) shares went soaring up following the pre-announcement of
better-than-forecast fourth quarter 2011 revenue from its sole
marketed product,Provenge , a vaccine for prostate cancer.
Management announced thatProvenge grossed $82.0 million in revenue
in the fourth quarter, 25% above the sequentially preceding quarter
and in utter contradiction to management's guidance of only modest
revenue growth in the quarter.
For the full year 2011,Dendreon reportedProvenge revenue of $228
million. Full year sales ofProvenge was, however, well below the
company's original forecast, in a band of $350 million and $400
million, which was withdrawn last year on dismal performance of the
Though expensive,Provenge is currently fully reimbursed by the
Centers for Medicare and Medicaid Services (
), including the costs of infusion of the vaccine.Provenge also has
the Q-code, which is a product-specific code that enables
electronic submission of claims, which in turn can expedite
payment, thereby facilitating the reimbursement process
Despite the favorable reimbursement environment for the
vaccine,Dendreon faced tough times in 2011 asProvenge sales failed
to live up to management's as well as investors'
expectations.Provenge's high cost density was alluding physician
acceptance of the vaccine. Other problems which were affecting the
sales of the vaccine included lack of easy access toProvenge and
inability on the part of physicians to identify eligible patients
Things seem to be changing now as awareness gradually improves
on the favorable reimbursement environment. The physicians are more
comfortable with prescribingProvenge as the average time to payment
for physicians has come down to less than 30 days.
Moreover, management pointed out that out of pocket expenses
were negligible for almost 75% of the patients onProvenge
treatment. The marketing and physician education initiatives
undertaken byDendreon management have also boosted sales.
The impressive preliminary Provenge sales were also driven by
more infusion centers coming online. Dendreon reported that the
number of centers where patients can be treated with Provenge
increased from 425 at the end the third quarter 2011 to 590 centers
at the end of 2011. This was beyond management's expectations to
end 2011 with 500 centers. In 2012 too management expects to add
500 new infusion sites.
Dendreon expects to post modest quarter-over-quarter growth in
2012 and believes it has sufficient cash in hand to function this
year. It aims to reduce costs in 2012 and also improve its
We currently have a Neutral recommendation on Dendreon. The
stock carries a Zacks #3 Rank (Hold rating) in the short run.
The successful commercialization of Provenge is crucial for the
financial performance of Dendreon as it can drive the company to
profitability. Though we are impressed by Provenge's encouraging
growth in the fourth quarter, we prefer to remain on the sidelines
until we get better visibility on whether the improvement in
Provenge's sales is sustainable.
We are also concerned about competition to Provenge from
Johnson & Johnson
) Zytiga which was launched in the second quarter of 2011 and is
doing reasonably well. Moreover, Medivation's pipeline candidate,
MDV3100, recently generated impressive data from a pre-specified
interim analysis of a late stage study, AFFIRM. MDV3100, if
approved, could pose competition to Provenge.
In the long run, we remain concerned about the company's
dependence on Provenge and the lack of a decent pipeline. We
believe Dendreon has little to fall back on if Provenge belies
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