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business newsHere's Why Dendreon Isn't Like Other Biotechs
By
Brett Chase
Aug 05, 2011 1:30 pm
The cancer drug maker is scaring investors away from biotech stocks after this week's Provenge bombshell.
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Dendreon helped take down stocks of rival biotech companies today and yesterday after reporting disappointing sales of prostate cancer treatment Provenge and pulling the company’s 2011 revenue estimate. Some doctors are concerned about insurance reimbursement for the $93,000 drug, the company said this week. (See Dendreon’s Stock Plunges on Low Provenge Sales.)
“While there is understandable anxiety about any company with a pending launch due to the Dendreon blow-up, we believe that these two situations are quite different,” Leerink Swann analyst Howard Liang writes in a note this morning about InterMune (ITMN).
Indeed, InterMune is very different. The company is preparing to sell its Esbriet pill for the lung disease idiopathic pulmonary fibrosis in Germany. But a Jefferies analyst Thursday warned that there were extremely high market expectations for Esbriet.
The company’s shares dropped 30% this week, trading at $23.37 Friday midday. Liang recommends buying the stock and has set a $54 price target on the shares.
Human Genome Sciences (HGSI) also declined. The company is still in the early stages of marketing Benlysta for lupus. The drug was approved by the Food and Drug Administration in March. Shares of the company dropped 15% Thursday but recovered a little today, trading at $16.23 midday Friday.
Robert W. Baird analyst Christopher Raymond says a number of investors expressed concern to him about Benlysta after Dendreon’s bad news.
“As unbelievable as that connection is, in our view, we deemed it necessary to address these concerns,” Raymond says.
In a note Friday morning, Raymond points out how the drugs are different, including the dosing regimen, the type of disease and specialty of doctors treating the conditions, as well as the different management approaches of each company. (Human Genome has managed expectations of Benlysta more conservatively, Raymond says.)
Raymond recommends buying Human Genome’s stock and has a $27 price target.
Still, Dendreon’s negative surprise isn’t likely to be forgotten anytime soon.
For Dendreon itself, “a long road toward rebuilding Street goodwill lies ahead,” says Canaccord Genuity analyst George Farmer.
Provenge, a vaccine that boosts the body’s immune system to fight cancer, is a good product according to Farmer. But the insurance issues are weighing too heavily on the potential success of the drug. “The Provenge clinical profile is perfectly suited for the intended prostate cancer customer, and we still see high uptake when, if ever, reimbursement concerns lift,” Farmer says in a note.
The analyst recommends buying Dendreon but cut his price target to $19 from $65.
Some other biotech stocks continue to get pounded today.
Savient Pharmaceuticals (SVNT) fell another 5% to $4.39 in midday trading Friday after being hammered Thursday (the shares are down almost 40% this week). Savient reported disappointing sales for the gout drug Krystexxa. Certainly that news would hit the shares anyway, but the stock appears to be dropping a little harder on the Dendreon effect. Regeneron Pharmaceuticals (REGN), which expects word from the FDA this month on its drug Eylea for a serious eye disorder, is down 14% this week, trading at $45.69 Friday.
Dendreon recovered just slightly, up 5% to $12.24 after dropping almost 70% Thursday. Some of the froth had come off Dendreon’s stock over the past year or so even before the company dropped the bomb this week. Dendreon’s shares rose to above $54 in April of last year after it won FDA approval. A review of the drug by the agency that oversees Medicare and Medicaid spooked a lot of investors. In hindsight, those who got out look smart.
Twitter: @brettchase
No positions in stocks mentioned.
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