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

The Deal: After String of Miscues, Dendreon Likely on Block

NEW YORK ( The Deal) -- What Dendreon (DNDN) did right was bring the first clinically successful immunotherapy to market. What it did wrong was, well, just about everything else. And that's why company officials are likely to announce soon that Dendreon will be sold.

Rumors began flying Friday after the bell that Dendreon had hired JPMorgan Chase (JPM) to help it find a buyer. The company is not commenting.

The best candidates for buying the biotech are competitors Johnson & Johnson (JNJ - Get Report) or Medivation (MDVN), according to Maxim Group biotechnology analyst Jason Kolbert.

Seattle-based Dendreon was a Wall Street darling in 2010. The Food and Drug Administration approved its product Provenge, a therapeutic vaccine for metastatic prostate cancer, in April 2010. At the biotech's height, shares were selling at more than $54. But shares have been trading below $5 since March.

Both J&J and Medivation have been nipping at Dendreon's heels. J&J's Zytiga and Medivation's Xtandi, which it commercialized with Astellas Pharma, both treat the same illness. They represent competitive therapeutic options at a lower cost to Provenge, and both are oral therapies.

"In this environment," Kolbert said in an interview with The Deal, "Dendreon lacks adequate resources to compete." The company has major debt, about $650 million. And Provenge is only expected to bring in between $300 million and $400 million this year. That's about 10% of what analysts were forecasting three years ago.

While Dendreon has a few other drug candidates in development, it's pipeline is pretty thin.

"The bottom line is, can Dendreon survive on just Provenge? The answer to that is, No," Kolbert said.

He added that for a company like J&J, already marketing a drug in the prostate cancer market, buying Dendreon would be an incremental expense with a big upside. "The SG&A line associated with marketing Provenge is killing Dendreon," he noted. But manufacturing costs for a company like J&J could drop those costs by as much as 40% to 50%. "That's still high for a biotech product, but it does suggest that a company with the right infrastructure can generate free cash flow from this product," Kolbert noted.
1 of 2

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
DNDN $0.06 -6.02%
JNJ $112.88 0.12%
AAPL $95.29 1.80%
FB $117.92 -0.55%
GOOG $695.91 -0.33%


Chart of I:DJI
DOW 17,780.52 -110.64 -0.62%
S&P 500 2,064.59 -16.84 -0.81%
NASDAQ 4,778.3910 -39.2030 -0.81%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs