Dendreon Corporation (DNDN) Citibank is Expecting -16% Downside From Here

Citibank believe a Speculative (S) risk rating for Dendreon is appropriate, given the price volatility and the risk associated with PROVENGE launch.

As with any development-stage biopharmaceutical company, investing in Dendreon involves many commercial, intellectual property (IP) and financial risks. We believe the most important near-to-medium term downside risks consist of: Commercial Risks — We note that the valuation for the stock is dependent on potential revenue opportunity from PROVENGE. Specifically, if lower-than-expected product sales or competing products emerge, this would represent opportunities for the stock price to not achieve our target price.

Manufacturing Risks — PROVENGE is manufactured uniquely for each patients at Dendreon's New Jersey facility. Currently less than 25% of the NJ facility capacity will be utilized to manufacture product as Dendreon waits for additional facilities to come on line. If approval of these facilities were delayed, this could represent significant negative impact on revenue potential.

Logistic Risk — Since PROVENGE is a personalized therapy, associated with a tight timeline, there will be challenges regarding its logistics. Any hurdles in the logistic of PROVENGE administration may negatively impact PROVENGE revenue potential. Stability of blood samples and drug product (time from obtaining blood sample at leukapheresis centers to Dendreon's New Jersey manufacturing facility and infusion of PROVENGE back into patients) is limited.

Reimbursement Risk — PROVENGE is priced at $93k per patient. Dendreon will be dependent on third-party payers, such as private insurance companies, agreeing to reimburse patients for the costs. If third-party payers and government health administration authorities do not reimburse or limit the amount of reimbursement, sales would be below our expectations.