Wednesday, April 15, 2009

What's up with Dendreon?

I have a few moments to spare from my website duties and just wanted to alert you to the recent action in biotech Dendreon (Nasdaq: DNDN). Yesterday the company reported success in extending the survival rate in men with advanced prostate cancer with their immunotherapy drug Provenge. When I first glanced at the stock chart I thought this was another acquisition in the pharma sector since the share price almost tripled on the open to $21.50, up from $7.30 at Monday's close.

The news stunned the seven analysts following the company. None of them had a buy rating on the stock but it's tough to blame them as no cancer vaccine before this has ever had success in late stage testing. After the results were announced, many analysts refused to raise their rating mainly because important details such as how long the drug extended life, if there were any serious side effects, and how statistically significant were the data weren't included and won't be revealed until the company presents its results at a medical conference on April 28th, although in a conference call Dendreon's CEO said that the results were statistically significant in extending patients lives by an average of four months.

If the drug proves to be successful, it is hoped that it can help some of the estimated 29,000 patients who die as a result of the disease each year. The bad news is that the hefty price tag, estimated at $50,000 per treatment, could be beyond the means of many individuals and insurance companies. Also, the treatment is labor intensive and probably wouldn't be advised for the very old or very frail, as one doctor quoted in Forbes noted. Still, even if Provenge is prescribed to a third of the patients (say 10,000), that represents an annual sales figure of a half a billion dollars.

Is that enough to justify the recent price jump? One analyst quoted in a Thomson-Reuters article feels that if there are no flaws in the company's data, there could be an immediate 50 percent upside on April 28th. And if the results are that positive, the company maybe targeted as an acquisition which is what drew me to its chart in the first place. Could other people have the same idea..?

Channeling Stocks Update
For those of you following the Channeling Stocks portfolio, today I added previous long winner SOHU to the short list with a $40 target. I also covered LRY at the closing price of $23.24. If the market continues up, I'll be exiting a lot of positions soon and it won't be pretty.

1 comment:

J.D. Swampfox said...

"If the market continues up, I'll be exiting a lot of positions soon and it won't be pretty."

Hang in there Doc! It's going up on vapors...