advantage ever.

    So why are the shares down so far?

    Simple answers:  Ignorance about statistics and Fear (with a capital F).

    The general media and many lazy analysts have belittled the "only 4.1 months of extra life" provided by Provenge in its large study, and have questioned whether this "small benefit" justifies its $93,000 course of treatment cost. 

    First, the "4.1 months of extra life" statement is simply wrong and displays a lack of understanding of statistical concepts.  The stated 4.1 month figure is not the "average" extra life, as has been widely reported, but is the "median".  The "median" is the halfway point in a series of numbers.  This means by definition that half of the men in the study who experienced a survival benefit lived more than an extra 4.1 months--many for years longer.  Eduardo Garcia, one of the patients who allowed the company to tell his story, lived an extra 9 years after being told he had 18 months left to live.  He got to see his grandchildren born.  A more accurate and telling statistic is that Provenge increased the chances of surviving three years--in these desperately ill men, most of whom were expected to live about 22 months--by a whopping 40%!

    Second, repeating the "4.1 months extra is not worth the money" derisively ignores that the actual benefit of Provenge is even greater than a 4.1 month median.  In the Impact study Provenge was not compared to a pure placebo, but to a control group that was offered frozen Provenge after their disease had progressed.  It turns out that frozen Provenge also seems to confer a survival advantage, so the true beneficial effect of Provenge in the real world is likely to be even greater than the 4.1 month median.  Compared to the men who elected not to cross over to frozen Provenge in the Impact study the treatment group had a 14.2 month survival advantage.

    Next is Fear.

    When  the CMS announced it was going to review Provenge to establish a national coverage standard, the market freaked out.  This is totally understandable against the background of all the reporters ignorantly questioning the price tag for Provenge since it "only gives 4 extra months of life", the climate of fear surrounding healthcare reform, and worries about rationing of healthcare.

    But a wise investor will look behind the fear and dig deeper for the facts to determine if the fear is justified.

    The key factor here is the applicable law.  I am an attorney with 30 year's experience, so trust me I have gone and looked up the controlling statutes.  And here is the absolute payoff--Medicare is prohibited by law--repeat that in caps:  PROHIBITED BY LAW--from considering cost when making a determination whether an FDA approved treatment is "reasonable and necessary".  Now here's where fear still holds sway.  Skeptics still say "Yeah, but I'm still afraid that they'll say $93,000 is not reasonable".  Read the statute further:  "reasonable and necessary" has a precise definition in the statute.  The treatment must be safe and effective--the FDA has already determined this.  The treatment must be furnished in accordance with accepted medical standards, in an appropriate setting, ordered and furnished by qualified personnel, meet the patient's medical need, and be at least as beneficial as an existing available alternative.  (Taxotere, the only other FDA approved treatment for late stage prostate cancer, provides only 2.4 month median survival benefit and has horrible chemo side effects, while Provenge just causes flu-like fever and chills for 2-3 days)  

    Provenge is going to be found to be "reasonable and necessary"--there's no choice.

    The demand for Provenge is massive.  Men are clamoring to get treated and Dendreon is hustling to put the finishing touches on three plants that will be able to produce up to 2.5 Billion dollars worth of Provenge annually.

    The success of Provenge validates the technology on which it is based--and there are follow on treatments based upon it for bladder cancer and renal cancer that will be entering the clinic this year and next.

    If Provenge can move into earlier stage disease--and the researchers have expressed the hope that Provenge given to men with healthier immune systems can transform prostate cancer into a chronic treatable disease--the revenues will be multiples of the $2.5 Billion for which capacity will exist within one year.

    Dendreon has not partnered and holds 100% rights to Provenge as well as to all its well protected technology.

    So what do you do when you see the market acting from ignorance and fear and panicking about the prospects of the company which truly could turn out to be the fabled "next Amgen"?

    You recognize the buying opportunity of a generation, and buy all you can get.

    Disclosure:  I have a large position in Dendreon.

