Dendreon Struts Its Stuff

At its analyst day yesterday, Dendreon (Nasdaq: DNDN  ) was like a peacock with only a third of its feathers grown in: ugly as hell now, but graceful if you can imagine what it'll look like once it has its full arsenal.

The biotech company now expects to submit the updated marketing application for its prostate cancer vaccine, Provenge, to the Food and Drug Administration by mid-November. That would put an approval around May of next year, assuming the FDA gives it a six-month review.

The good news is that demand for the drug -- assuming it gets approved -- should be high. The bad news is that the company won't be able to serve that many customers in the first couple of quarters after approval. In the second half of next year, Dendreon only expects to be able to sell $60 million to $125 million worth of Provenge. Once additional capacity becomes available in plants in New Jersey, Atlanta, and Los Angeles, Dendreon will be able to bump that up to between $1.2 billion and $2.5 billion annually. Considering that the drug seems to work better than sanofi-aventis' (NYSE: SNY  ) Taxotere with fewer side effects, I'd say that seems entirely possible.

The slow start doesn't bother me because the value of the company will be dominated by what it can sell at the peak, not how fast it gets out of the gate. Onyx Pharmaceuticals' (Nasdaq: ONXX  ) Nexavar had a relatively slow start and is now approaching a run rate of $1 billion annually. Biogen Idec (Nasdaq: BIIB  ) and Elan (NYSE: ELN  ) saw Tysabri pulled off the market shortly after its first launch, but the duo has battled back. It's not how you start, but how you finish, that matters.

Provenge is tailor-made for each patient and Dendreon unveiled a tracking software called Intellivenge where patients can track their product through the manufacturing process. Despite the dorky-sounding name, I like the idea as it makes the treatment very patient centric. As surgical-robot maker Intuitive Surgical (Nasdaq: ISRG  ) can attest, patient-driven demand is a wonderful thing.

I still think Dendreon has a little room to fly from here. But first it needs to grow in the rest of its feathers.