Macro Tsimmis

intelligently hedged investment

Dendreon (DNDN) update #2

Posted by intelledgement on Fri, 02 Mar 07

Dendreon announced yesterday that an FDA advisory committee will meet on 29 March to consider the company’s application for approval of their anti-prostate cancer immunotherapy, Provenge. While not unsurprising for the FDA to invoke the help of an advisory committee in a difficult case—the data the company have submitted for approval are a bit unorthodox, given that Provenge failed to meet the primary endpoints in two Phase 3 studies but did demonstrate an apparently significant survival advantage—it does mean we are likely to know whether or not Provenge will be rejected sooner-than-expected.

The FDA rarely goes against the recommendations of their advisory committees, so if the committee is not happy with the data, the agency is likely to require Dendreon to complete their third Phase 3 study, which means a delay of two or three years. On the other hand, if the committee is comfortable with the data submitted in support of Provenge, we will still have to wait until 15 May to see if the FDA grants unconditional approval or (much more likely) approves limited use of Provenge for terminal patients with no other recourse pending the final results of the third Phase 3 study.

The Street does not seem very happy with this development, as the stock was down yesterday on the news and is down again today. Seems weird to us; when we bought the stock in January at $4, we thought we might not know Provenge’s fate for nine months (if the FDA even agreed to consider the company’s application for approval, although we figured that was a foregone conclusion). Well the FDA not only agreed to consider the application but fast tracked it with a decision targeted for May—four months to wait instead of nine—and in February, the stock was over $5. Now we learn we might have the answer in four weeks; can’t see how that is suddenly bad.

The Street’s valuations are not always reasonable—by definition, they have to be unreasonable to at least two folks or there would never be any transactions!—but there is an unusually large short position on this stock and that may be depressing the price here. Whatever, if you have been sitting this one out, you have another chance to get in at the same price we obtained two months ago.

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