Dendreon Corporation (DNDN) recently received clearance from the U.S. Food and Drug Administration (FDA) to expand manufacturing facilities for its cancer vaccine Provenge in the US. The company’s New Jersey facility, which is currently operating at 25% capacity with12 workstations, can now be fully operational with 48 workstations.

We believe the approval will significantly increase the availability of Provenge which will help Dendreon to meet pent up demand for the vaccine. Dendreon expects to have 500 centers where patients can be treated with Provenge by the end of 2011, well above the current 50 centers.

The company is also building additional capacity in Atlanta, Georgia and Los Angeles (LA), with each having 36 workstations.  Dendreon has filed a post-approval supplement for FDA approval of the LA facility. An FDA decision is expected in mid-2011.

The Atlanta facility is expected to be operational in mid-2011. These facility expansions would drive a ten-fold increase in capacity in 2011. The company has earmarked $90 million for bringing these facilities online.

Dendreon hopes to generate revenue of $350-$400 million in 2011 with approximately half of the sales expected in the final quarter of the year.

Unlike traditional vaccines that prevent diseases, Provenge treats by stimulating the body’s own immune system to attack cancer cells. Provenge is the first product in the new therapeutic class known as active cellular immunotherapies (ACI).

Prostate cancer is the most common non-skin cancer in men in US. The disease affects approximately 2 million men in the US.

Our Recommendation

We currently have a Neutral rating on Dendreon which is supported by a Zacks #3 Rank (short-term Hold rating). We believe Provenge has blockbuster potential and its successful commercialization should push Dendreon towards profitability.

We are also encouraged by the FDA approval for the additional capacity. On a more cautious note, we remain concerned about the company’s dependence on Provenge and the lack of a robust pipeline. Dendreon has little to fall back on if Provenge’s performance belies its potential. We therefore prefer to be Neutral on the company.

 
DENDREON CORP (DNDN): Free Stock Analysis Report
 
Zacks Investment Research