Dendreon seems guaranteed to provide investors with a rollercoaster ride of excitement. From the surge after announcing the success of its hugely binary phase III trial of immunotherapy  Provenge earlier this month, to yesterday’s plunge caused by speculators, and today’s rocket skywards once again, the stock is certainly a headline maker.  

The market now seems convinced that Dendreon will start making headlines for what ultimately has always been the goal, helping men with advanced prostate cancer live longer. If the FDA grants approval next year,  Provenge would represent the first therapeutic  cancer vaccine to make it to the US market, a considerable achievement when bearing in mind the failures that have littered the space in the last 18 months.  

The group’s $24 share price this morning and huge $2.4bn market cap points to a lot of faith in the FDA granting approval, which at the earliest could come by mid-2010. 

The regulator made it quite clear what Provenge should achieve to win approval, and it appears to have done just that. The overall risk of death was reduced by 22.5%; 22% was the target.  Provenge extended the life of advanced prostate cancer patients by just over four months, beating the three-month benefit seen with  Sanofi-Aventis’ Taxotere, the current standard of care for these men. Three year survival was improved by 38%.

The results have prompted many doctors to say the treatment could now replace chemotherapy in this patient population. 

Blockbuster opportunity

Analysts reckon the product represents a blockbuster opportunity, with sales of a couple of billion dollars possible. This represents a remarkable about turn of sentiment, as many of these analysts were, understandably, very reluctant to ascribe any chance of success to the product before the results were known. 

Now there appears to be a competition to ascribe the most value. Needham and Co appear to be winning, today slapping a mountainous $38 price target on the stock, closely followed by Brean Murray, which believes the shares are worth $35, and Lazard with $33. 

Those values equate to a market cap of between $3.2bn and $3.5bn, remarkable for a company that is unlikely to start generating revenues for more than 12 months, and has still to win regulatory approval, not a foregone conclusion given the FDA's rejection of the vaccine in 2007. 

Fundraising on the horizon

Dendreon ended 2008 with $109m in cash, and considering it wants to market  Provenge itself in the US, the coffers will need to be swelled. With the share price sky high, an equity offering is surely on the horizon. A cynic might suggest those investment banks waving mountainous valuations around are fishing for business.  

A marketing deal outside the US will also be sought. When that emerges, the identity and structure of the deal will provide interesting insight into the industry’s view on Provenge. 

Also on the horizon is the all important final section of the journey towards marketing approval, the FDA review. Analysts and investors appear to be envisioning a gentle stroll, despite the fact that past experiences suggest treacherous pitfalls should not be discounted. 

Although the signs are certainly looking brighter, the Dendreon rollercoaster might not yet have come to rest.