In the case of Questcor Pharmaceuticals Inc (NASDAQ:QCOR), the company bought its only product, Acthar Gel — a product that treats several rare diseases — for just $100,000. Dendreon has racked up an accumulated deficit of $2 billion and debt of $600 million in the development of Provenge.
Questcor Pharmaceuticals Inc (NASDAQ:QCOR) constantly develops Acthar, expanding its usage, and over time, has increased the price of Acthar from just $50 to over $28,000 a vial, due to additional orphan indications. Dendreon’s Provenge is limited in treatment potential, targeting a protein that is highly expressed in prostate cancer but not many other forms of the disease.
Questcor is a great company with 60% revenue growth and an operating margin of 55%. Dendreon’s revenue is declining roughly 10% over the last year, and its operating margin is negative 76%. Clearly, these are two entirely different companies, as Acthar is relatively cheap to produce, while Provenge is not. Thus, Questcor’s one-product approach is supported by Acthar’s success.
Lastly, the icing on the Dendreon cake is its manufacturing woes and why the outlook for Dendreon should have always been sketchy. Patients first have to get a blood draw. This blood draw’s purpose is to harvest a type of white blood cells called monocytes. Those have to be shipped overnight and matured into antigen cells, which are then shipped back to the physician.
The patient is then rushed to the hospital to be given Provenge by IV, as the drug can not be stored, and this process creates only one dose of Provenge. Then, the process repeats.
Recap
I don’t see any reason to be optimistic about Provenge or Dendreon. We’re talking about a company with an obscene amount of debt and obligations with a poor pipeline and no end in sight for their ongoing cash drain.
Instead, if looking for an immunotherapy company, I prefer Celldex Therapeutics, Inc. (NASDAQ:CLDX), a company with a large pipeline including two late-stage products to treat advanced breast and brain cancer. The company has no debt, and has released positive data on all of its clinical programs. Thus, Celldex Therapeutics, Inc. (NASDAQ:CLDX)’s likelihood of becoming the next Dendreon is rare, due to the diversity in which Celldex Therapeutics, Inc. (NASDAQ:CLDX) has developed its pipeline, not relying on one cancer drug.
With that said, I’m skeptical of Provenge’s value for investors. The company can only cut costs so far, meaning investors must then seek value in Dendreon’s pipeline. But with no near-term pipeline catalyst, no profitability, and a need for cash Wedbush’s $0 price target may be the ultimate outcome for Dendreon.
The article Why Wall Street Has Turned Against Dendreon originally appeared on Fool.com is written by Sherrie Stone.
Sherrie Stone has no position in any stocks mentioned. The Motley Fool owns shares of Dendreon.
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