Dendreon Finds New, Long Overdue Lifeblood

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Shares of Dendreon Corp. (NASDAQ: DNDN) moved higher Monday after the biotech company said it will start to market Provenge, its prostate-cancer drug, in Europe this year.

The announcement came as the Seattle company reported its fourth-quarter loss was smaller than expected. While the news on Europe was deeply welcome, the company still faces enormous headwinds in its struggles to reach profitability.

Provenge is the first and only FDA-approved therapeutic vaccine for advanced prostate cancer. Provenge takes the body’s own immune cells and reprograms them to attack advanced prostate cancer.

Dendreon said Provenge will be made available first in Germany and the United Kingdom through Centers of Excellence — medical facilities that provide easily accessible specialized medical services to patients. The drug will be manufactured on a contract basis.

The roll-out for Provenge was not yet clear, but getting the drug approved in Europe is a big deal for Dendreon, shares of which have collapsed from a May 2010 peak of $56.24, when analysts projected revenue could hit $3 billion to $4 billion. They were trading at $3.38, up $0.50, or 17.4%, early Monday.

The drug has struggled against intense competition from Johnson & Johnson’s (NYSE: JNJ) Zytiga and Medivation Inc.’s (NASDAQ: MDVN) Xtandi. Both drugs are orally administered, in contrast to Provenge’s intravenous injections.

As a result, Dendreon has burned through millions of dollars of cash in the past year or so. It had $199 million on its balance sheet at the end of 2013, down from $429.8 million a year ago.

The company has worked to boost revenue and cut costs. The goal is to make the company cash-positive “as soon as possible,” CEO John Johnson said on Monday’s conference call. But the company would not say when that will occur.

Being able to market Provenge in Europe will help and is long overdue. Because of the competitive pressures, the company has cut its staff by two-thirds since 2010 and reduced its cost of goods sold to 51% of revenue.

The shares have been heavily shorted, reaching 60 million shares in August. However, that total dropped to around 45 million shares by the end of January.

In the fourth quarter, the company lost $0.17 a share, better than the consensus estimate of a loss of $0.24. Revenue was $74.8 million, down 8.3% from a year ago’s $81.6 million. That was better than the Street estimate of $73.6 million. The company lost $296.8 million, or $1.95, for the full year 2013, compared with $393.6 million, or $2.65, in 2012. Revenue fell 12.9% to $283.7 million.

The big question is whether Dendreon can boost revenue and cut costs fast enough to survive or find a merger partner. That is still not clear.