Are Monthly Numbers Necessary, Dendreon?

Data is great, but investors should be careful analyzing Dendreon's (Nasdaq: DNDN) monthly sales numbers.

Source: Company releases.

That leaves the company expecting $13.4 million to $14.4 million in sales in the last two months of the fourth quarter, which puts the average monthly production below the October number. The decline from full capacity is because of holidays and plant maintenance.

The problem here is that the granularity for 2010 takes the focus away from the Dendreon's real value. Whether it's working at 70% or 100% of maximum capacity doesn't really matter when the company can only produce $10 million worth of Provenge each month.

The focus should be on 2011, when the capacity will increase tenfold. Expanded capacity at Dendreon's New Jersey plant will come online in March, and its new Atlanta and Los Angeles plants come online around mid-year. Dendreon is guiding for revenue of $350 million to $400 million next year, with about half of that coming in the fourth quarter.

If you take that $200 million run rate from the fourth quarter and extrapolate into 2012, Provenge sales are quickly approaching blockbuster status. Competition from sanofi-aventis' (NYSE: SNY) Taxatore doesn't seem to be an issue; it's all about capacity at this point.

Of course, there are some caveats with that run rate. The company has to get the Food and Drug Administration approvals for the expanded capacity. I have no reason to think that Dendreon can't do it, but the FDA does seem to be cracking down on production facilities. Bristol-Myers Squibb (NYSE: BMY) got a warning letter from the FDA last month, and Gilead Sciences (Nasdaq: GILD) received one the month before. However minor, investors should be aware there's some risk here.

There's also the issue of getting Provenge paid for by Medicare. The Centers for Medicare & Medicaid Services will hold a meeting on Nov. 17 as part of the process of establishing a national payment guideline. On the conference call yesterday, CEO Mitchell Gold didn't seem too worried, pointing out that Provenge is in an elite class of cancer drugs with Avastin and Herceptin from Roche and Eli Lilly's (NYSE: LLY) Alimta that have shown a survival benefit of greater than four months in metastatic cancers.

With so much of the Provenge sales already priced into the stock, investors will need to be patient. Focusing on the future -- rather than monthly numbers -- is the only way to approach Dendreon.

Roger Friedman has three stocks for your watchlist.