Following an unfavorable regulatory decision for its lead drug Provenge, biotech Dendreon (NASDAQ:DNDN) now finds itself facing more issues, as it revealed in a SEC filing earlier this week.
Last month it was the initiation of a slew of mostly spurious lawsuits on behalf of shareholders, and now all the attention seems to have attracted the Securities and Exchange Commission. As Dendreon announced in a regulatory filing, the SEC has opened an informal inquiry into how it handled the Provenge marketing application and correspondence with the FDA.
Investors who were comfortable owning shares of Dendreon before this week shouldn't be scared off from their investment in the drugmaker just because of this announcement of an SEC inquiry. When expectations by investors are high and then not met, publicly traded drugmakers (and other companies for that matter) get into all sorts of problems and are often the focus of the SEC, whether warranted or not.
I have little insight into whether Dendreon committed SEC violations in its public disclosures and other actions in regards to Provenge, but even if Dendreon did commit SEC violations, the worst that would happen to the company would be fines in the millions of dollars.
When you're a money-losing development-stage drugmaker, every dollar counts to help stave off a cash crunch, but even the worst-case outcome with this SEC inquiry (which would be years in the making) won't shape the future of the drugmaker and will be inconsequential to Dendreon investors when compared with the pivotal interim phase 3 Provenge study results coming up next year.
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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.
