2 Lessons From Dendreon

Was anyone else staring at Dendreon's (Nasdaq: DNDN  ) results in one window yesterday and the stock price in another and thinking something didn't seem right?

Turns out there was some weird trading of Dendreon's shares yesterday afternoon; this was right before trading on the stock was stopped ahead of presentation of the data for the company's prostate fighter, Provenge, at the American Urological Association's annual meeting.

The data looked good. Really good. But the stock was trading down 45% right before trading was stopped for the data presentation.

We already knew Provenge had passed its pivotal phase 3 trial, but the data confirmed that the treatment can get past the FDA and it suggests how well Provenge might sell.

Provenge extended survival by 4.1 months compared to placebo, which should be good enough for approval and fairly robust sales. The current treatment for advanced prostate cancer, sanofi-aventis' (NYSE: SNY  ) Taxotere, extends survival by about 2.5 months. In addition to the apparent longer survival, Taxotere is a nasty chemotherapy agent with horrible side effects compared to Provenge, which has relatively minimal side effects.

So what have we learned from yesterday?

  • When a CEO describes the data as "unambiguous," that probably means the full data set will look good. There are some CEOs out there that pump up weak data, but clearly Dendreon doesn't have one.
  • Put stop losses on stable companies like Johnson & Johnson (NYSE: JNJ  ) or Abbott Labs (NYSE: ABT  ) if you must, but stop losses can cause a lot of pain on more volatile stocks like Dendreon, Las Vegas Sands (NYSE: LVS  ) , and Citigroup (NYSE: C  ) .

If you missed getting in on the soap opera or got stopped-out with a cameo, there's still plenty of time to buy Dendreon. The company plans to amend its marketing application in the fourth quarter, which would push a potential FDA approval back until this time next year.

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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Johnson & Johnson is a selection of the Income Investor newsletter. The Fool has a disclosure policy.


Read/Post Comments (5) | Recommend This Article (24)

Comments from our Foolish Readers

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  • Report this Comment On April 29, 2009, at 2:45 PM, TMFSpiffyPop wrote:

    What a rollercoaster. Dizzying. --DG

  • Report this Comment On April 29, 2009, at 3:43 PM, tgauchat wrote:

    The situation was bold faced fraud and price manipulation, no doubt about it. The stock should have been halted for the entire trading day, well before the debacle.

  • Report this Comment On April 29, 2009, at 3:45 PM, gvtrader wrote:

    I just about fell out of my chair when I saw the stock price drop in half, I had bought 200 shares about an hour earlier. Yikes!! Sure was glad to see it recover over night and sold it first thing this morning.

  • Report this Comment On April 29, 2009, at 10:31 PM, tomd728 wrote:

    Great for the Longs but what a night it must have been before the next open.I was long Elan many moons ago and while it came back it was over months of agony.

    There were guys looking for option prices throughout this nightmare and finding the options symbols had

    changed or so I'm told.....

    Oh yeah.. trying to sleep with a position in DNDN Tuesday night ? Bela Lugosi,Boris Karloff,Peter Lorre,

    and your old girlfriend all hanging out by the window sill.

    Tom

  • Report this Comment On April 30, 2009, at 10:34 AM, ThinkOutofTheBox wrote:

    "Potential" approval? The key word is "Potential". "Possible" $2 billion in sales? The key word is again "Possible". Folks, if you already made some money from DNDN, GET THE HECK OUT, and move on to others.

    Stocks like DNDN is so obvious of a SCAM stock. That's it. You guys should know what to do.

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