3 Biotech Stocks to Avoid: Amarin, Dendreon, and Prosensa

Editor's Note: A clarification was made regarding the clinical trials of three competing prostate cancer drugs.

In the stock market, everyone loves a great turnaround story. In the biotech sector, where companies can rally or plunge by the double-digits on an FDA approval or rejection, bottom-fishing investors love to search for broken stocks with overlooked positive catalysts around the corner.

However, these three biotech stocks -- Amarin , Dendreon , Prosensa -- don't fit that category at all. Read on to understand why these dogs of the sector should never be mistaken as underdogs.

Amarin: Sit tight until 2017, dear investors...
Amarin's chances for a turnaround in 2014 went from minimal to non-existent after the FDA rejected the company's request to reconsider its October 2013 decision to rescind its ANCHOR clinical trial SPA (Special Protocol Assessment) on January 21.

That decision shattered Amarin's last hope at pursuing the critical ANCHOR indication for its only marketed drug, the fish oil treatment Vascepa. Vascepa was approved in 2012 to treat "severe" hypertriglyceridemia (triglyceride levels equal to or higher than 500 mg/DL) in patients not taking statins. The ANCHOR indication would have expanded Vascepa to patients with "elevated" hypertriglyceridemia (equal to or higher than 200 mg/DL but less than 500 mg/DL) who were also taking statins -- which would have helped it reach roughly 20% of the U.S. population.

More importantly, it would have helped it escape competition from GlaxoSmithKline's Lovaza, the leading fish oil treatment for severe hypertriglyceridemia. Lovaza, which was approved in the U.S. in 2004, generated $917 million in fiscal 2013 sales compared to $16.2 million in Vascepa sales in the three quarters since the drug's U.S. launch in January 2013.

AMRN Chart

Source: Ycharts.

Although Vascepa notably does not raise "bad" LDL cholesterol levels as Lovaza does, it hit the market far too late and couldn't match GSK's marketing muscle. To make matters worse, a generic version of Lovaza could arrive in early 2015 and erode sales of both drugs. Those factors make Wall Street's original peak sales estimates of $1 billion to $2 billion for Vascepa look absurd.

Amarin's financials also don't look like they're built to last. The company finished last quarter with $225.9 million in cash and equivalents and $239.8 million in debt. It notably issued additional ADR shares in July 2013 to raise $121.2 million, but it still reported a negative operating cash flow of $201.0 million over the past 12 months.

The only real catalyst for this stock won't arrive until 2017, when it announces the outcome of the phase 3 REDUCE-IT trial testing Vascepa for cardiovascular events. That's a long time to wait for an announcement that could ultimately amount to nothing.

Dendreon: The cautionary tale that gets worse by the year...
Meanwhile, Dendreon, the maker of the metastatic prostate cancer drug Provenge, has become a cautionary tale in putting too much faith in Wall Street's peak sales projections. Back in 2010, analysts forecast that Provenge could hit peak sales of $3 billion to $4 billion. Take a look at sales of Dendreon over the past year to see what went wrong:


Product revenue

YOY growth

1Q 2013

$68 million


2Q 2013

$73 million


3Q 2013

$68 million


4Q 2013 (preliminary)

$75 million


Source: Dendreon quarterly reports.

A total of $284 million in Provenge sales in fiscal 2013 is a far cry from Wall Street's blockbuster estimates, and also represents a disappointing 13% decline from fiscal 2012.

To make matters worse, two major competing treatments -- Johnson & Johnson's Zytiga and Astellas/Medivation's Xtandi -- were later approved in the U.S. and Europe. Both drugs quickly gained favor over Provenge, since both drugs were orally administered in contrast to Provenge's intravenous injections, and both drugs demonstrated higher efficacy rates during clinical trials. Compared to a placebo, Zytiga and Xtandi respectively demonstrated median extensions of life of 4.6 and 4.8 months, compared to 4.1 months for Provenge. However, this isn't a perfect apples to apples comparison, since Zytiga and Xtandi's data came from patients who already received chemotherapy, while Provenge was tested pre-chemo.

