Dendreon's Dip Creates a Great Opportunity

Jun. 8.10 | About: Dendreon Corporation (DNDN)

Shares of Dendreon (NASDAQ:DNDN) dropped to under thirty seven dollars on Monday morning, closing the day ten percent to the downside at $36.70. A dip in the DNDN share price had been expected by some during the time between the FDA's announcement of Provenge approval and the commercial launch of the product, but Monday's drop may also have been the result of an 'honest mistake' by CNBC who had reported that the supply of Provenge outweighed the current demand. CNBC corrected their mistake later in the day, stating that, in actuality, the demand for Provenge outweighed the supply. By then, however, the damage had been done and the DNDN stock embarked on a 10% downward spiral for the day.

Speculation was rampant around the Internet and in the blogosphere that CNBC's 'mistake' was not quite an honest one, but one intended to help out some Wall Street buddies looking to build on their positions for lower prices. CNBC's already suspect track record of honest reporting - including Jim Cramer's questionable tactics - only add fuel to the fire.

That said, whether intentional or not, the damage is done and both existing and prospective longs of the stock should look beyond the alleged manipulation and take advantage of DNDN's dip in price at these levels, and especially if it drops lower.

For all of the controversial history behind Provenge's path to FDA approval, the product is real and the demand is there - as indicated in black and white in CNBC's later article. To be fair to CNBC, the context of the original article did indicate that the original supply vs. demand comment was a misprint. Dendreon is no longer a speculative company or stock - the company has an approved, groundbreaking product nearly ready for commercial launch that could pull in as much as $120 million during the second half of 2010 alone, according to previous company estimates. By 2011, Provenge could be a billion dollar a year product, and that number will - most likely - only grow as production ramps up in Dendreon's production plant in Georgia.

The future is promising for this company, and over the mid to long term, DNDN could very likely become a pure powerhouse in the market, although those that stuck with the company and rode the wave from three bucks already consider the stock a powerhouse winner. However, the short term could be tricky and it wouldn't surprise me to see the stock drop a little further, unwarranted or not.

The sales revenue from Provenge is not yet rolling in and that gives the big players a little bit more time to load up on their positions, which could mean that the big boys are going to keep this one in their buy zone for a while longer. If that turns out to be the case, then this will be a great opportunity for everyone with a mid to long term outlook to load up, in my opinion.

As always, I say buy a little at a time - this way you're in if a run materializes, but there's still money on the sideline to average down if the stock slides any more.

Monday's move undoubtedly created fear and panic for many investors, but look beyond the emotion and concentrate on DD - are the chances good that Provenge will become a bigger winner in the market? VFC says, you bet.

If for some reason this stock drops to below thirty bucks again, I love it. Either way, I think we'll be looking at significantly higher prices in a couple of years from now.

All just my opinion.

Disclosure: No position.