Cancer drug setback drives down Dendreon

Once a supposed blockbuster, Provenge costs a whopping $93,000 per treatment, but its effectiveness has been called into question.

By InvestorPlace Nov 3, 2011 11:22AM

By Barry Cohen,


Dendreon (DNDN) was getting ripped apart Thursday with a 35% loss in intraday trading. The reason for the biotech company's woes is a report that sales of its potential blockbuster cancer drug may top out at $500 million -- a fraction of what many people had hoped for – and may see even more disappointing numbers if its direct-to-consumer advertising campaign falls short.


So what's the score? Does this cancer cure have more potential than critics are claiming, and does it have a future with patients who are simply desperate for alternative treatments?


Or is Provenge, a cancer treatment that costs a whopping $93,000 for patients, indeed doomed to fall flat because it simply doesn't work as well as it should?

Post continues below.

First let's recap the news that led to the DNDN stock sell-off: Collins Stewart analyst Salveen Richter wrote to investors after meeting with management, according to an article in Medical Marketing & Media, that $500 million is about all that could be squeezed out of Dendreon's drug. The Seattle company's desperate need for success with Provenge became even clearer when Dendreon reported third-quarter results Tuesday showing November sales. Even though Dendreon's revenue tripled from the same period a year earlier, it lost $147.1 million, or $1 per share, in the third quarter -- almost twice the decline for the same period in 2010.


For Dendreon it was a case of déjà vu. In August, it was trading at nearly $36 when it severely cut its sales forecast for Provenge. That day, investors jumped ship in droves, sinking the stock by nearly two-thirds.

Now more about the drug: Provenge was approved in April 2010 as the first therapy in the U.S. that trains the body's immune system to attack prostate cancer cells as if they were a virus. The treatment, which costs a$93,000, was cleared for patients with advanced cases of the disease after Dendreon's three-year effort to persuade the FDA to back the medicine.


Given growing concerns about government reimbursement, the drug's cost undoubtedly has affected sales. Doctors don't like the fact that they have to lay out the $93,000 and then wait for reimbursement from payers.


This cash flow concern is one big reason many physicians are gravitating toward the recently approved Johnson & Johnson (JNJ) prostate medicine Zytiga. For one, they don't have to finance its purchase. Moreover, patients can take Zytiga pills themselves, unlike Provenge, which is delivered by IV. And Zytiga treatment runs about half the cost of Provenge. What's more, Zytiga reportedly works faster and reduces cancer-related pain.

Not good for Provenge.

"The bloom is off the rose for Provenge because patients are looking for something that can treat them more quickly" and with greater convenience, Charles Duncan, a biotechnology analyst for JMP Securities, told Reuters.


Still, Dendreon isn't ready to throw in the towel. The opportunity is just too big. After all, prostate cancer kills about 250,000 men a year worldwide and is the second-most-common cause of cancer death in men in the U.S., after lung cancer.


So Dendreon is turning to patients to try to jump-start sales of Provenge by expanding consumer advertising. The DTC expansion follows a revamped doc-detailing approach Dendreon began in July.


Is there a place for Provenge in treating prostate cancer? Dr. James Gulley, a director of clinical trials for the National Cancer Institute, thinks so. His opinion is echoed by Dr. Susan Slovin, an oncologist with Memorial Sloan-Kettering Cancer Center. But given the waning enthusiasm for the drug and the emergence of Zytiga, it now appears Provenge is highly unlikely to live up to its lofty expectations.


As of this writing, Barry Cohen did not own a position in any of the aforementioned stocks.


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