The one smidgen of good news that Dendreon received last year was the approval of Provenge in the EU in September. The company then inked a two-year deal with PharmaCell to market the drug in Europe. However, I seriously doubt that the two companies have enough marketing muscle to compete against Zytiga and Xtandi.

DNDN Chart

Source: Ycharts.

With only $166.7 million in cash and equivalents and $597.6 million in debt, Dendreon is in a precarious situation. Its only source of revenue is drying up fast, and it has no other late-stage pipeline candidates.

Prosensa: GSK doesn't believe in it -- so why should you?
Throughout 2013, Prosensa and its former partner GlaxoSmithKline competed against Sarepta Therapeutics to launch the first dedicated treatment for Duchenne muscular dystrophy (DMD).

DMD is a rare and fatal genetic disease which affects one in every 3,500 boys born worldwide. The disease causes progressive muscle weakness, usually confining patients to a wheelchair by age 12 and causing death by age 16.

Prosensa's drisapersen and Sarepta's eteplirsen both use RNA exon-skipping technology to boost the production of dystrophin, a protein necessary for muscle growth which DMD patients lack. The clinical trials for both are mainly measured in two main ways -- the production of dystrophin and a six-minute walk test, which gauges how far a patient can walk within six minutes.

Prosensa's problem is that drisapersen has consistently trailed eteplirsen in efficacy. A phase 2 study conducted by GSK showed that drisapersen patients could walk an average of 117 feet more than patients given a placebo. Unfortunately, that didn't measure up to the improvement of 152 feet Sarepta reported in its eteplirsen patients. However, investors should note that GSK's group consisted of 53 boys compared to only 12 in Sarepta's group.

GSK and Prosensa then moved on to a phase 3 study with 186 boys, but that trial failed to meet its primary endpoints or even demonstrate an improvement over the placebo last September. As a result, the stock plunged from $24.00 to $7.14 in a single day. Sarepta didn't fare much better -- its stock lost more than half its value on November 12, after the FDA told the company that it should not seek accelerated approval for eteplirsen on its positive phase 2 results alone.

RNA Chart

Source: Ycharts.

GSK eventually handed drisapersen back to Prosensa in January 2014, ending the four year collaboration between the companies. That left Prosensa dead in the water, with only $112.3 million in cash at the end of last quarter, and a negative operating cash flow of $28.4 million.

Last month, Prosensa reported some additional data at the JPMorgan Healthcare Conference which suggested that earlier treatment of DMD with drisapersen could slow the progression of the disease. However, investors should take that development with a grain of salt, considering that Sarepta also released 120-week results at the conference which showed improvements in the six-minute walk test among its original 12 patients.

The Foolish takeaway
In conclusion, biotech investors shouldn't confuse an underdog with a dog. These three busted biotech stocks -- Amarin, Dendreon, and Prosensa -- don't have any real positive catalysts on the horizon and won't recover anytime soon. Yet shrewd investors should notice that their failures highlight better, more conservative picks in each category -- GSK for fish oil treatments, J&J or Medivation for metastatic pancreatic cancer drugs, and Sarepta for potential DMD treatments.

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The article 3 Biotech Stocks to Avoid: Amarin, Dendreon, and Prosensa originally appeared on Fool.com.

Leo Sun has no position in any stocks mentioned. The Motley Fool recommends Johnson & Johnson. The Motley Fool owns shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Michael Therami

The author has attempted to support his position concerning the median overall survival (OS) benefits for Provenge, Xtandi, and Zytiga. A quick review of the sources of the information contained in this article clearly shows the information contained within to be inaccurate.

Provenge median overall survival (OS) benefit = 4.1 months and is statistically significant. Source --- IMPACT Phase III clinical trial published July 28, 2010.

