Dendreon (DNDN) is on sale. I don't think the sale will last long, but while people are willing to let the shares go for any price, I will be happy to stand there and hold their hands and say, "It's okay, I understand, and I will be willing to exchange your shares for ... " what is likely a 70% discount to what they paid not long ago.
Dendreon is new and is bound to have a bumpy ride up to cruising altitude. To have expected any less is simply not reasonable. The problems with the sales channel have a clear and direct solution, and the product works. Provenge is the main drug that Dendreon is producing and really is the make or break product. What I found very encouraging was reading on WSJ.com that Medicare is not only going to pay for treatment (at a cost of about $93K for a standard course), but more importantly, Medicare is going to aid in the cost recovery speed and process for doctors.
While the street was looking for faster forward growth and Dendreon committed the ultimate sin by guiding lower, it does not mean that it has not been now fully priced in. I suggest that the price reflected from the bloodbath sale in after hours trading has more than fully priced in the slower growth. In fact, I looked over the numbers that came out and came to the conclusion that the selling was a combination of panic sellers worried it would go to zero, along with shorts pounding it down from the momo action that was in play.
Once the dust settles, I believe astute investors will take a hard look at some of the numbers I have been looking at. For example take a look at these:
Price / Book: ~5
Price / Sales: ~ 30
Total Cash Per Share: $4.00+
Quick Ratio: 1.42
Short Interest Last Report: 11%
Revenue year-over-year has increased from $48.06 million for 2010 vs. $0.10 million for 2009.
These numbers look very attractive, especially when compared to other biotech companies that do not even have a marketable product yet. Dendreon does, and it should not be forgotten that Provenge is a new product that has only been on the market for about a year.
The conference call was held Aug. 3 as well and here are some key points that you may find interesting.
Mitchell Gold, President and CEO: ... In the second quarter, we reported gross revenues of approximately $51 million, an increase of approximately 81% over the prior quarter. While this quarter-over-quarter growth is impressive, it was slightly below our own internal projections for the quarter. In July, we recorded gross sales of approximately $19 million, which is below our anticipated growth ....
We believe that the overall market opportunity for Provenge is significant. Let me share with you why this is the case.
There is strong physician interest in Provenge. By the end of the second quarter, we had more than 255 accounts infusing Provenge which was in excess of our guidance of 225. At the end of July, we had more than 300 accounts at infused Provenge.
We identified three key issues which we believe are all readily addressable and will move us towards the goal of ensuring all patients who need Provenge are getting it.
I highly recommend taking the time and going over the situation and see if you too come to the conclusion that those selling in after hours sold too cheaply. I have the opinion that it often takes a day or two for the dust to settle. MetroPCS (PCS) is a good example. I will be watching it tomorrow for a likely investment. That was the case where waiting a couple of days can be the best course of action. With DNDN, the full discount is offered now; consequently I started buying late in after hours trading. Unlike most of my trading, I did not buy any for my trading account. Rather I bought some shares into retirement accounts as I believe the fullest opportunity with DNDN is more than a day trade. Tomorrow I will take a look at the option landscape, expecting massive implied volatility and write calls against the stock I bought or will be buying. This method is a synthetic naked put option trade. Since options for equities do not trade in after hours, this was the best method for me to work into this trade.
Disclosure: I am long DNDN.
