Will Dendreon Catch Johnson & Johnson or Fall Behind Celldex?

Dendreon (NASDAQ: DNDN) will release its quarterly report on Tuesday, and investors have bid the stock down toward levels not seen in a decade as the company's Provenge prostate-cancer treatment hasn't taken off the way the company had hoped. With hopes of catching up to Johnson & Johnson (JNJ 0.22%) and its rival prostate-cancer drug Zytiga fading, can Dendreon stay ahead of promising upstart Celldex Therapeutics (CLDX 4.20%) in the immunotherapy space and keep its high-growth dreams alive?

Dendreon's story is a reminder that FDA approval doesn't automatically mean huge success. Shareholders celebrated early when Provenge won a thumbs-up from the regulatory body, but after years of waiting, the company has still not seen the ramp-up in sales that they were counting on when they got so bullish about Dendreon stock. Let's take an early look at what's been happening with Dendreon over the past quarter and what we're likely to see in its report.

Stats on Dendreon

Source: Yahoo! Finance.

Can Dendreon earnings ever recover?
In recent months, analysts have gotten more negative about Dendreon earnings, widening their loss estimates for the third quarter by $0.02 per share and their full year 2013 and 2014 projections by four times that amount. The stock has continued its slide, plunging 44% since early August.

Much of the stock's decline came right after Dendreon released its second-quarter earnings results in August. The company didn't lose quite as much money as investors had expected, but it also didn't bring in as much revenue as projected. The kiss of death, though, was Dendreon's guidance that year-over-year revenue from Provenge wouldn't grow, once again demonstrating the challenge that the prostate-cancer treatment has faced in gaining traction. Johnson & Johnson's Zytiga has managed to hold onto too much of the market, even though Dendreon finished enrollment in trials combining Provenge with Zytiga in an attempt to broaden its use.

Source: Images Money, Flickr.

Dendreon did get some good news in September, when the EU's equivalent of the FDA approved Provenge for use in Europe. Still, the open question is whether Provenge will do any better in Europe than it has in the U.S., as both J&J and Medivation have ridden the wave of demand for their treatments. In particular, Medivation's Xtandi is more cost-effective in addition to having slightly greater efficacy.

Another aspect in Dendreon's favor is that it owns extensive manufacturing facilities. With the sale of one facility last year raising $43 million, the company's remaining two manufacturing plants clearly have value. But the clock is ticking against Dendreon, as it has $620 million in convertible notes maturing in early 2016. Without an anticipated expansion in Provenge sales, it'll be hard either for Dendreon to get the money to repay its debt from cash flow or to refinance its debt at favorable rates.

But other immunotherapy companies are starting to come on strong. Celldex Therapeutics has combined its immunotherapy approach with its antigen-presenting-cell targeting technology to develop promising treatments for brain cancer and breast cancer. If Celldex can get treatments approved, it could quickly become a threat to Dendreon in oncology.

In the Dendreon earnings report, watch to see how sales move forward in Europe. With Dendreon depending on revenue growth, it needs wins across the Atlantic in order to reinvigorate investors who've grown impatient with its sluggish results so far.

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