    Disclosure: long Dendreon

    Stocks: DNDN
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Comments (45)
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  • nice article and a must read for those who need some catching up..
    7 Jul 2010, 02:06 PM Reply Like
  • Saul,
    You have done a great service to the investment community. Clarifying the "median" survival number will give folks vital information to understand trial jargon.
    Especially important is the applicable law followed by CMS in determining a national coverage standard. Great stuff!
    7 Jul 2010, 02:15 PM Reply Like
  • Thank G_d...a voice of reason. Something realistic beyond the shills and amateur stock analysts that haunt the Internet these days. You know the ones . . . they'll put "Dendreon" in their article titles at the drop of a hat, and then, proceed to repeat incorrect data and rumors as if that would lend credibility to their already tarnished images and scribblings. And to think that journalism once was a lofty craft, its practitioners to be envied by all. I'd rather my daughters dated used car salesman than anyone resembling today's so-called "journalists" (not that there's anything wrong with that! (;>)) Most journalists today wouldn't be able to separate truth from fiction in any given story if you stuck their noses in the facts! Case in point: the difference between "average" and "median". I rest my case.
    7 Jul 2010, 02:15 PM Reply Like
  • Well done..............
    7 Jul 2010, 02:19 PM Reply Like
  • Excellent and finally FACTS posted in an article about Dendreon and Provenge. I'm waiting to see if some of these drive-by media analysts and reporters care to defend their erroneous articles about the science of Dendreon and their "interpretations". The net is scarred with erroneous "reports" about Dendreon and we all know why. We have the elephant in the room with Provenge and chemo cancer industry wants nothing more than taking the light off of Dendreon and the death blow it will provide to the chemo industry in the years to come. Nice article and all should educate themselves more about Provenge especially CMS. The chemo industry knows and understands fully. They should be and are very, very afraid.
    7 Jul 2010, 02:32 PM Reply Like
  • Great...Now I challenge any of those so called "experts" or "dr's" who are writing about Provenge to refute any of the information in this article...Then we'll know who's really full of $hit...
    7 Jul 2010, 02:37 PM Reply Like
  • I all those people who posted negative/incorrect information and articles today on SeekingAlpha, in Forbes, etc.: please retract your misinformation, apologize, or refrain from misleading your readers in the future. Thank you.
    7 Jul 2010, 03:05 PM Reply Like
  • Great arguments in favor of Provenge and outlining the stellar investment case. You've nailed it. However, I wouldn't be so quick to buy in to the media's "spin" that the CMS review is about "whether" to cover Provenge- for starters there is highly questionable legal basis for doing so given the clean FDA label, to put it mildly- rather CMS is almost certainly mindful of the attractive non-toxic nature of immunotherapy and can easily foresee wildly uncontrolled off-label usage. The potential for use in healthier and healthier patients as a preventative or cure, is a clear and present danger so to speak, until the science behind such usage is able to catch up. CMS must guard against inappropriate coverage, although indeed a strong if not airtight medical argument can be made for such usage (malpractice accusations for failing to prescribe, anyone?)
    7 Jul 2010, 03:26 PM Reply Like
  • Great article and well written with facts. Keep it up and spread the truth.


    7 Jul 2010, 03:46 PM Reply Like
  • This is a fantastic piece, sending copies to relatives who I've told the Dendreon story to.
    7 Jul 2010, 03:59 PM Reply Like
  • Looking for this one on the Yahoo wires......
    7 Jul 2010, 04:00 PM Reply Like
  • Great article! Cuts through the massive amounts of BS spewed around about Provenge, Dendreon and the whole mess. They've got an approved drug, the question isn't if its covered, just how much it is covered BEYOND what the label says.
    7 Jul 2010, 04:03 PM Reply Like
  • How refreshing to read a factual article regarding Dendreon! Thank you for getting the facts out.
    7 Jul 2010, 04:16 PM Reply Like
  • Thank you for the post - can you provide any links that would give some details on the crossover survival vs. non-crossover (other than just the generalities that have been repeated) and perhaps some other long-term survivors' stories? I've been looking for this information without much luck.
    7 Jul 2010, 04:25 PM Reply Like
  • Author’s reply » Doc--The best source of facts is Biotech Stock Research, which is a subscription service. David Miller, the main guy there has been following Dendreon--and presenting the fact suggesting Provenge works--for ten years. The cross over figures and survival benefit are from FDA documents dealing with the approval of Provenge. They are public record, but hard to sift through. My figures came from BSR--but David cited FDA documents.
    7 Jul 2010, 04:34 PM Reply Like
  • Author’s reply » Also I hope that relatively soon all the Impact data will appear in a major journal (NEJM I'm hoping).
    7 Jul 2010, 04:36 PM Reply Like
  • thank you for FINALLY bringing the facts to light!
    7 Jul 2010, 04:45 PM Reply Like
  • Excellent insight! This is the kind of article (well-reasoned and full of facts, as opposed to FUD) that I wish Seeking Alpha had more of.
    7 Jul 2010, 05:19 PM Reply Like
  • Great summary of what has been a true saga.
    7 Jul 2010, 05:24 PM Reply Like
  • As a group health actuary, I followed the Provenge saga and its amazing the incorrect information that comes from the so called experts. The 14.2 month survival against the true placebo group is compelling. Excellent article on the real deal.


    Provenge is the real deal and I hope CMS does nothing to complicate nor delay this FDA approved drug that has met the highest of safety and efficacy standards through FDA's SPA.


