Of the four aspects of a SWOT analysis -- strengths, weaknesses, opportunities, and threats -- understanding the threats is often most important. Without knowing what can go wrong, terribly wrong, it's impossible to know whether a company is worth your investment.

Dendreon (Nasdaq: DNDN) and its prostate cancer treatment, Provenge, have three threats: One appears to be taken care of, one is on its way to not being a problem, and the third is one that investors need to keep an keen eye on.

Getting it paid for
Proving that a drug works and getting it past the Food and Drug Administration is only half the battle these days. Drugmakers still have to get their drugs paid for.

Private insurers are important, but given the late onset of prostate cancer, getting the Centers for Medicare & Medicaid Services, or CMS, to pay for Provenge is priority number one.

When CMS decided to investigate whether it would pay for the costly, $93,000 treatment, investors were rightfully a little worried. Excluding or reducing the number of Medicare patients that can take Provenge would take a major bite out of Dendreon's revenue.

Fortunately that doesn't seem to be an issue. CMS issued draft guidance yesterday stating that the Provenge was "reasonable and necessary" for patients when used as indicated. Assuming the agency doesn't do a 180 when it issues final guidance after the public comment period, this threat appears to be averted.

Ramping up production
Provenge isn't your typical drug that can be made ahead of time. The treatment is specific for each individual patient. In order to increase revenue, Dendreon had to ramp up the number of workstations it uses to produce the treatment.

Considering the novel nature of Provenge, there was always the possibility that the FDA would be sticklers when signing off on new manufacturing capacity. So far though, that doesn't seem to be a problem. Earlier this month, Dendreon got expanded capacity at its New Jersey approved, which quadrupled the potential output of the facility. The approval should give investors confidence that the FDA will also sign off on new plants in L.A. and Atlanta that are next in the cue.

Up and coming drugs
Herein lies the biggest threat to Provenge.

At the moment, Provenge has little competition. sanofi-aventis (NYSE: SNY) sells Taxotere, which treats the same type of prostate cancer patients: metastatic hormone-refractory prostate cancer. Sanofi also sells Jevtana, but that's only approved for patients that have already failed Taxotere. Considering Taxotere's nasty side effects compared to Provenge, it shouldn't be much of a competition once Dendreon isn't supply constrained.

Coming up from behind though, there are a couple of drugs that could give Provenge trouble.

Johnson & Johnson's (NYSE: JNJ) abiraterone is being tested in patients that have failed Taxotere -- that is, after patients would have already been eligible for Provenge -- but there's little reason to think it won't also work earlier in the disease progression.

Medivation's (Nasdaq: MDVN) MDV3100 is farther behind, but it's in the same boat. It'll first go after patients that have failed chemotherapy and latter be a potential direct competitor to Provenge.

There's also OncoGenex Pharmaceuticals (Nasdaq: OGXI) and partner Teva Pharmaceuticals (Nasdaq: TEVA), which are running phase 3 trials of OGX-011 in prostate cancer.

And Exelixis's (Nasdaq: EXEL) cabozantinib looks like it's helping prostate cancer patients although it's even further behind.

They're threats for sure, but these drugs still need to prove that they can extend survival beyond what Provenge has done before they'll be legitimate issues for the drug.

The wall of worry
While these threats are real, as Dendreon avoids them and investors become more confident, the share price is bound to rise. Considering it topped $55 per share in the post-approval euphoria last year, I don't think it's impossible that we might see that level again if the threats are averted.

Speaking of threats, this just-released video message reveals the real threat to your wealth.

Johnson & Johnson is a Motley Fool Inside Value and a Motley Fool Income Investor recommendatio. Exelixis is a Motley Fool Rule Breakers recommendation. Motley Fool Options has recommended a diagonal call position on Johnson & Johnson. The Fool owns shares of Exelixis, Johnson & Johnson, and Teva Pharmaceutical Industries. Motley Fool Alpha LLC owns shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. The Fool has a disclosure policy.