These 2 Stocks Saw Red

The European elections set off delayed market reactions as the European Union begins to come unglued. The elevation of a socialist again to the French presidency and gains made by neo-Nazis in Greece show there is no political will for the austerity measures needed to return the countries to a firmer financial footing. The euro may crumble or Greece may exit the union, or both.

As the Dow Jones Industrial Average fell below the 13,000 mark again, some companies fell even harder, so first let's see whether they had good reason to drop. Sometimes, panic-fueled declines can make excellent buying opportunities.

A disconnect on growth
It's not so much a surprise that Provenge is experiencing only "modest growth" according to first-quarter results -- heck, sales of Dendreon's (Nasdaq: DNDN  ) only marketed drug were actually a little bit above expectations again -- but it's the slow realization that the prostate cancer treatment may never be the blockbuster once hoped for that sent the biotech's shares plummeting 25%.

Whether it was cost, reimbursement policies, or whatever, the window of opportunity appears to be quickly slamming shut. Johnson & Johnson  (NYSE: JNJ  ) makes competing therapy Zytiga, which is growing sales even faster than Provenge, with analysts expecting it to make the $1 billion peak sales mark, and Medivation has under development MDV3100, which looks promising.

At least one analyst says there's really only one option available to Dendreon as a catalyst for its stock to rise, and that's for it to get bought out. Highly rated CAPS All-Star TSIF agrees, noting that that was the plan from the beginning as this go-it-alone approach is a road too difficult to travel.

The hazards of going it alone in a tough medication market, especially with a drug that is expensive and needs customization. I believe Dendreon could still be a buyout candidate by someone with a better channel already established. This was the intent from the beginning.

Add Dendreon to your watchlist, then tell us on the Dendreon CAPS page or in the comments section below who you think might be a willing buyer.

In search of a dent puller
Remember those auto-body repair commercials from the 1980s where after a car wreck someone came on to say, "Uh-oh, better get Maaco"? Well, it looks like the first-quarter earnings wreck for MAKO Surgical (Nasdaq: MAKO  ) will have the surgical robotics company looking for a repair specialist too.

Sales of its premier RIO system were disappointing to say the least as only five units were sold, leading management to dramatically cut full-year guidance. Considering how strong sales were in the fourth quarter, it looks like a lot of RIO systems sales may have been pulled forward.

But as the Fool's Evan Niu points out, such slim sales in the first quarter are nothing new. Two years ago the company had equally dismal results but went on to post stronger and stronger gains in the quarters following. Even though investors bailed en masse from the stock yesterday, sending it careening downhill by 36%, there's little reason to believe it's been totaled. MAKO should be able to salvage itself, particularly since there's typically a seasonal drop off in Q1.

Still, the tough talk last time around of being financially sound enough to not need to tap the capital markets seems to have been just that -- talk -- as MAKO also lines up financing just in case. While planning for the future is always prudent, perhaps executives shouldn't be so bold if they can't back up the talk with the walk.

You can't say it's a general malaise in robotics sales even though Hansen Medical (Nasdaq: HNSN  ) reported fewer sales too. Last month, Intuitive Surgical (Nasdaq: ISRG  ) enjoyed a 24% increase in sales of its da Vinci systems, though its stock has pulled back from its highs too.

Previously I rated MAKO to outperform the market on CAPS, and I don't plan on changing that outlook. I agree with CAPS member wjcoffman, who views its first-quarter results as a hiccup.

Tell me in the comments section below or on the MAKO Surgical CAPS page whether you think it will keep moving like a shark, then add the stock to the Fool's free portfolio tracker to see if it ends up swimming with the fishes.

Ready for a resurrection
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Fool contributor Rich Duprey owns shares of Intuitive Surgical, but he holds no other position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of Dendreon, MAKO Surgical, Intuitive Surgical, and Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of MAKO Surgical, Intuitive Surgical, and Johnson & Johnson. Motley Fool newsletter services have recommended creating a diagonal call position in Johnson & Johnson. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (6) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 10, 2012, at 1:28 PM, tokelau wrote:

    How can you call 1st quarter miss a 'hiccup' if management guides down for the whole year? That would give the meaning of 'inside information' a new dimension. Seriously, MF isn't what it used to be. You should do some serious soul searching, maybe a week in the mountains, something like that. You're shamelessly plugging your own reports and you make more terrible misses every day. The truth that 'buy-and-hold' days are over was lost on you. We are all responsible for our own actions, but the days of trusting the MF as the only smart, not-too-commercial 'people like yourself' advising unit, seem to be gone. Too bad.

  • Report this Comment On May 10, 2012, at 1:34 PM, pfan12000 wrote:

    The reason why Dendreon has always drop in valuation after each of the last 3 quarters was the heightened expectation for the earnings and sales launch and rampup set initially by Mitch Gold (former CEO) back when they first achieved FDA approval for Provenge. Due to CMS and early reimbursement issues as well as attacks by the chemotherapy and alternative competing treatments players there were legitimate reasons slowing the initial launch. The statement "but it's the slow realization that the prostate cancer treatment may never be the blockbuster once hoped for that sent the biotech's shares plummeting 25%" is plausible if the assumption that Provenge will NEVER become the blockbuster treatment it once promised. In addition to being a possible buy-out candidate DNDN may sooner than later meet their sales goals if they can convince Doctors that Provenge should be used first in any treatment regime that sequentially treat the cancer to prolong life (with good quality of life factored into consideration). The theory that Zytiga and Medivation's approach will take away sales from DNDN is without merit as Provenge's mechanism of action is totally different and may be used first in a sequence approach to treating APC. If anything Zytiga and MDV3100 are the real competitors for each other's sales.

  • Report this Comment On May 10, 2012, at 4:49 PM, kydderr wrote:

    put your money where your mouth is or don't recommend others to do so - the way i see it , I am thinking these MF services have way too many people adding their two cents when we buy in for Tom and David's advice. Take that to the next board meeting.

  • Report this Comment On May 10, 2012, at 8:43 PM, rockythesquirell wrote:

    I agree totally with Car1020 I paid for advice from Tom and David. I have stopped taking advice from a lot of other writers here as they seem to promote more losers then winners.

  • Report this Comment On May 11, 2012, at 10:44 AM, obga18 wrote:

    you all are a bunch of wimps, thanks for selling out and getting scared, making the stock more affordable to purchase another 1000 shares....cant wait for it to get back to its peak again...long live the fool

  • Report this Comment On May 11, 2012, at 1:29 PM, stoneteeth wrote:

    There are so many analysts ie. Seeking Alpha for one, that give long dissertations about buying a stock, then at the end they include, I don't own the stock and have no intentions to buy it. The whole equities market is a manipulation that crushes the small investor every day.

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