Why does Cell Genesys (CEGE) trade in union with Dendreon (NASDAQ:DNDN)? While it is true that both CEGE and DNDN are in the cancer vaccine arena with prostate cancer drugs, those vaccines completely compete against each other.
CEGE is expected to have its trials completed for potential approval of GVAX in 2010. DNDN will likely have a one year head start with Provenge. This one year head start is positive for DNDN, but not the end of the world for CEGE. GVAX trials for advanced prostate cancer have shown great progress and GVAX is already being tested in other cancers besides advanced prostate cancer trials, including phase 2 trials for patients with leukemia and pancreatic cancers.
DNDN market cap sits above 600m while CEGE is about 300m. When DNDN made its rise above 20 and then to 25, CEGE followed up over 7. When DNDN crashed back to 7, then 6, then 5 and now back to 9, CEGE has followed a similar pattern in smaller increments.
Why is CEGE tied to DNDN? CEGE’s GVAX vaccine is not tied to DNDN’s success or failure of Provenge. CEGE technology is not dependent on DNDN. CEGE has a history of making wise decisions with regards to its financials. What a smart move it was for them to sell stock when DNDN was cruising to institutional investors. CEGE raised gross proceeds of $60 million, selling 10.8 million shares of common stock at a price of $5.55 per share. You can currently buy the stock for more than a dollar off on the open market compared to what the institutions bought 60 million dollars worth! So much for a discount for buying in bulk!
Previously CEGE owned a large portion of Abgenix (ABGX), which was bought by Amgen (NASDAQ:AMGN) and CEGE sold its holding for a huge gain. In January and February 2006, CEGE sold 3 million shares of Abgenix resulting in gross proceeds of $65.5 million and a realized gain of $62.7 million. Another investment that could pay dividends in the future is Ceregene. According to the latest 10-K, CEGE owns approximately 25% of Ceregene, which is a clinical stage biotech concentrating on neurological disorders, such as Lou Gehrig’s Disease and Parkinson’s, its Parkinson’s drug is in Phase II trials. So, CEGE itself provides a broader range investment than DNDN, even though DNDN is further ahead in the quest for a prostate cancer “vaccine” therapy.
While I own shares in both companies, they are certainly competitors and should not trade in tandem. Even CEGE states in its 10-k that an example of a competitor in “the cancer immunotherapy area includes Dendreon Corporation.” Shouldn’t DNDN’s recent problems with the FDA have been good news for CEGE and its stockholders?
Disclosure: I own shares in DNDN and CEGE.