(Written by Alexander Crawford. Data sourced from Finviz.)
Getting FDA approval for a new drug is not always the end of the road, especially for biotech firms that have chosen not to sell their marketing rights to larger pharmaceutical companies. When small biotech firms maintain ownership of their new product launches, their ability to successfully market and sell the drug is put to the test.
Investors now wait and watch as Seattle Genetics (SGEN) faces this same hurdle.
Late last week the FDA gave marketing approval for Seattle Genetics’ Hodgkin lymphoma drug Adcetris, the company’s first commercialized drug and the first new drug for the disease in over 30 years. The 14-year-old company had run up a deficit of more than $546 million during development, according to FierceBiotech.
Seattle Genetics has U.S. and Canadian commercialization rights for Adcetris, meaning that sales, marketing, and pricing lie on their shoulders.
After the recent share-price slashing that Dendreon Corp. (DNDN) had endured for not meeting their initial sales expectations with Provenge, investors are concerned that Seattle Genetics may meet the same fate. Dendreon shares fell 67% on August 4 after pulling their 2011 revenue estimate of $350-400 million.
Dendreon’s CEO Mitchell Gold told Bloomberg the main stumbling block had been lack of knowledge about insurance coverage, with Medicare and Medicaid’s coverage of Provenge impacting physician adoption.
“You have to develop a drug, and then you have to be able to launch a drug, and those are not necessarily connected,” Mark Monane analyst at Needham & Co. said in an interview with Bloomberg before the FDA approved Adcetris. “If you’re good at development, it doesn’t give you a get-out-of-jail-free card.”
Jason Kantor, an analyst with RBC Capital Markets told Bloomberg, “there is a general concern about owning any company into a drug launch, and the recent blowup of Dendreon does not help…general concerns relate to reimbursement, uptake, execution and expectations.”
No longer is it enough for biotechnology companies to spend years and millions of dollars developing experimental drugs, gathering data to show their medicines can help patients with acceptable levels of side effects. Investors want to know if the drug will be reimbursed by insurance companies, how many patients will benefit from it and which doctors will prescribe it, Monane told Bloomberg.
Do you think that Seattle Genetics will successfully launch Adcetris? Below we report some interesting data on the stocks mentioned in this article.
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1. Dendreon Corp. (DNDN): Biotechnology Industry. Market cap of $1.77B. The stock is currently stuck in a downtrend, trading 39.9% below its SMA20, 61.5% below its SMA50, and 65.58% below its SMA200. It's been a rough couple of days for the stock, losing 6.01% over the last week.
2. Seattle Genetics Inc. (SGEN): Biotechnology Industry. Market cap of $1.69B. The stock is a short squeeze candidate, with a short float at 21.65% (equivalent to 11.36 days of average volume).