Three weeks ago, I announced my intention to create a portfolio composed of 10 companies that investors have unjustly cast aside. My goal in creating the One Person's Trash Is Another Person's Treasure portfolio is to highlight just how successful value investing and contrarian viewpoints can be, as well as uncover some great companies that have a good chance of turning their fortunes around. For a more thorough explanation of what I hope to accomplish and how I'll measure my success, I encourage you to visit my portfolio mission statement.

For reference, here are my previous two selections:

For my third selection, I've chosen biotechnology firm Dendreon (NASDAQ: DNDN).

Why traders have given up on Dendreon
When Dendreon's late-stage prostate cancer treatment Provenge was approved by the Food and Drug Administration in April 2010, its prospects were immeasurable. With few treatments available to patients and what appeared to be a big survival advantage, Provenge was expected to become a blockbuster. However, a series of bungles -- including pricing the full course of treatment at $93,000 and marketing the drug on its own without a partner -- allowed its competition to sweep in and steal the show.

Currently, Johnson & Johnson's (NYSE:JNJ) Zytiga appears to be the metastatic castration-resistant prostate cancer treatment of choice among physicians, according to research firm Baird. Also, Medivation (NASDAQ:MDVN) and Astellas Pharma (OTC:ALPMY) received an extremely rare early approval for Xtandi to treat prostate cancer in August. On top of this, you can add in competition from Jevtana, made by Sanofi (NASDAQ:SNY). In Europe, Medivation has already filed for approval while Zytiga gained EU approval last year -- but only after dropping the price of Zytiga lower than its current $5,500 monthly bill that you find in the United States.

Simply put, the deck is already stacked against Dendreon, and it was forced to restructure its operations and reduce its workforce in order to cut expenses to manageable levels -- and still the company is losing money.

Why investors should trust Dendreon
Every basket portfolio of 10 companies should have one or two long-shot picks, and this is one of mine. Provenge sales may have limped out of the gate, and Dendreon's certainly moving at a snail's pace in Europe as it runs trials for EU regulators on safety, but there are plenty of ways Dendreon can turn things around.

To begin with, Dendreon could (and in my personal opinion, will) seek out a partner with more marketing knowledge, specifically abroad, which could then help Dendreon price its Provenge treatment to a level which is likely to draw the praise of EU regulators and insurers. As my Foolish colleague David Williamson recently noted, EU insurers are much more cost sensitive, so pricing Provenge appropriately in Europe will be important. Dendreon was recently informed by Aetna (NYSE:AET) that its Provenge treatment would be covered on a limited basis which may also spur more insurers domestically to cover the full treatment.

Secondly, don't discount the fact that Provenge is continuing to take market share from Zytiga -- it's just occurring at a slower pace than it had been occurring previously. Dendreon's latest quarter showed 27% product sales growth over the year-ago quarter even with sequential quarterly revenue falling 2.5%. With Dendreon's cost-saving restructuring expected to take full effect by the third-quarter of next year, we can expect losses and cash burn to minimize all while sales continue to inch higher.

A third point: Have we forgotten that Dendreon has an expansive pipeline? Currently, Dendreon is running five early and advanced phase 2 and phase 3 clinical trials with Sipuleucal-T (aka Provenge); an ongoing mid-stage trial for DN24-02, an active cellular immunotherapy that targets the HER2/neu receptor for the treatment of breast, ovarian, and colorectal solid tumors; and an early-stage trial for D3263-HCI, which targets and activates a specific type of calcium ion channel of the TRP protein series to cause cell death in solid tumors.

What you'd get here
As I said, this isn't going to be a typical One Person's Trash Is Another Person's Treasure selection, because I tend to focus on deep value discounts that have very low P/E ratios, often pay dividends, and have strong cash flow. That's not the case in any way, form, or shape with Dendreon.

Dendreon has lost money in each of the past 10 years, and its high R&D and marketing costs associated with its pipeline haven't made getting closer to profitability any easier. Yet, if you were to jump into Dendreon shares right now, you'd be paying just 1.8 times 2013 sales projections. Having followed the biotech sector for quite some time, I've learned that biotech investors are frequently willing to pay two to seven times peak sales of a drug perhaps a decade down the road. To me, this shows a large overreaction by pessimists to Provenge's potential at just 1.8 times next year's sales. In addition, you get a pipeline with eight current clinical candidates and multiple pre-clinical trials.

Assuming Dendreon gains approval to market Provenge in Europe, it wouldn't be out of the question to expect annual sales to boost over the $500 million mark within two years. It won't be an overnight success story, but I do believe Dendreon will prove the naysayers wrong in the end and that's why I'm adding it to the One Person's Trash Is Another Person's Treasure portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.