In sports, if things aren't going well for a team, the first one shown the door is usually the head coach. It works much the same in business, as Dendreon
When it was announced that well-regarded CEO John Johnson was jumping ship from Savient, the small cap saw its shares plummet by 10%, while Dendreon, Johnson's new home, moved upward nearly 5%. Savient couldn't have been caught totally off guard: Johnson has served on Dendreon's board for about half a year, allowing the other members to kick his managerial tires.
bungled less-than-ideal rollout of prostate cancer vaccine Provenge, featuring unrealistic sales expectations, a rapid build-out of excess manufacturing capacity, pulled guidance, mass layoffs, all of which culminated in one of the worst stock performances of 2011. It has gotten to the point where management's "modest" sales-growth target last quarter was better than feared (but still a sequential decline, mind you) and shares popped 50%!
Can a new CEO right the ship? Possibly. Despite Dendreon's official line about strengthening commercial efforts this situation is not exactly a mirror of Vertex Pharmaceuticals
Two things stand out for me about John Johnson's switch. He was Savient's CEO for little more than a year as the stock fared worse than Dendreon's in 2011. Savient was looking for a takeout partner before he arrived, but struggled when having to bring gout drug Krystexxa to market on its own, something Johnson was supposed to help with. To have a CEO abandon ship after such a short and trying time must be disconcerting for Savient investors and his lack of success at Savient may be a red flag for Dendreon investors. However, Johnson, when running ImClone, successfully parlayed top drug Erbitux into a $6.5 billion buyout by Eli Lilly
And while a 5% move may not be much, without the CEO announcement, Dendreon shares would have likely been down today. Its newest potential rival, Medivation's
Much like the new direction of Dendreon, a lot remains to be seen.
Dendreon and Savient have taken investors hoping for massive returns on wild ride the past couple years. Fool analysts think they've found another health-care company with just as much upside, but also with potentially a much smoother pass to success. You can read about it in their new free report: "Discover the Next Rule-Breaking Multibagger." You can get your copy for free for a limited time by clicking here.
David Williamson owns shares of Dendreon, 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. Motley Fool newsletter services have recommended buying shares of Vertex Pharmaceuticals. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.