Dendreon Gains. Why?

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Dendreon (Nasdaq: DNDN) nearly doubled yesterday before settling down a bit after the company announced news that investors should have already figured out.

Dendreon's press release stated that the FDA had agreed that if its prostate cancer compound Provenge was able to successfully show a survival advantage in its ongoing phase 3 study, that would be sufficient to satisfy the approvable letter concerns that caused the agency to deny the drug marketing approval last month.

It's more than a bit surprising to see shares of Dendreon rise on such a non-event. Does yesterday's press release really reveal anything investors didn't know already? With a Special Protocol Assessment for the ongoing D9902b study already in place, the company has announced multiple times throughout the past three years that the FDA had agreed that successfully proving efficacy on a survival endpoint in this study could form the basis for the drug's approval.

Furthermore, Dendreon's management even said in a conference call three weeks ago following the approvable letter that the ongoing D9902b study could fulfill the "additional clinical data in support of the efficacy claim" that the FDA was looking for to get Provenge over the approval hump.

What has changed now is that Dendreon is in need of some cash to continue funding its operations. In the past weeks Dendreon has cut a substantial portion of its employee headcount to help reduce its burn rate. Now that shares are up so much on the rehashing of old news, it might be a good time for Dendreon to raise some cash via a dilutive share financing.

Compared to other biopharmas with oncology compounds in similar stages of development, shares of Dendreon appear at least $150 million overvalued on a relative basis with its $750 million market cap after this run-up in price yesterday. With the announcement of what amounts to old news and the probable several years' wait until positive Provenge results come out, investors should take this into account when deciding whether shares of Dendreon are a good value at the moment.

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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.