Shares of Dendreon Corp. jumped again on Friday, a day after the drug developer said sales of its prostate-cancer therapy Provenge kept growing in the fourth quarter.
THE SPARK: The Seattle company announced Thursday before markets opened that Provenge revenue climbed to $82 million in the quarter, better than the projections of several analysts. That represented a 25 percent increase over sales in the previous quarter and more than triple the drug's total from the fourth quarter of 2010.
The drug's annual revenue total of $228 million fell far below an old forecast for $350 million to $400 million that Dendreon withdrew in August.
THE BIG PICTURE: Provenge is used as a treatment for prostate cancer that has not responded to previous therapies. The drug is designed to train a patient's immune system to fight the cancer. It was approved in April 2010, and it is the company's only marketed product.
A round of treatment with Provenge costs $93,000, and Medicare conducted a long review of the drug before deciding to cover it in June.
THE ANALYSIS: Wedbush analyst David M. Nierengarten said the better-than-expected sales appear to be driven by an unexpectedly large jump in the number of clinics signed up to infuse Provenge. He expects a return to more moderate, quarter-to-quarter growth rates of less than 10 percent in the coming quarters.
"It is likely that the incremental clinics represent the `waiters' who watched how their peers established reimbursement practices," Nierengarten wrote in a Friday morning research note.
William Blair analyst Y. Katherine Xu said Provenge could face tough competition if other options like Johnson & Johnson's Zytiga receive regulatory approval.
"Despite encouraging growth in the fourth quarter and a potential upswing in early 2012, we continue to be concerned with Provenge's eventual potential and profitability, and believe the surge in the stock today based on the fourth-quarter (announcement) is unjustified," the analyst wrote in a Thursday research note.
SHARE ACTION: The stock jumped about 40 percent Thursday to close at $10.62. Shares then climbed another 7 percent, or 75 cents, to $11.37 Friday morning while broader trading exchanges were down slightly.
Dendreon shares traded above $30 for much of 2011 before they plunged in August after the company withdrew its 2011 revenue forecast, citing reimbursement concerns.