    End stage prostate cancer patients have been waiting for this higher quality, safer and more effective drug than existing chemotherapy option. Male Provenge candidates have been funding Medicare their entire working lifetime and now is the time for CMS to support their need at this terrible time of advanced prostate cancer.


    FDA put Dendreon and end stage prostate cancer patients through a long and rigorous process. CMS clarification needs to be positive for continuity of administration across the United States and not whatsoever induce fear for Medicare eligibles who are dealign with this prevalent disease. 14.2 months of survival w/o the adverse affects (and costs of these adverse affects) of toxic chemotherapy is compelling.


    Great article.
    7 Jul 2010, 05:49 PM Reply Like
  • Great post, FINALLY someone explaining the real situation with DNDN without all the BS agenda.
    7 Jul 2010, 05:51 PM Reply Like
  • Saul - Thank You for taking the time to write and publish this article with the sound of reason and true facts surrounding all that is Dendreon. It is truly amazing the amount of mis-information that gets put out on the wires that a lot of folks just take as gospel without ever realizing what it is their reading. The actions and work of yourself along with others (too many to list) will surely be rewarded someday in one way or the other.
    Keep on spreading the word. The word of TRUTH and thanks again........retiresumday
    7 Jul 2010, 06:13 PM Reply Like
  • Saul...I too want to add my sincere thanks for your hard work and dedication. Your unwavering intestinal fortitude to fight for the patients, the truth, what's right and the little guy. THANK YOU!
    7 Jul 2010, 06:35 PM Reply Like
  • OH MY GOD, finally an analyst who publishes the whole true and not half the story like most of these analyst.
    7 Jul 2010, 06:57 PM Reply Like
  • Finally someone gets it right!!!!!!!!!! Thank you for clearing up the confusion.


    We need more cowbell from Saul.
    7 Jul 2010, 07:04 PM Reply Like
  • Saul, This past month I was able to suggest Dendreon's Provenge to a friend whom I've witnessed being ravaged by prostrate cancer. When the poorly communicated CMS study was made public, I couldn't imagine the negative impact on my friend's newly found hope. Your article gave the facts that have been absent from so many articles about Provenge. And, the poor communication of the CMS study, totally ignored the possible crushing impact on men suffering prostrate cancer. Thank you, for the clarification!


    I grew up, as has everyone else, I imagine, with the hope that some day there would be a cure for cancer; the cancer that took my Father, when I was 5 years old, and breast cancer which threatened and impacted my Mother's life. Now, there appears to be a novel and humane FDA approved weapon (Provenge) against cancer. Time will tell if it is a "cure" or the best current hope in our fight with cancer. But, it deserves...we be supported with accurate information. Thank you, again, for your insightful article. Alii Kai
    7 Jul 2010, 07:13 PM Reply Like
  • Very well written. I have been following DNDN for some time and your article adds a new perspective that has not been written in the general media. I hope that you will write more articles in the future.
    7 Jul 2010, 07:19 PM Reply Like
  • Finally a factual write-up about Provenge and Dendreon to contrast most of the other articles on this to topic at SeekingAlpha which seemed aimed at manipulatuing share price without regard to the facts...


    It is truly refreshing to read your instablog on this matter and I am surprised that it has not yet been published by SeekingAplha as an article already because it explains very well how Provenge works; the stellar statistics on the survival adnantage that it provides as compared to all other treatments for this population; how the Fear factor has been used to unnaturally decimate the price; and how that presents us with a golden opportunity to buy DNDN at a way oversold price...


    Thank you for posting and I hope SeekingAlpha will promote your instablog to an article because it is a must read for anyone interested in this topic...
    7 Jul 2010, 08:17 PM Reply Like
  • Excellent article. I am so glad you have clarified the difference between the median and the average life advantage of 4.1 months. Now it's blatantly clear that provenge is worth 93,000$ and more, from a chronically underfunded and potentially bankrupt medicare system. I mean 4.1 months extra life: how can anyone dare to question the utility of life? As for the complexity of the procedure and the pipeline of cheaper more effective therapies, I say boo. This is here now and we are entitled to it. Oh and regarding the massive insider selling of directors, it's just rational they take some profits off the table; they are firmly convinced in its potential, honest!!
    7 Jul 2010, 08:40 PM Reply Like
  • Saul,
    Thanks for clearly stating the benefits of Provenge and factually reporting the CORRECT interpretation of the survival data and the mild side effect profile. This is a 'must read', not only for investors but for patients, doctors advocacy groups and yes, the media in general.


