Dendreon Holds Its Ground on CHMP Decision, EU Outlook Still Questionable Print E-mail
By Brian Wilson - Lead Contributor   
Monday, 08 July 2013 14:54
Dendreon has made a significantly recovery since the recently made 52-week low of $3.69/share on news that the Committee for Medicinal Products for Human Use (CHMP) adopted a positive opinion Provenge – a cell immunotherapy that has been on the US market for roughly three years for the treatment of metastatic castration-resistant prostate cancer (mCRPC). This essentially means that the therapy has been approved in the European Union for the same indication, although many investors are now questioning whether or not this news can indeed turn the company’s financial situation around.

Although Provenge generates substantial revenue from the US mCRPC patient population alone, growth actually contracted in Q1 2013 to $67.6 M (down from $82 M in Q1 2012) due to preference given to competing prostate cancer drugs Zytiga (Abiraterone) and Xtandi (Enzalutamide). While there is demonstrated overall survival (OS) benefit in using Provenge, it cost $93,000 per round of therapy and generally extends patients’ lives by about four months. The reimbursement situation has improved since Provenge’s launch, although adoption rates have yet to even approach Wall Street’s early sales expectations.

Dendreon is now looking for a partner company in Europe that will be able to host Provenge’s manufacturing operations, although many analysts point to the losing battle that the company faces with extremely high capital expenditures and low profit margins on the product itself. COGS was 64% in Q1 2013, despite three quarters of cost-cutting and efficiency efforts made by company management. Because of the unattractiveness of those figures, many question Dendreon’s ability to secure a partnership that will not further worsen its financial situation.

Also important to note is the company’s cash burn rate, which was $93 M between Q4 2012 and Q1 2013. The company’s cash position of $337 M as of March 31st doesn’t even offset the $539 M of convertible senior notes due 2016 which were mentioned in my Q1 reaction notes (link).

It’s because of this that virtually every analyst on Wall Street holds a neutral or negative opinion on the stock. Although the stock saw some relief on the CHMP decision, this unsurprising news does little to change the financial data. Short interest, while incredibly high, is unlikely to dissipate so long as the stock continues its downtrend.

We may see Dendreon hold its higher ground for a while on the notion that the European market will boost revenues, although another quarter of revenue contraction due to competition in the US prostate cancer drug market can easily erase the gains.




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