Dendreon's plans for its newly approved cancer immunotherapy Provenge , including a higher-than-expected per patient price, have cheered investors and prompted analysts to jack up revenue forecasts, despite limited product supply in the near term.

After a long regulatory journey, Provenge (sipuleucel-T), an autologous cellular immunotherapy, was cleared April 29 for treating asymptomatic or minimally symptomatic prostate cancer that is metastatic and resistant to standard hormone treatment (Also see "Dendreon Set To Ship Provenge Within A Week" - Pink Sheet, 29 April, 2010.).

Dendreon's stock price soared by 26 percent to $50.18 in late afternoon trading that day. In late-afternoon trading on April 30, it was up even further to about $54.

Other similar stocks also got a lift from the news, according to the Mentor Capital Cancer Immunotherapy Index, which tracks 11 companies in the space, including Dendreon, Provectus, Immunocellular Therapeutics, Oncothyreon and Antigenics. On average, cancer immunotherapy stocks were up by 10 percent following FDA approval of Provenge, according to the index, and Immunocellular Therapeutics had the biggest gain of about 22 percent.

FDA has not yet released any background material on its approval decision for Provenge. Thus, while the first approval of a therapeutic cancer vaccine does mean the agency reviewers have some familiarity with this type of product, it is still too soon to be confident that the Provenge decision offers much reassurance for other products. There are significant differences between the various cancer immunotherapies in development, and each will likely meet with strict scrutiny.

Price Revelation Spurs Forecast Changes

Meanwhile, the Provenge label, pricing and commercialization plans were well-received by Dendreon analysts, despite company acknowledgements that supply will initially be quite limited. During an investors call that followed approval, Dendreon executives said they were aiming to treat just 2,000 patients in the next twelve months as capacity ramped up at three manufacturing facilities, of which only one is currently on-line.

However, the company also revealed it would be pricing the drug at $93,000 per patient - pricing that "dwarfs expectations," noted J.P. Morgan analyst Cory Kasimov commented in an April 30 note

Previously, J.P. Morgan had assumed a $65,000 per patient price and projected revenues of $76 million, $271 million, $756 million and $1.2 billion, respectively for the years 2010 to 2013.

Based on the actual prices disclosed April 29, Kasimov revised 2012-2013 revenue forecasts up to $113 million, $376 million, $875 million and $1.5 billion. Even these figures might be too conservative, as they are based on relatively low expectations for penetration, the analyst observed.

"In the end, we do not view U.S. peak sales of $3-4 billion as unreasonable, should capacity be added," he wrote.

Baird also revised its forecasts, having modeled with a price of $70,000 and projected revenues of $81million, $325 million and $674 million for 2010 to 2012, respectively. Following the release of the higher-than-expected prices and favorable details on labeling, potential Provenge revenue "is within striking distance of $100 million this year," analyst Christopher Raymond noted. He raised forecasts to $89 million, $371 million, $771 million, $1.34 billion and $1.76 billion from 2010 to 2014, respectively.

Raymond viewed many aspects of the Dendreon approval positively, saying, for example, that "the label is both broad and clean ... warnings and precautions appear quite routine."

Another piece of what was seen as good news in the April 29 call was that the company is planning to put partnership discussions aside and to venture outside the U.S. on its own. Now that the drug is cleared in the U.S. the company will be discussing prospects for approval with European officials.

Keeping the EU rights is the "way to go," Kasimov observed, and together with the higher-than-expected price, significantly boosts valuation.

Reimbursement Outlook Favorable For Now

About 75 percent of the patients targeted by the drug are eligible for Medicare, which makes CMS coverage decisions critical. Dendreon announced on the call that it is scheduled to meet with CMS officials next week to discuss reimbursement.

The company missed Medicare's January deadline to submit new products for assignment of a product-specific J-code for reimbursement billing. But it anticipates a temporary billing code will be assigned. Having a product-specific J-code could be a significant aid for physician prescribing decisions, Raymond also noted.

The use of a temporary code could wind up as an advantage for Dendreon. Until CMS assigns a permanent code to Provenge, coverage and payment will be up to local Medicare contractors, who most likely will reimburse Provenge at the invoiced price, according to Amy Thornton, a CMS reimbursement expert with Concept Capital's Washington Research Group, cited in a Prevision Policy analysis.

In an April 30 note, however, DataMonitor analyst Fleur Pijpers advised that though approval of Provenge is a big step forward in cancer treatment, price could limit use.

The current standard of care is Sanofi's chemotherapy Taxotere (docetaxel), which costs only about $18,000 per patient but is much more toxic than Provenge, Pijpers noted. Dendreon has argued that including associated costs, such as premedication and supportive care, Taxotere's price tag actually amounts to $60,000.

DataMonitor expects that Provenge's more favorable side effect profile will encourage use in patients who are asymptomatic prior to Taxotere, but that Taxotere will ultimately still be needed.

Dendreon has established a patient access program to help patients meet co-payments, but that may not go far enough.

"Given that healthcare systems are becoming increasingly cost conservative, the high cost of Provenge may hinder its uptake in some patient groups, particularly those that do not qualify for the patient access plan that Dendreon has set up in light of the approval," Pijpers wrote.

- Emily Hayes ( e.hayes@elsevier.com )

Provenge Tide Lifts All Immunotherapies; Price Cheers Investors

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