CAPS Rating: 2 out of 5

A biotechnology company focused on the discovery, development and commercialization of novel therapeutics that harness the immune system to fight cancer.


Player Avatar zzlangerhans (99.85) Submitted: 10/24/2013 5:45:54 PM : Underperform Start Price: $2.39 DNDNQ Score: +19.22

In seven years of following biopharma stocks, I can remember two instances where I was absolutely flabbergasted by a phase III trial success. One was Delcath's positive results for their PHP system in metastatic melanoma in April 2010, and the other was Dendreon's success in the IMPACT trial in April 2009. In both cases I went heavily into negative territory with my underperform picks, gave up on the picks for significant losses, and then eventually kicked myself when both stocks fell back to their pre-trial levels and subsequently carved out new lows. I also continued to trash my score with both stocks, attempting ill-advised outperforms for comebacks that were too small and too late when they finally arrived.

I still suspect that Dendreon somehow found a way to game the IMPACT trial to meet the primary endpoint after missing it in the interim analysis. Many have said that the commercial weakness of Provenge, aside from reimbursement concerns, is related to oncologists not being convinced by the data despite FDA approval. Although I don't see the FDA as a reed blowing in the winds of public opinion, the fact remains that the pressure brought against the agency prior to the approval of Provenge was unprecedented. I have seen the FDA approve drugs like Adasuve and Zelrix that are useless or superfluous after prior rejections, and I believe at a certain point if the drug isn't clearly harmful they will throw up their hands and let the marketplace make the ultimate call on whether the drug survives.

In the case of Provenge, I believe that call has been made, and it isn't a favorable one for Dendreon. The latest quarterly revenues were disappointing, the burn continues to be prodigious, and institutional owners are dumping the stock. A favorable opinion from CHMP on Provenge approval in Europe was basically a blip on the long-term price chart. Dendreon will always have its cheerleaders until their share price approaches zero and probably afterwards, but my assessment is that bankruptcy is only a matter of time.

I did learn a valuable lesson from greenthumbing Dendreon along with many other stocks that I didn't believe in long-term. While these stocks will often shock the street by doubling overnight on a positive development after a long period of decline, it's very difficult to get the timing right so that even the double makes the trader whole. What happens more often is that the double doesn't happen until the trader is down 60% from his starting price, he holds on against his own better judgement to try to get back to even, and then rides the stock back down to the bottom of the hole again once the catalyst proves to be bogus. Be very careful buying declining stocks for a rebound if you don't believe in the story. It just doesn't work.

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