Xtandi median overall survival (OS) benefit = 2.2 months and is statistically significant. Source --- PREVAIL Phase III clinical trial published October 22, 2013.

Zytiga median overall survival (OS) benefit = NOT STATISTICALLY SIGNIFICANT. Source --- the J&J Zytiga website in the FAQ section. The quote concerning Zytiga's median OS benefit is, "the difference is not statistically significant".

If you look up the information provided by the author in his article, you will see the following two errors in his research:

1) The Xtandi study cited indicated an overall survival benefit when treating patients with chemotherapy (docetaxel) then Xtandi. This does not represent the performance of Xtandi --- it represents the performance of chemotherapy followed by Xtandi. The author compared this information to results from the IMPACT study in which Provenge alone was given to patients who had never previously been given chemotherapy. It is not a valid comparison.

2) The information cited by the author concerning Zytiga's median OS benefit was taken from a J&J press release and not the clinical trial report. In that press release J&J states that data from the "interim analysis" of the study suggested a 4.6 month median OS benefit. However, as anyone familiar with clinical trials knows, the "interim analysis" data from a study is not valid. It only provide an indication of what the results of the study may be at completion. J&J halted the Zytiga Phase III clinical trial and as a result the study never reached the endpoint for OS. As a result, J&J must publish on its Zytiga website that the OS results were "not statistically significant". This can be verified by visiting the FAQ section of the Zytiga website.

February 18 2014 at 8:10 AM Report abuse rate up rate down Reply
Michael Therami

Yet another Motley Fool writer publishing lies about Dendreon. Let's do some fact checking, shall we:

In the article above, Leo Sun claims that, Zytiga and Xtandi "demonstrated higher efficacy rates during clinical trials" over Dendreon's Provenge. Sun goes on to say, "Compared to a placebo, Zytiga and Xtandi respectively demonstrated median extensions of life of 4.6 and 4.8 months, compared to 4.1 months for Provenge". THESE ARE FALSE STATEMENTS.

Here is the TRUTH. The median overall survival (OS) rates as demonstrated in Phase III clinical trials are follows:

Dendreon's Provenge: 4.1 months

Astellas' / Medivations' Xtandi: 2.2 months


The FACT is that Provenge provides nearly double the median overall survival (OS) rate of Xtandi. The Zytiga Phase III study was halted before a statistically significant OS could be reached.

Leo Sun goes on to say that Dendreon's "only source of revenue is drying up fast". However, he includes data in the article that demonstrates that Q4 sales exceeded Q3 results by double-digit rates. Is that an example of revenue "drying up"? The FACT is that in 2013, Dendreon launched a direct-to-consumer (DTC) marketing campaign that appears to be getting the message out to patients and physicians that Dendreon is the only immunotherapy for prostate cancer approved by the FDA.

Finally, Leo Sun ignores all potential catalysts that exist for Dendreon:

1) Reuters and Bloomberg reported back in October that the company had brought on JP Morgan to help facilitate the sale of the company.

2) Dendreon is seeking a partner to help launch Provenge in the EU

3) Clinical trials are currently underway in which Provenge is being tested as a combination therapy with Zytiga and Xtandi. If the results indicate that Provenge followed by Zytiga or Provenge followed by Xtandi extend life further than either treatment alone, Provenge could become part of a sequenced therapy that becomes the new standard in treatment for mCRPC.

4) If the company is not sold, Dendreon could enter into a partnership with a big pharma / biotech firm.

5) Dendreon could potentially refinance their debt under more favorable terms.

Indeed, Dendreon has a past that was quite disastrous. However, this article by Leo Sun is completely one-sided and contains blatant inaccuracies. By failing to write a balanced piece, Sun has painted an image of DNDN that ignores that current value of the companies product, pipeline, IP and patents. In doing so, he completely misses the upside potential that could be realized should one or more of the catalysts listed above come to pass.

February 17 2014 at 6:32 PM Report abuse rate up rate down Reply