Should you Buy Dendreon Corporation (DNDN) on Earnings? – Johnson & Johnson (JNJ)

Actual Results

The company surprised the market with better than expected earnings by reporting an EPS of $-0.26 (a loss of $38.7 million), as compared to $-0.56 per share expected by the Street. The beat has instigated a rally of approximately 5% as investors showed their pleasure on a smaller than expected loss. According to the company, Provenge sales were also impacted by seasonality, superstrom Sandy, and salesforce vacancies. According to the company it would start it’s direct to consumer marketing efforts for Provenge during the first half of 2013.

Competition

Provenge operates in very competitive market with tough competition from Xtandi by Astellas and Zytinga by Johnson & Johnson (NYSE:JNJ). Zytiga is the pricier product due to a superior brand name with J&J and its ability to market the drug. The drug has recently also received approval for treatment prostate cancer in late stages even before patients receive chemotherapy. It has been approved because studies show that it reduces tumor growth and increases life expectancy by an average of 5 months.

According to reports, Xtandi received approval last August and has been available since September. It is even pricier than Zytiga at $7450/month ($5,500/month for Zytiga). According to analyst forecasts, the drug has the potential to generate peak sales of $2.2 billion by 2015 as compared to $1.8 billion for Zytiga. Despite these high caliber competitors, there might still be hope for Provenge because this market is expected to hit $9.1 billion in sales by 2021.

Bottom line

The market has reacted positively to improving sales data for Provenge and more focused management by the company. There is little doubt of the mammoth potential in this market, but Zytiga and Xanti are both breathing down Provenge’s neck. Therefore I recommend that investors hold and wait for more good news before going for this risky investment.

The article Should you Buy this Company on Earnings? originally appeared on Fool.com and is written by Mohsin Saeed.

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