Human Genome Sciences
Earlier this month Dendreon
But the thing is, the sales ramp -- how quickly sales increase -- is fairly meaningless for the long-term investor. Sure, bringing in revenue quickly and producing positive cash flow is important for biotechs launching their first drugs. But, assuming you're going to hold your shares for many years, the value of the biotech is based on what you think sales will look like at that point: the peak sales for the drug.
The question investors have to ask themselves is whether the relatively slow starts are a sign that peak sales might be lower. Are doctors just not prescribing it right now or will they not prescribe it at all?
Benlysta treats lupus, a disease that waxes and wanes. While the symptoms aren't pleasant, the disease isn't immediately life-threatening either. Doctors may put a few patients on the drug, see how they do, and then increase their prescribing habits as they gain confidence with the drug. AVANIR Pharmaceuticals'
For Provenge, it's possible that doctors aren't prescribing the prostate cancer treatment because they don't think it works or isn't worth the money, which would obviously affect peak sales. But the company's explanation that doctors are worried about having to buy the drug with the possibility of not being reimbursed seems completely reasonable. If that's the problem, once doctors are convinced insurance companies and Medicare will pay quickly, they'll increase their prescriptions and peak sales shouldn't be affected.
For both Benlysta and Provenge, the truth probably lies somewhere in the middle. The companies should be able to recover from slow starts; both are innovative medications. But the lack of enthusiasm, compared to a drug like Vertex Pharmaceuticals'
Keep track of Human Genome Sciences and Dendreon as they launch their drugs. Just click on the companies' names to add them to My Watchlist, the Fool's free watchlist service.
