Dendreon (NASDAQ: DNDN) is a classic example of how a company fares as they struggle through the arcane and sometimes bewildering process of gaining FDA approval of a new treatment protocol.
A little more than a year and a half ago, the Seattle-based company was anxiously awaiting FDA approval of its new drug treatment protocol for prostate cancer.
The company's new drug, Provenge, had completed a trial that found that the treatment extended the lives of men suffering from prostate cancer an average of 4.5 months over those who did not receive the treatment. The company felt it had adequately demonstrated the efficacy of the treatment and deserved FDA approval.
In an unexpected but somewhat typical move, the FDA chose not to approve the drug for distribution at that time. It opted to delay approval until completion of another study under way with 500 subjects. This came in spite of a finding by an FDA panel that the drug was "safe and substantially effective."
The release of that conclusion drove the price of DNDN stock to $20 share. The euphoria was quickly exhausted, though, as the agency soon thereafter announced the delay in approval.
Investors had hoped that the more recent study, when concluded in October, would provide the basis for a resubmission of the FDA approval request. That was not to be, as the study failed to meet minimum criteria for life extension.
While submission of the FDA request has been delayed, there was promise from the test results that the treatment was successful, though not to the extent desired.
Patients receiving the Provenge protocol were 20% less likely to die than those on a placebo. While certainly positive with respect to those who benefitted, the results did not reach the 22% level the company needs to advance its approval request with the FDA.
Company officials have indicated that they are encouraged by clinical trial results, and believe that collecting subject data over a longer period of time will produce the desired results, as past experience has indicated that Provenge has proven to be more effective over longer periods.
The current trial will be completed by mid-2009. If results improve to the minimum level necessary, the FDA application will be resubmitted, with approval slated for early 2010.
DNDN is currently trading at about $4.50 per share. The company is highly leveraged, with a debt-to-equity ratio of over 7. At the current price, investors have minimum downside risk, but should wait a few months while the study is being completed before committing too much capital to this name.
Louis Navellier's PortfolioGrader Pro, which offers free ratings for nearly 5,000 Wall Street stocks, rates DNDN a C or Hold.
Jamie Dlugosch is a contributor to InvestorPlace.com.
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