A Dreadful Day for Dendreon

Shares plunged Wednesday after the FDA requested more data on the biotech's prostate cancer drug, dashing hopes of a quick approval

Talk about a roller coaster ride. Just over a month after its stock soared on word that a U.S. Food and Drug Administration advisory panel had vouched for the safety and efficacy of its lead drug candidate, shares of Dendreon (DNDN) cratered May 9 after the agency requested more clinical data. The latest decision derails market hopes that the company's Prvoenge compound for treatment of prostate cancer would be approved quickly.

The Seattle-based biotech announced on May 9 that it received an "approvable" letter the preceding day from the FDA regarding its Biologics License Application (BLA) for Provenge, which was accepted for filing by the agency in January, 2007. The FDA has requested additional clinical data in support of the efficacy claim contained in the BLA. The company said in a May 9 press release that it is seeking a clarification from the FDA as to the nature of the requested data.

"Given our strong belief in the survival benefit and safety profile of Provenge, coupled with the positive outcome of the Advisory Committee meeting, we are disappointed that this decision will cause a delay in the availability of Provenge", said Dendreon CEO’s, Dr. Mitchell H. Gold. "We are committed to working closely with the FDA to resolve these questions in a timely and efficient manner to bring Provenge to patients with advanced prostate cancer who currently have few appealing treatment options."

After the news hit, the selling started. The shares were down 61% to $6.88 on the Nasdaq May 9 with shares trading hands at nearly four times average daily trading volume. The stock is still above their 52-week low of $3.57 reached on Mar. 21.

The news is a textbook example of the volatility inherent in shares of smaller biotech outfits, where investor hopes live and die based on FDA pronouncements and requests. Dendreon's stock price surged nearly 150% on Mar. 30 after news that an FDA advisory committee of outside experts voted 17 to 0 in favor of Provenge's safety and 13 to 4 on its efficacy.

Provenge is designed to stimulate a patient's immune system against prostate cancer. A midstage trial of the vaccine in 127 patients with late-stage prostate cancer failed to reach its stated goal of slowing the disease's spread, usually a death knell for a new drug facing the FDA (see BusinessWeek, 4/30/07, "Teaching The Body To Fix Itself"). But when Dendreon dug into the data it discovered patients on Provenge lived an average of 4 1/2 months longer than those receiving the standard chemotherapy, Taxotere.

But since the trial wasn't meant to prove survival, it was possible something else could be prolonging these patients' lives. The company will pin its hopes on the outcome of a Phase III trial for the drug now underway. Needham & Co,. analyst Mark Monane expects the company to report top-line data from the trial in the second half of 2008 or the first half of 2009, according to a report on Standard & Poor's MarketScope. While he continues to be enthusiastic about Provenge's market potential for this disease setting, given uncertainty of development path, expected lack of significant news flow in the next 12 to 18 months, Monane downgraded his opinion on the shares to hold from buy.

"Outside of full rejection, this is almost a worst-case scenario," analyst Paul Latta of securities firm McAdams Wright Ragen said in a May 9 note. "Unfortunately there is no timeline, which is causing a lot of uncertainty." Latta kept his hold rating on the shares. (McAdams Wright expects to receive and intends to seek compensation for investment banking services from Dendreon in the next three months.)