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When is enough? Analysts that follow Dendreon (NASDAQ:DNDN) can’t stand to see the stock move higher, except when it moves on their terms. Cramer and Mad Money pick against DNDN (this is nothing new – Cramer has been negative on DNDN for many years and doesn’t normally like many small biotech plays).

Cramer’s buddy at the Street.com Adam Feuerstein was first negative on DNDN, then turned positive after the advisory panel recommended approval, but now is utterly back in the negative camp – stating ignorantly in his latest article that he thinks DNDN is dead-money for the next 2 years! He is flip-flopping more than Kerry, but has been wrong each time!

He will be wrong again as DNDN is a prime example of a stock that the “Street” missed the first time and for some reason (money) the street is being pig-headed in not realizing the enormous disparity between the market size of the drug and the market value of the company: A drug that WILL be approved in 2008, 2009, or 2010 in a 1 billion dollar a year market (not including off-label use for other cancers) and a company that trades for approximately 600 million dollars.
provenge
Analysts were caught completely off guard when the FDA’s scientific advisory committee of experts in the oncology field gave its overwhelming approval to the FDA approving Provenge, Dendreon’s lead candidate for advanced prostate cancer. The vote of the committee of “experts” was not close -- 17-0 saying Provenge for prostate cancer is “reasonably safe” and 13-4 saying there’s “substantial evidence” that it’s efficacious. Based upon this panel recommendation and the fact that prostate cancer remains a rampant killer, without a viable alternative the FDA should have approved the drug.

It has been well documented that there are currently few, if any, suitable treatments for men with advanced prostate cancer. Certainly no drug exists that both extends survival and does so with little to no side effects, except Provenge. However, in a startling maneuver, the FDA did not approve the drug, but instead required Dendreon to seemingly complete its current trial specifically focused on the clinical significance of extended survival. At the point of the approvable letter it was certainly not clear whether the FDA would allow interim data.

This was the NEW information released this week and not merely reiterating previous information, as was stated by numerous analysts. I too was on the conference call and while Gold was hopeful that the FDA would allow interim data, this was never confirmed from the FDA’s mouth on that call.

Dendreon CEO Mitchell Gold clarified that the FDA would accept interim data, stating that the FDA will accept either “a positive interim or final analysis of survival” from its ongoing IMPACT study. Gold continued, “We anticipate completing enrollment in the IMPACT study this year and anticipate interim survival results in 2008. We are committed to making PROVENGE available as rapidly as possible to help the many men with late-stage prostate cancer who currently have few appealing treatment options.” The date of approval could move up considerably, so the stock was justified in making the move!

This announcement sent DNDN shares higher before analysts once again were caught off guard (they had been negative on the stock since the approvable letter was issued). The stock moved as high as 12 before settling to the low nine’s, still a nice move for the day. During the day on Thursday and again on Friday, the analysts rushed to decry the DNDN stock action as unsupported and that the announcement by Gold contained no new information. The Bank of America analyst repeated his sell call and others similarly chimed in.

The Motley Fool wrote an article stating that DNDN was 150 million overvalued compared to its “peers” based upon its 750 million market cap. Well guess what . . . as it stands after Friday’s action taking the stock down further, the market cap of DNDN is back to just above 600 million. I guess it’s not overvalued anymore!

DNDN is not for everyone – it will continue to be volatile and could be worthless someday, but if you're interested in the stock I encourage you to do your own investigation, read the reports, look at the charts (before and after the stock was thought to be a slam dunk for approval), do the math, and decide if the stock is a good long term buy. I would look at DNDN as a one-trick pony at this point. Although it has other drugs in various stages, all its resources are directed at Provenge and it needs Provenge to help fund research on its other candidates. Estimate the size of the Provenge market, the chance of approval in 2008, 2009, or 2010, and then decide if it’s a prudent investment. This will not be a “dead in the water” investment waiting for approval. A release of positive information from the IMPACT trial would certainly move the stock or a pharma partnership could move the stock prior to approval. This is a 20 dollar stock masquerading below 10 to allow the big boys a chance to make their money. Its market cap should be well over the low-end potential 1 year market of its drug.

Disclosure: I am a long-term investor in DNDN (with no relationship to the CEO except the last name).

RELATED READING:
- Dendreon Catches a Break From The FDA
- Dendreon Volume and Volatility Compress Ahead of ASCO
- Dendreon Interest Remains Extremely High

DNDN 1-yr chart:
dndn chart

Source: Analysts Keep Dumping On Dendreon, Despite The Math