Dendreon's Golden Age Is Still On Track

| About: Dendreon Corporation (DNDN)
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On Friday evening, Dendreon (NASDAQ:DNDN) announced that the FDA had approved its third Provenge manufacturing facility (in Atlanta), news that would ordinarily be well-received by investors and add momentum to a company whose 'Golden Age' had been materializing before our very eyes.

However, a monumental sell-off at the beginning of August fizzled the short term expectations that the company had predicted, and maybe also fried the long term hopes that had investors anxious to see what would come next.

The price decline came when the company announced that the high price tag of Provenge treatment had doctors skeptical about prescribing it, and as a result, the year-end sales guidance of $350-$400 million would be canned.

Until that point, it had been smooth sailing for Dendreon, as quarter-over-quarter growth was in line with company expectations. That growth was backed-up by positive FDA approvals for full capacity at the New Jersey facility and for the opening of the Los Angeles facility. Those approvals were to enable Dendreon to meet the growing demand for Provenge and send the growth rate through the roof.

So what now?

Has the company that ushered in a new age in cancer treatment already faded into the sunset, only to see other companies fill its shoes?


It's my opinion that this is just a glitch on the radar screen. The CMS has recently put the final stamp on full reimbursement for Provenge treatment, and the company is out to "educate" the doctors that they will in fact receive full reimbursement from CMS and insurance companies. It's likely that what we're seeing is a period of acceptance.

There are also concerns that the 'bang for the buck' behind Provenge treatment might not be worth the high cost. I'd like to argue that this opinion is most suited for those looking to see the DNDN price decline, rather than for those who would like to see a loved one live a little longer.

The key points entertained by Dendreon's CEO during the recent earnings call revolve around the hesitation of doctors to prescribe this treatment, not the reluctance of patients to use it.

2011 is not a wash yet for Dendreon, and the recent price drop could be a gift for those who still hold a positive long term outlook for cancer immunotherapy treatments.

In fact, given the drastic price decline, the long term might not be so far away. With another facility approved, Dendreon will soon be able to handle 'full capacity' to meet demand.

If the current roadblocks can be hurdled, then the next twelve months could have Dendreon right on track to evolving into its Golden Age in full throttle.

Disclosure: No position.