Cancer vaccine pioneer Dendreon (NASDAQ:DNDN) delivered news yesterday that its investors have been anxiously awaiting: final three-year survival data from a phase 3 study of Provenge, the company's flagship prostate cancer vaccine. The results of study D9902A appear, from what has been reported, to support earlier results from another phase 3 study called D9901. It looks like Provenge significantly extends survival of men with advanced prostate cancer, which is where the rubber meets the road for any cancer therapy.

This doesn't mean all is smooth sailing ahead for Dendreon, of course. The results just reported came from a small, truncated study not really designed to stand on its own. While results of the study look pretty good both separately and pooled (Provenge had a 23% median survival advantage over placebo in the combined D9901 and D9902A study groups), we don't have any detailed information. As is not atypical, Dendreon is reserving the meat of the results until they can be presented at a scientific conference.

The big question now is whether or not the FDA will let Dendreon file for approval of Provenge on the basis of these data alone, or wait to see more from the D9902B study, which is still enrolling. Dendreon management intends to talk to the FDA and have an answer to that very question by the fourth quarter of this year. If D9901 and D9902A are sufficient for at least a provisional approval, then Provenge -- which has Fast Track status -- could conceivably be on the market by late 2006. If not, it could be 2008 or beyond before the drug reaches the market.

Booster shot
Nevertheless, the data to come out of D9902A were clearly encouraging, if light on detail, and the stock went up sharply after it was released. Up sharply on a percentage basis, that is. In fact, Dendreon is down 36% for the year to date despite putting out some pretty good news. I bought Dendreon stock back in February because I thought the stock was being undervalued and that the potential upside of Provenge outweighed the program's admittedly considerable risks. Now, the risks are slightly lower, and the stock is a few pennies cheaper than when I bought it.

Yet it seems that this may be the dawning of the cancer vaccine era. A deal announced this week between Motley Fool Income Investor recommendation Merck (NYSE:MRK) and Geron (NASDAQ:GERN) gave this therapeutic strategy a higher profile. The two companies will develop a cancer vaccine using Geron's telomerase target and Merck's vaccine technology. The deal also gives Merck an option on Geron's dendritic cell-based vaccine, which is already in phase 1/2 development. (Remember this deal -- we'll come back to it later.) Only a little bit behind Dendreon in clinical progress is Cell Genesys (NASDAQ:CEGE), which is in phase 3 testing of its GVAX prostate cancer vaccine. And Genitope (NASDAQ:GTOP) should soon be reporting interim phase 3 data on its non-Hodgkin's lymphoma cancer vaccine.

With the exception of Geron, all of these companies have enterprise values in the neighborhood of $250 million to $300 million -- a far cry from the value attached to companies with more conventional late-stage, but still-risky cancer drugs, like, say, Telik (NASDAQ:TELK) or Onyx Pharmaceuticals (NASDAQ:ONXX) (with enterprise values in the $650 million to $700 million range).

But cancer vaccine companies labor under two heavy discounts. One is the commercially unproven modality that therapeutic vaccines represent. Unlike your basic immunization, these vaccines don't prevent anything. They are used to jumpstart the immune system, which has been conditioned to ignore cancerous cells, back into action. The FDA has never approved a therapeutic cancer vaccine. None has yet made it as far as a regulatory submission. That's a risk in terms of both product approval and manufacturing. Making sure a product customized to each individual patient is nevertheless made with the consistency and purity that FDA demands is no small feat. Both Dendreon and Antigenics (NASDAQ:AGEN), another cancer vaccine company with a phase 3 product, have had to delay clinical programs in the past when the FDA demanded additional manufacturing information about drugs used in trials.

The "personalized" aspect of the vaccines has created another worry for cancer vaccine companies: that the process of formulating and administering these drugs will mean lower sales.

Too much bother?
In the case of Provenge, a recombinant manufactured cancer antigen is paired with an individual patient's own dendritic cells to make the final product. That means using the drug is a multistep process that includes getting a patient specimen and sending it to the vaccine manufacturer. There's reason to be concerned that such products won't be used as readily as treatments that can be pulled off the pharmacy shelf, and that sales will thus be low even if the products are approved. In fact, there is even an almost-kinda-sort-of precedent in Zevalin, a product of Motley Fool Stock Advisor pick Biogen Idec (NASDAQ:BIIB) .and it is not terribly encouraging.

Zevalin is a monoclonal antibody linked to a radioactive payload used to treat certain non-Hodgkin lymphomas. While it is not personalized for each patient in the sense of using an individual's biological matter in the formulation process, each dose must be compounded for a specific patient at a special nuclear pharmacy before it is administered, and each patient must be pre-treated with Rituxan, requiring an oncologist to coordinate closely with a nuclear medicine specialist. And sales have been lousy. Zevalin generated worldwide sales of $23 million in 2004, with revenues actually dropping in the U.S. from the previous year. Rituxan, in contrast, had worldwide sales of $1.6 billion in 2004.

I'm not suggesting Zevalin is a serious a model for what cancer vaccines will face. Zevalin has been a lackluster product in large part because Rituxan is such a good one, and because insurance companies have resisted paying for it. But the inconvenience of the product for prescribing physicians also plays a role, and investors have some reason to worry that may carry over to cancer vaccines, too.

I believe cancer vaccines have the potential to do quite well, however. While Provenge must be prepared for each patient, for instance, it puts relatively little strain on the physician. Blood simply needs to be drawn and white blood cells separated out by leukapheresis. Dendreon will do the rest when it receives the sample.

To this extent, preparing to administer Provenge doesn't seem much different for doctors than sending a blood sample to a lab for a diagnostic test. Other cancer vaccines that require antigens from a patient's tumor -- Antigenics' Oncophage melanoma vaccine, for instance -- put a little more burden on the caregiver, but not so much that doctors should hesitate to use them if they prove more effective than alternative therapies.

A change in the wind
Another obstacle for cancer vaccine companies -- that they were laboring along without much interest from Big Pharma -- disappeared this week. The Merck-Geron deal shows that Big Pharma is interested in cancer vaccines and thinks they can be significant, profitable products. Until now, it has been notable that Dendreon, Antigenics, Cell Genesys, and Genitope have all neared completion of their clinical programs without signing on a marketing partner. While that may ultimately be good news for the companies, it has also been a seeming lack of validation, or at least a lack of any serious interest, from the pharmaceutical mainstream.

Merck, at least, has finally showed itself willing to break a few rules. With any luck, some of these cancer vaccine companies will soon be changing the rules about how deadly cancers are treated.

Karl Thiel owns shares of Dendreon. The Fool has a strict disclosure policy.