Why Dendreon is a 'Must-Own' Stock For Biotech Investors

May. 7.07 | About: Dendreon Corporation (DNDN)

Trading in Dendreon (NASDAQ:DNDN) last week made all the longs' broker account balances rise significantly day after day after day. However, my own reading is that that was only the prelude to what is in store for longs in the days, months, and years ahead.

It should be known by all by now that the FDA PDUFA Date is May 15. It is no telling what this binary event can do to the PPS should the FDA hand down its approval for Provenge to market before or on this date. My own speculation is that being one of the most heavily shorted stocks and with a relatively small float, an FDA approval announcement will trigger what I have turned as the mother of all short squeezes!

The FDA ruling is, however, only an immediate catalyst for the PPS. Although in my mind approval is as sure a thing as I can ask for, and I have put my money where my mouth is, it is not approved until being announced. In the highly unlikely event of being granted an approvable letter, longs' hedge is the 9902b Phase III clinical trial. Under that circumstances, the clock may be set back a little but the eventual marketing rights will be granted. If that turns out to be the case, I have the patience to wait! I hope PC patients and investors don't have to go through that.

I want to go on with the short- and mid-term catalysts for the stock, assuming an FDA approval announcement. As of now, Dendreon owns 100% world right to Provenge. Management has repeatedly made it crystal clear that the company has no intension of partnering for the US market whatsoever but the door for ex-US (also known as ROW) commercial partnership(s) is wide open. Therefore, the short-term catalyst for the stock in my mind is the announcement of the ROW partnership(s) following the FDA approval decision, likely being consisted of sizable upfront cash payments, milestone payments, sales royalties, and sharing co-development costs of pipeline products.

With Provenge's marketing revenue and ROW partnership upfront cash infusion, Dendreon is well positioned to launch clinical trials for its rich pipeline products. Neuvenge for breast and ovarian cancer is the immediate candidate for the launching pad. This should constitute a mid-term catalyst for the stock.

In the meantime, clinical trials will be launched for Provenge label expansion from AIPC to ADPC. There has been research evidence that Provenge is better than no Provenge, and early Provenge is better than late Provenge (the P11 Study).

Think for just a minute of the market potentials of Provenge for all Prostate cancer, and Neuvenge for Breast and Ovarian cancer - it is mind-boggling, isn't it?

It is a thrill for me to own DNDN below four and a half! But from a risk perspective, the high teens are actually a better price to own the stock as the pre-AC uncertainty was removed.

Do your own DD and make your decision. Get in before the approval announcement if you want to make the pre-approval easy money!

A side point along the train of my thinking: how many hedge funds that shorted DNDN will go bankrupt? One can't help stop wondering...

I am also positioned in IDM Pharma (IDMI) and Dor Biopharma (DORB.OB) for the May 9 ODAC meeting. Percentage wise, these two stocks may potentially be the next DNDN upon positive ODAC recommendation and subsequent approval.

Best luck to relevant patients and happy investing!

Disclosure: Author has a long position in DNDN

DNDN 1-yr chart