Cautious on Dendreon's Rally

Shares of Dendreon Corp. (DNDN) jumped 38 percent last Friday and another 13% in early morning trading today. However, we don't see any clear rationale for the rally at this point of time. We believe investors are looking ahead to long-awaited data on the company's experimental Provenge vaccine to treat advanced prostate cancer, but we are cautious about the final results anticipated by the end of April.

As a reminder, Dendreon's lead drug candidate Provenge is under phase III IMPACT confirmatory study for prostate cancer under a special protocol assessment (SPA) with the FDA. Provenge is a therapeutic vaccine.

Previous two phase III studies generated mixed results. Study D9901 showed that Provenge approached, but did not meet its primary end point of showing a significant delay in time to disease progression (p=0.052, HR=1.4). However, Provenge showed a statistically significant median survival benefit (secondary endpoint) in patients with advanced prostate cancer (25.9 versus 21.5 months, p=0.01, HR=1.7) during the trial. Study D9902 did not achieve either the primary or secondary endpoint.

Despite the mixed results, DNDN submitted a biologics license application (BLA) for Provenge in November 2006 based on a combined analysis of the data from the D9901 and D9902A trials, which showed that patients on Provenge demonstrated a 23% improvement in median survival rate compared to patients on placebo (p=0.011, HR=1.8). In addition, the 36-month survival rate was 33% in patients who received Provenge compared to 15% in patients who received placebo.

To our surprise, the FDA Advisory Committee voted 17 to 0 in favor of the safety of Provenge in response to the question and 13 to 4 in favor of the efficacy question in March 2007. However, the FDA granted Provenge just an "approvable" opinion, requesting additional clinical data in support of the efficacy claim contained in the BLA.

Disappointed with the FDA decision, Dendreon initiated a third phase III trial D9902B (IMPACT) study. Late in May 2007, Dendreon confirmed that the FDA will accept either a positive interim or final analysis of survival data from its ongoing IMPACT study to amend the BLA for Provenge.

On October 6, 2008, the planned interim analysis of the phase III IMPACT clinical trial was conducted by the independent data monitoring committee (IDMC). The interim data did not achieve a statistical significance, but was very close to the 22% (20% actual) reduction in the risk of death based on 304 events.

Therefore, the company needs to depend on the final analysis to achieve statistical significance which is anticipated by the end of April. If the study demonstrates approximately a 22 percent reduction in the risk of death, based on 304 events, the company would expect the study to meet its primary endpoint of overall survival.

We are cautious about the final results of IMPACT since the study only enrolled about 500 patients. Investors may be encouraged by the news that the American Urological Association (AUA) on Friday invited Dendreon to de a late-breaker presentation for findings from IMPACT trial at its upcoming scientific meetings on April 28 in Chicago. Late-breaker presentations at medical meetings usually involve high-profile studies, or ones of particular interest to healthcare professionals.

However, selection of studies as a late breaker is no indication whether the data will be positive or negative. Dendreon will definitely release IMPACT data by the end of April, but may not do so at the meeting.

With the final IMPACT data only three weeks away, we certainly will keep a close eye on them, and will update investors as soon as the data are available.

Read the full analyst report on DNDN