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Dendreon Could Push Higher If New Drug Trials Succeed
Posted by: Dividend King (IP Logged)
Date: April 23, 2012 10:13AM
Several years ago, I worked for a biomedical company. While they did not manufacture drugs, they were a leader in the biotechnology field, developing infusion pumps for diabetics. The pump literally changed a person's idea of what it means to live with diabetes.
I remember talking with our customers and their families about the way the pump had revolutionized their life. I remember the tears in a mother's eyes as she talked about how excited her son was on his seventh birthday when, for the first time, he was able to eat a piece of birthday cake along with his friends, or the Olympic swimmer who could resume his regiment with confidence by wearing his waterproof pump.
It was during that time I realized how important biotechnology was, and the impact new drugs and equipment could make on lives. However, with all research there comes a price and the need for investors who believe in the mission and quest of a biotechnology company.
In the pharmaceutical arena, this is even more apparent. Drugs take years to develop, and millions of dollars of investment go into research and trials. In addition, when a trial fails, all too often we are quick to bail or turn and find the next up and coming star on the block. Dendreon (DNDN) may be a great bet for those who are looking to test the biomedical waters. This biotech is focusing on cancer research and treatment. In its channel, DN24-02 is looking promising so far. DN24-02 is an immunotherapy drug that, if successful, will treat solid tumors. It is in the clinical development stage. Phase 2 trials are currently underway, and a Phase 3 trial has already been planned. This drug is certainly one to watch, as any successful new development could potentially push the stock higher.
Provenge, Dendreon's prostate cancer drug, is currently the only drug Dendreon manufactures. Other drugs they have in the pipeline are focusing on kidney, cervical and colon cancer. While the testing and approval process could take years, it is worth noting that the National Cancer Institute estimates that the cost of cancer treatments will rise from $125 billion to around $173 billion by 2020. This will prove to be profitable to those companies, and their investors, that develop effective drugs.
A major competitor, Johnson & Johnson (JNJ) is going head to head with Dendreon's prostate cancer treatment. Zytiga costs less than one-half the cost of Dendreon's Provenge ($40 thousand versus $93 thousand) for the recommended series of treatments.
There is a lot of discussion about both drugs. A major positive aspect of Provenge therapy is it is the first drug moving towards a prostate cancer vaccine. This provides a huge opening for Dendreon to conduct academic and industry research. This will generate an enormous amount of data that used properly can expand the role of Provenge in prostate cancer.
Dendreon recently scored another big win with its partner Merck (MRK) when they were granted a patent approval for a hepatitis C virus inhibitor currently being researched and developed.
What does that mean for us as investors? It is a good bet to invest in the pharmaceutical arena. Dendreon has upside potential. With a balanced investment, the long process of research and trials could lead to a huge payoff.
Recent legislation has been incredibly supportive of emerging companies such as Dendreon. The Jumpstart Our Business Startups(JOBS) Act allows public emerging growth companies five years to focus on conducting critical research on debilitating diseases before having to divert funds on costly regulations and reports.
Progenics Pharmaceuticals (PGNX) trading at just below $10 is a more serious threat to Dendreon. Progenics stock has been fairly stable averaging around $10 for some time. With a new medication in the wings that has been showing significant results, they could come charging by Dendreon. Sanofi (SNY) is Dendreon's largest competitor. Sanofi's focus is much broader than just cancer.
Cancer needs a cure. New drugs and treatments affect the hope cancer patients count on. The effectiveness of these drugs will be what drives the market. A well-informed investor will keep in mind a balance in their stock portfolio. It is easy to be cautious and take the wait-and-see attitude. However, that is when the bull runs wild and tramples you in the dust.
If Dendreon can get on track, I feel the stock will increase in value. At $10 a share, this could be a bright up-and-coming stock. Taking charge of a stock while it is still low can be a good strategy. Dendreon is struggling to stabilize after a few blows but if its past history is any indication, there is a huge upside if the company succeeds. If that is the case, you want to be on the back of the bull, not under it.
Stocks Discussed: MRK, JNJ, DNDN, PGNX, SNY,