The holidays may be over, but the presents keep coming for investors. After the first two trading days this year saw the Dow Jones Industrial Average climb, chatter about "the January effect" foreshadowing a great year began to pick up. Dendreon (Nasdaq: DNDN ) did a little year-end foreshadowing of its own with a report that sent shares higher by a whopping 50% this morning!
That is how you do an operational update!
I've been upset with Dendreon's management in the past as far as the bungled rollout and the excuse-making (just two months ago they were preemptively blaming Thanksgiving and Christmas for sales-growth shrinkage) and the attitude surrounding the stock was dour. Sales for the fourth quarter topped Wall Street expectations by 14% at $82 million, but growth still shrank sequentially, and management won't budge from their "modest" estimates.
If Provenge can build sustainable momentum, then the company could well be back on its way to reclaiming its "most-favored biotech" throne. After pulling 2011 sales guidance of $350 million to $400 million in August, shares plummeted 65%. The final tally turned out a little over half of that estimate, at $228 million. Provenge's failure to launch became a theme of 2011. It wasn't just enough to get a drug through the rigorous FDA process anymore and expect sales to show up.
Savient Pharmaceuticals (Nasdaq: SVNT ) actually edged out Dendreon as 2011's worst health-care stock, losing 80% of its value last year. The company was hoping for a buyout, but when its white knight never showed, Savient was forced to launch its gout treatment Krystexxa on its own with poor results. Human Genome Sciences (Nasdaq: HGSI ) is another headliner here, losing 69% last year as its drug Benlysta, the first lupus treatment approved in half a century, sold less than $20 million in the third quarter, much to the chagrin of marketing partner GlaxoSmithKline (NYSE: GSK ) . Because of the waxing and waning nature of the disease, doctors appear slow to prescribe the drug in a consistent manner, adopting a wait-and-see approach.
In Dendreon's case, if sales meaningfully strengthen in 2012 not only does the company have a chance to achieve the peak sales of Provenge, but at this depressed price it becomes an attractive take-out candidate. Sure, there are new competitors on the horizon, but this is biotech -- there are always exciting drug candidates making their way through clinical trials. So while Medivation's (Nasdaq: MDVN ) MDV3100 and its stellar efficacy look great so far, investors should not just assume Provenge's life span will be cut short by the oral medication. Plus, with 1 in 6 men expected to be diagnosed with prostate cancer, there should be more than enough patients to go around in what is estimated as a $9 billion market.
Look, I've been hard on Dendreon out of love. They have a great product that can save lives. I own shares and discussed a potential rebound this year despite the rollout challenges and the lower-than-expected margins due to Provenge's unique manufacturing process. But it all starts with getting doctors to prescribe the drug, and that's why today's report is a step in the right direction.
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