This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Dendreon: Parsing Provenge's Problems

Updated with new stock price.

SEATTLE ( TheStreet) -- Dendreon (DNDN) shocked investors Wednesday by announcing that Provenge sales are growing much slower than expected because doctors are concerned about getting reimbursed for using the expensive prostate cancer drug.

Some thoughts, observations and questions for Thursday morning after watching Dendreon shares plunge 62% to $13.65 in Wednesday's after-market trading session. On Thursday morning, Dendreon is trading around $14:

"WTF just happened?" Dendreon blames the "cost density" of Provenge for the setback, which is jargon for doctors unwilling (or unable) to shell out $93,000 for a treatment course of Provenge before receiving reimbursement from their patients' insurance companies.

Provenge is certainly not the only high-priced cancer drug, but when prescribing Provenge doctors are on the hook for a lot of money ($93,000) in a relatively short period of time -- let's say one month. [That's the "density" issue.] By contrast, the cost and reimbursement risk of other high-priced cancer drugs -- Roche's Avastin, for example -- is spread out over many months, even longer.

For investors, this is a somewhat rough reminder that doctors are business people too. Cash-flow issues affect a doctor's business, which in this case, means doctors are unwilling or hesitant to have a lot of prostate cancer patients on Provenge, Dendreon says. This situation won't change until reimbursement for Provenge improves to the point where doctors have confidence that they can recoup their cash outlays quickly.

Take a guess at a revised Provenge sales estimate now because no one, including Dendreon's management team, seems to have a reliable forecast. Visibility into Provenge sales has dropped to near zero, which is a situation that investors hate.

Dendreon pulled its 2011 Provenge forecast of $350 million to $400 million and said to expect "modest" growth in the third and fourth quarters. Modest growth? Gee, thanks for being so specific.

Provenge sales in the first half of the year totaled $78 million. Dendreon said Wednesday that July sales were $19 million and that August sales were a bit higher. Is 10% quarterly sequential sales growth "modest?" If so, that would imply third-quarter Provenge sales of $55 million. Assume 20% growth in the fourth quarter and you get $65 million in Provenge sales. Add it all up and round to an estimate of $200 million in Provenge sales for 2011.

That's just a guess, but one that's well below Wall Street's $370 million consensus estimate for Provenge before Wednesday's shocker.
1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
BMY $71.13 -1.15%
DNDN $0.06 -6.02%
JNJ $112.69 -0.05%
AAPL $95.18 1.64%
FB $117.43 -0.96%


Chart of I:DJI
DOW 17,750.91 -140.25 -0.78%
S&P 500 2,063.37 -18.06 -0.87%
NASDAQ 4,763.2240 -54.37 -1.13%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs