BRIDGEWATER, NJ ( TheStreet) -- Dendreon ( DNDN) reported Provenge sales of $78 million for the September quarter, down sequentially and short of Street expectations again, yet the stock soared higher at Friday's open because some investors see a light emerging from the end of a long, dark tunnel. As I mentioned in my preview, the best thing Dendreon had going for it coming into today's third-quarter earnings was ultra-low expectations. Investors were so accustomed to Dendreon blowing itself up four times a year that Friday's no-drama report was a giant upside surprise. Dendreon shares jumped 24% to $4.75 in early Friday trading. Of course, some perspective is in order. Coming into today, Dendreon shares hadn't traded this cheap since before Provenge's phase III study results were announced three years ago. Provenge sales of $78 million in the quarter were up 28% year over year but down 2.5% sequentially. Provenge quarterly sales must reach $100 million for Dendreon to be cash flow positive on an operating basis. Provenge sales are actually moving in the wrong direction but 14% quarter-over-quarter growth among community urologists -- the drug's target audience -- suggests a turnaround is possible. "The community setting is where we will see most of our
Provenge growth going forward," said Dendreon CFO Greg Schiffman on Friday's conference call. Dendreon certainly needs community urologists to use more Provenge because demand elsewhere lags. Performance with community oncologists was flat quarter over quarter (although that's an improvement over an 8% decline in the second quarter.) More troubling was the 25% decline in Provenge use by academic oncologists. Dendreon blamed the fall on competition from clinical trials of other experimental drugs. Perhaps, but it also lends weight to the argument that academic oncologists have never truly embraced Provenge because they simply don't believe the survival data upon which the drug was approved. Dendreon executives insisted that Johnson & Johnson's ( JNJ) prostate cancer drug Zytiga has not significantly impacted Provenge use to date. However, on its own call last week, J&J estimated that Zytiga market share in the pre-chemo setting -- where it's not yet approved -- was already 30%. The FDA is expected to make an approval decision by Dec. 14 on Zytiga in the pre-chemo prostate cancer setting.
The message Dendreon is sending to doctors is that Provenge and Zytiga can and shoud be used sequentially when treating prostate cancer patients. Data from a Dendreon-run sequencing study of both drugs will be ready next year. The company also announced Friday that it will run a similar sequencing study with Dendreon and Medivation's ( MDVN) Xtandi, which roared out of the launch gate earlier this week. Both Zytiga and Xtandi are formidable competitors if doctors decide that either drug is a suitable replacement for Provenge. Dendreon reported a net loss of $154.9 million in the third quarter 2012 compared to a net loss of $147.1 million in the year-ago quarter. This quarter's net loss included $81 million in charges associated with the previously announced restructuring aimed at reducing the company's overhead and expenses. -- Reported by Adam Feuerstein in Boston. Follow @AdamFeuerstein