    Thanks for clearing the air, it needed doing.
    7 Jul 2010, 10:09 PM Reply Like
  • At last a concise review of the development, efficiacy, and cms issues relating to Provenge. In marked constrast to the muddled misinformation on Forbes and other site, I hope the article recieves the widest dissemination it deserves- especially in informing PC patients of these issues so vital to living with cancer.
    7 Jul 2010, 10:10 PM Reply Like
  • Excellent analysis, SaulK! Thanks for helping to get the truth out. So many of the Dendreon opinion pieces here on SA and elsewhere on the web are full of inaccuracies, and appear to be written by conflicted and/or clueless authors (sadly, even some MDs are in that category).
    7 Jul 2010, 10:42 PM Reply Like
  • This article should never have been published. It might now drive DNDN's price back up to where it should be before I have a chance to buy as much as I want. Thanks for nothing, Saul.
    7 Jul 2010, 10:46 PM Reply Like
  • The author clearly states a very compelling argument for the latent, unappreciated investment value in this innovative company. Dendreon’s initial FDA approved product, Provenge, offers a select group of men, for whom there are few options remaining other than death, the best hope for survival with a remaining productive quality of life. Importantly, on balance, the cost of treatment with this therapy will be no more expensive than the all-in cost for alternative approved care for this group of hormone refractory prostate cancer patients.
    7 Jul 2010, 11:45 PM Reply Like
  • Well said. Finally, a balanced article without "facts" taen out of context.
    7 Jul 2010, 11:51 PM Reply Like
  • Thanks Saulk, for enlightening the individual investors like me about the reality. I invest my hard earned money .... hoping for a profit in the long run.. but misinformation and manipulation have transformed wall stree into a Casino. I was appalled to read a negative article by a Doctor recently on provenge....Looks like majority of the people have sold their souls for tiny worldly gains... What a shame!


    I hope you will be able to keep us posted on this forum on a regular basis.


    Thanks again!
    8 Jul 2010, 12:37 AM Reply Like
  • Great post! Too bad we're not going to get a "news headline" link to this on sites like Yahoo. Only pretentious "doctors" and "analysts" tend to get that kind of "right"...
    8 Jul 2010, 04:42 AM Reply Like
  • A pointed and excellent investment analysis Mr. K! Where is it that one might find an opportunity to invest in a biotech that already has the binary risk of approval behind it, a readymade future market revenue generation probability of 1.25 to 2.5B in front of it, and to now be trading at a pre-approval top line data announced level?


    Assuredly most if not all who have read and agree with your commentary already have or are at least considering initiating a position. What they need to recognize beyond the financial concern however is that everyone everywhere irrespective of their opinion concerning this company already own a vested position with respect to course, magnitude, and speed research will be permitted to take from this point forward.


    Dendreon’s Active Cellular Immunotherapeutic (ACI) approach to cancer care is very much as you say is the “Holy Grail”. It represents a wholly paradigmatic shift in SOC cancer medicine. Gate keeping agencies such as CMS are all too often prove reluctant to grasp the concept of tomorrow. To anyone with a dollar invested and to everyone with a heartbeat, it is critical that at this juncture, with the window for comment still open, to visit the CMS comment page and express supportive concern for this humane treatment modality.


    An investment of a moment of your time may prove to be the most worthwhile one you will ever make. Write.


    Thank you Saul .... brilliant work!
    8 Jul 2010, 09:46 AM Reply Like
  • Thank you Saul for so eloquently spreading the truth about Dendreon and Provenge!
    8 Jul 2010, 11:56 AM Reply Like
  • Great job Saulk. Very refreshing to see the very occasional article based on facts and not a bunch of hooey!
    8 Jul 2010, 12:30 PM Reply Like
  • Great job Saul. Thanx for helping to get the word out in ACCURATE, easy-to-understand language. If only the mainstream media was as concerned about the truth and the REAL facts about Provenge...


    Pig, from the IV board.
    8 Jul 2010, 12:43 PM Reply Like
  • Thank you Saul for making sense of this issue. Your article helped me greatly. Thanks again.
    8 Jul 2010, 07:03 PM Reply Like
  • Thanks Saul for taking time to help clairify this matter, it has helped me greatly!
    8 Jul 2010, 07:06 PM Reply Like
  • To see all of the pertinent stats from the Provenge trials this is the slideshow to study. Note the 3 year survival numbers mentioned by Saul, and keep in mind that "placebo" for these trials is not a clean term, with some men taking "Frovenge," or frozen Provenge, some progressing to Taxotere, and some men taking no treatment upon progression. So if 33% of the integrated study men lived 3 years in the drug group, what would pure placebo be? Not sure, but well under 20% is a lock. From someone who lost his father to PCa, that goes a lot farther than 4.1 median months improvement.


    slide 30 has the integrated study data, but there's lots of good stuff here
    8 Jul 2010, 08:36 PM Reply Like
  • Well done Mr. SaulK.


    Long DNDN shares
    10 Jul 2010, 02:12 PM Reply Like
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