whats worth?

Below is a post from DNDN yahoo groups espousing the potential upside for that company. Using the same logic and the fact that Prima Directors expect the market size for Ovarian Cancer worldwide at 3.6 Billion by 2010 and a conservative 50% market share given that are no really useful alternatives for this insidious disease, it seems that PRR has potential for $14. WOW!







On 4/14/2009, Dendreon announced that primary IMPACT study endpoints had been met, which means data demonstrates at least a 22% reduction in risk of death. The company will present detailed study results at the American Urological Association’s Annual Meeting on 4/28/2009. Dendreon has said it plans to resubmit a Provenge BLA application in Q4 2009. It is likely that the Provenge application will once again receive priority review; this means if Dendreon submits the new BLA in early Q4, an approval decision could very well come as soon as December 2009, and almost surely no later than March 2010.

To approximate the value of Dendreon, I will use two methods. First, if Provenge is approved, it will compete directly with Sanofi’s Taxotere (Docetaxel), which generated about $2.8 Billion in 2008 sales. Although Taxotere is indicated for other cancer indications in addition to Androgen Independent Prostate Cancer (AIPC), it is safe to assume more than 50% of its annual sales are due to AIPC, based on the difference sales of the drug after it gained FDA approval for AIPC in 2004. It is also worth noting that because of the serious side effects of Taxotere, somewhere between 25%-50% of the potential prostate cancer patients refused Taxotere treatment. Taken together, the estimated market for AIPC should be at least $1.8-$2.8 Billion.

Because Provenge has been shown to be much more effective, with few serious side effects, it is reasonable to expect that it will gain greater than 50% of the market share after approval, leading to peak sales estimates between $900 Million to $2.8 Billion a year. Current Price/Sales ratios for cancer-focused biotech with at least one approved product range 4-8 times, and therefore, if Provenge is approved, Dendreon should be valued at $3.6-$7.2 Billion (based on the low end $900 Million sales figure). As of March 5, 2009, Dendreon has 98 million shares outstanding, leading to a price per share of $36-$73. Finally, there is always a chance that Provenge won’t get approved, and so the expected Dendreon share price using a 70% chance of approval will be around $25-$51 ( [0.7*$36]+[0.3*$0] and [0.7*$73+0.3*0], assuming Dendreon is worth $0 per share if Provenge is not approved).

The second method is based on premiums paid in 2008 M&A deals involving cancer-focused biotechs. Three deals stand out as being appropriate for comparison: Eli Lilly’s (LLY) acquisition of Imclone, Takeda’s (TKPHF.PK) acquisition of Millennium Pharmaceuticals, and Celgene’s (CELG) acquisition of Pharmion. In each of these deals, a cancer-focused biotech with one potential blockbuster cancer drug was acquired; the drugs being Erbitux, Velcade, and Vidaza belonging to Imclone, Millennium, and Pharmion, respectively. In all three deals, the premiums paid were around 50%. Therefore, using this method, the current acquisition price tag for Dendreon shares based Thursday’s (4/16/2009) closing price would be around $25.50.

I made quite a few assumptions here to arrive at these estimates, but I believe they are reasonable, factual, and conservative enough to serve as an initial valuation attempt for Dendreon.