BioWatch: Dendreon Looks Even Brighter (DNDN)

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Earlier this week, we highlighted Dendreon Corporation (NASDAQ: DNDN) as one of five biotechs with 50% implied upside.  A new report is out from Canaccord Genuity that has figures which could imply even more upside than what we were reading into shares at the time.

Canaccord Genuity asked, “Can we eliminate the finger test soon?”  Surely, you get their point.  This has been a great week for Dendreon if you look at the stock chart.  A proposed decision memo from the Centers for Medicare/Medicaid Services (CMS) actually supported full reimbursement rates of Provenge in its labeled indication for the specific aims in prostate cancer treatment.  That is not all forms and stages of prostate cancer, but this narrows the definition and should alleviate some of the concerns that surround this stock.

Canaccord Genuity’s Life Sciences analyst George Farmer was expecting a supportive memo, but apparently the support from CMS was more positive than what he was looking for.  He was pleased that there was “no mention of a need to verify metastatic disease” prior to coverage from local contractors.  This is big because it speeds up the process and that speeds up the time of treatment for these patients who are otherwise considered to be dying. 

The company is not entirely out of the woods yet.  A final CMS decision is due on or about June 30, 2011. 

Farmer sees his sales estimates for Provenge of $367 million in 2011 and about $1.2 billion in 2012 being ‘reasonably achievable.’  What Farmer believes is that doctors are likely to be more apt to recommend and prescribe Dendreon’s Provenge with a lower worry about reimbursement risk. 

As a reminder, Provenge numbers for the next two quarters are not as critical as what is expected ahead.  The company’s increased production is on facilities being constructed as we speak and that means that the bulk of the 2011 guidance is very back-end loaded.  It will not be until 2012 that you start to see a normalized revenue growth rate from Dendreon.