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Dendreon Stock Jump Reflects
Optimism About Cancer Drug
By GEORGE STAHL
March 30, 2007 11:49 a.m.
Dendreon Corp.'s share price surged Friday after a Food and Drug Administration advisory panel recommended the agency approve the company's proposed prostate-cancer treatment.
The gain reflects optimism about the Seattle company's new cancer treatment -- for which some project world-wide sales of more than $1 billion. Many investors had doubted the treatment's chances for approval; according to FactSet Research, 33% of the company's float was sold to short sellers, who buy stock on the expectation it will fall.
Dendreon's Provenge has provoked much debate in the medical and investment community, with some questioning the strength of the data and the treatment's merits. The panel's recommendation, however, appears to reflect physician interest in the novel therapy, which spurs a person's immune system to fight the cancer. Current treatments attack the cancer cells directly.
In late-morning trading, Dendreon shares were up $8.36 at $13.58 on the Nasdaq Stock Market. Trading in the stock had been halted Thursday during the panel hearing. The stock rose as high as $19.40 before the opening bell Friday.
The FDA panel unanimously said Dendreon's Provenge was safe. It also said the FDA should consider approving Provenge despite two clinical studies showing it didn't meet study goals. The Provenge studies showed the treatment failed to meet a goal of reducing so-called time to progression, or the advancement, of cancer.
However, a subsequent analysis of one of the studies, which involved 127 men, showed those receiving Provenge lived about 4.5 months longer than men not receiving the treatment. Most panel members said that survival data suggest that the treatment might work.
Some panel members said the FDA should require the company to complete a larger ongoing study of Provenge to demonstrate whether the therapy really works, while others suggested the product be allowed on the market on a limited basis until final data from that trial are released in 2010.
The FDA usually follows the advice of its expert committees but isn't bound by them. An FDA action on Dendreon's Provenge is expected by May 15.
Momentum for Immunotherapy
Banc of America analyst William Ho, who raised his price target on Dendreon to $20, wrote in a research note that the panel's actions reflect the momentum at the FDA behind cancer immunotherapy and the agency's desire to see that type of product approved.
The FDA's presumed openness to cancer immunotherapy is also lifting shares of Biomira Inc., a small Canadian biotech that also specializes in this area. Biomira shares recently traded at $1.21, up 15% from their close Thursday. Other biotechs developing related drugs saw their stocks move, including Cell Genesys Inc., up 28% at $4.48; Favrille Inc., up 16% at $3.03; Genitope Corp., up 12% at $4.16; and Antigenics Inc., up 15% at $2.27.
Despite the panel's recommendation, Mr. Ho remains cautious on Dendreon's stock. "We believe the stock should trade well [before the FDA acts in May], but longer term, without scientific rigor, we are maintaining our 'neutral' rating given the uncertainties surrounding the statistical significance of the survival efficacy signal."
Mr. Ho estimates Provenge could generate peak U.S. sales of $630 million and world-wide sales of almost $1.1 billion in 2011 before succumbing to competition from new products. He estimates Provenge could sell at $37,500 per course, or a 25% discount to what appears to be the threshold for Genentech Inc.'s Avastin.
In an interview Friday on CNBC, Dendreon Chief Executive Mitchell Gold said the company had an adequately sized sales force to market Provenge in the U.S. but that it would be open to an international partner.
Dendreon has a lot riding on Provenge. The company has no products currently on the market, and Provenge is the furthest along in development. The company has earlier-stage studies under way of proposed experimental immunotherapies to treat cancers of the breast, ovaries and colon.
Because of Dendreon's heavy reliance on Provenge and the doubts about its ability to reach the market, the stock attracted a lot of short interest, pressuring the company's share price. Investors who "short" shares borrow and then sell them, betting that the price will fall and that they will be able to buy back the shares later at a lower price for return to the lender.
The rush by investors to cover their short positions are adding to Dendreon's gains Friday. The stock is at levels not seen since late 2000, shortly after the company's initial public offering. The stock's all-time high is $26.63 a share, hit in September 2000, three months after the IPO.
New Class
Provenge may be the first of a new class of "active-cellular immunotherapies," according to Dendreon. These are designed to stimulate a person's immune system to fight a disease such as cancer.
Provenge is considered a therapeutic vaccine that is made using a patient's own white blood cells -- combining them with a protein and infusing this back into a person. Existing therapies are aimed at killing cancer cells or choking off blood supply and other proteins involved in cancer growth.
Dendreon had asked the FDA to approve Provenge to treat men with advanced prostate cancer who stopped responding to hormone therapy.
The FDA agreed with Dendreon that Provenge was "generally well-tolerated," with the most prominent side effects being fevers, chills and fatigue. However, the FDA said it was concerned about an increased number of strokes among patients treated with Provenge compared with patients who didn't receive the treatment.
The only other treatment for advanced prostate cancer that has been shown to improve overall survival is Taxotere, a chemotherapy drug from Sanofi-Aventis. Chemotherapy drugs often have significant side effects, including nausea, vomiting, anemia and infection.
An estimated 218,890 new cases of prostate cancer will be diagnosed in the U.S. in 2007. Prostate cancer will result in 27,050 deaths this year in the U.S. More than 65% of all prostate-cancer cases are diagnosed in men 65 and up.
--Jennifer Corbett Dooren and Peter Loftus contributed to this article.
Write to George Stahl at george.stahl@dowjones.com
