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Is Dendreon Corporation (Nasdaq:DNDN) Worth more without Provenge?

This is perhaps a startling thought to many people. But while I do find it provocative, it is perhaps not very far-fetched and has its merits. Of course, if one believes that Provenge is a guaranteed blockbuster than the thought is simply absurd. But if one takes what I consider a more realistic view that the path to Provenge’s success is extremely difficult then, perhaps, getting rid of Provenge is not such a bad idea. Dendreon Corporation (Nasdaq:DNDN) is burning close to 100 million dollars per year, with most of the money going to Provenge clinical trials, building manufacturing facilities for Provenge, preparing the sales force for Provenge, etc. Provenge, Provenge, Provenge – everything else seems to be on the back burner. While the company still has cash at the moment, it is running out of it fast. In fact, the money will have to be raised sometime in 2006, before or soon after the launch of Provenge. Dendreon Corporation (Nasdaq:DNDN) will likely to be starving for cash till 2008 before the money from the Provenge sales may start trickling down. And what if the trickle is very meager? Two-three years from now new cheaper drugs could well outcompete Provenge and reduce it to a fancy expensive drug with limited patient base.

There are several competitors that could bring their drugs relatively soon after Provenge hits the market. Prostvac-VF from Therion, GVAX from Cell Genesys, Inc. (Nasdaq:CEGE), and DN-101 from Novacea, Inc. (Nasdaq:NOVC) come to mind. While these drugs are likely to be approved after Provenge, they will most likely be much cheaper to produce because they are not custom-manufactured for each patient. With so many drugs targeting the prostate cancer, the ability of a company to deliver drugs that are competitive price-wise could be the most critical for winning a substantial share of the market. I would go as far as to suggest that the scenario according to which Provenge is not even able to pay for the cost of its own development is quite likely. At the same time, the cash that Dendreon Corporation (Nasdaq:DNDN) has now could be used to more speedily pursue highly promising Trp8 inhibitors that are currently in the pre-clinical development. ~130M in cash is large enough to push Trp8 program well into phase II clinical trials. It may be unfortunate that the money will be spent on Provenge, a possible money sink with no meaningful return to the shareholders. DNDN should continue to produce good setup for the short-term trader but it may not be such a great play for the long-term investor.

Companies:

Dendreon Corporation (Nasdaq:DNDN)
Cell Genesys, Inc. (Nasdaq:CEGE)
Novacea, Inc. (Nasdaq:NOVC)

Categories:

DNDN
CEGE
NOVC

NASDAQ DNDN
NASDAQ CEGE
NASDAQ NOVC
Novacea Inc
Cell Genesys Inc
Dendreon Corporation

Originally published 11/2005 trading-signal.blogspot.com/2005/11/is-dendreon-worth-more-without.html

Testing Google Blog Search

This is a test of my trading system blog. Google blog search is having trouble indexing it right now.

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Carnal Stock

Is oil going higher? How often do the anlysts get it wrong?

Analysts polled by Reuters keep moving their oil price projections for 2006 higher and higher. The May forecast of $64 average price for 2006 got bumped up to $66 in the June prediction. These forecasters make me smile. I have to keep wondering if they ever gonna get it right. Notice the same analysts' forecast from this winter for $57 and $59 oil for 2006.

The forecast for 2007 is $61. Do they still stick with their winter forecast of $43 oil in 2010? Could Peak Oil be for real?


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Carnal Stock

peak oil

Carnal Stock Blog

This blog accompanies my Carnal Stock site where I post trading signals generated by my system.


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