A week after cautionary statements from company officials regarding first quarter Provenge numbers sent Dendreon (DNDN) shares slipping, the company faced a new challenge last week - competition.
According to reports that circulated last week, Johnson & Johnson's (JNJ) prostate cancer drug, Zytiga, was primed to mount a huge challenge to Provenge on the open market, based on late stage study results.
A review by an independant monitoring committee confirmed the success of Zytiga in a late stage trial and concluded that "it would be unethical to continue" the trial - strong words of encouragement - and the committee also "effectively ended the trial early so that the patients getting the placebo could be offered Zytiga instead."
The decision was a huge boost for JNJ - and proved a detriment to DNDN shares, which quickly dropped below the ten dollar mark during intra day trading late last week. The news understandably shook the nerves of some long term Dendreon investors who recognize that the ongoing woes that surround the Provenge commercial launch may be further threatened by the strong competition that could be mounted by Zytiga, given the positive results.
Early-February highs of nearly seventeen dollars were quickly erased after the fourth quarter earnings call, and the upcoming week could prove to offer no comfort for investors, although if there is any positive from last week's trading action it's that DNDN never closed below ten bucks at the end of a trading session, only dipped below the mark a couple of times during the week.
Investors who have loaded up on DNDN for below ten dollars and flipped a few trading shares into spikes - such as that seen in early February - have done well playing the short term peaks and valleys, but every time news such as last week's Zytiga competition hits the wires, it chips away at the faith and confidence of long term investors who still consider Provenge within reach of achieving the billion-dollar potential that was so heavily touted once the product was approved by the FDA a couple of years ago.
There are encouraging signs for Dendreon, however.
Although the most recent earnings call was accompanied by a cautionary tone, Provenge sales numbers are still increasing. The cost and reimbursement issues surrounding last summer's dramatic price drop have been for the most part settled and even some of the Zytiga reports last week emphasized the fact that there may be room for both treatments to be used on patients in conjunction with one another.
The short term is certainly positioned to continue along the road of volatility for DNDN, but the long term potential is still in tact - although little by little, the long termers may start to lose faith unless a sustained turnaround materializes.
Disclosure: No position.