Why Dendreon Shares Took Off

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Dendreon (NASDAQOTH: DNDNQ  ) -- a biotech company whose lead treatment, Provenge, targets advanced stage prostate cancer -- spiked as much as 19% following an upgrade from research firm Sanford C. Bernstein.

So what: Bernstein upgraded Dendreon before the opening bell today to "outperform" from "market-perform" and noted that it could be one of the market's best performers this year. The covering analyst, Geoffrey Porges, specifically opined that the competitive landscape was stabilizing and that Provenge use should only rise in 2013. Porges expects Johnson & Johnson's (NYSE: JNJ  ) Zytiga to provide little competition to Provenge and feels that physicians will prescribe Provenge in combination with, rather than in competition with, Medivation's (NASDAQ: MDVN  ) Xtandi.

Now what: I often recommend against placing too much emphasis in analyst upgrades and downgrades because they have a very short-term effect on a stock; however, this one I happen to agree with. I do see the possibility of Provenge being used in combination therapy increasing, and it appears we'll be seeing the fruits of its cost-cutting efforts by mid-year. I'm a realist and not expecting a surprise profit or anything, but there's no reason why growth can't continue by double-digits and why more insurers can't join Aetna (NYSE: AET  ) and jump on board with some sort of coverage of the treatment.

Craving more input? Start by adding Dendreon to your free and personalized watchlist so you can keep up on the latest news with the company.

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