Shares of Dendreon (NASDAQ: DNDN ) soared 13% in early trading today after Sanford C. Bernstein upgraded the stock from "market-perform" to "outperform." Even better, Berstein singled out the drug company as potentially one of the top stocks of 2013.
What it means
Any good news is welcome for long-suffering Dendreon. The stock actually traded above $50 per share back in 2010 after its prostate cancer drug Provenge was approved by the Food and Drug Administration. However, sales for Provenge were much lower than projected. As a result, Dendreon shares dropped more than 90% from its peak.
Longtime readers of The Motley Fool know that we don't automatically fall into lockstep with analysts' opinions. However, when those opinions are based on solid fundamentals about the company, it pays to listen. Is that the case with Bernstein's upgrade of Dendreon?
Berstein analyst Geoffrey Porges commented that the market for Provenge is improving, despite competition from Medivation's (NASDAQ: MDVN ) Xtandi and Johnson & Johnson's (NYSE: JNJ ) Zytiga. Interviews with urologists found that they are frequently prescribing a combination of Provenge and Xtandi, according to Porges.
These comments are only anecdotal, but Dendreon's preliminary results for fourth quarter did confirm increased sales for Provenge. However, current growth rates won't allow the company to reach profitability soon.
It's a long shot for Dendreon to get back to its high levels of 2010. However, it doesn't need to do that for investors to achieve big gains. The landscape for Provenge does appear to be improving, although at a slower pace than Dendreon shareholders would prefer.
The good news, though, is that the opportunities for Provenge are still significant, and the stock could be poised to move up as the company capitalizes on these opportunities. Bernstein's upgrade seems to be right on target in my view.