Dendreon (DNDN) Cancer Vaccine Appears to be a Success; Analysts Miss It

I wish I could say I never heard of Dendreon (DNDN) before today, but a reader was good enough to email me about this stock not even a month ago in the $3s. As a general rule, except for some of the really huge biotech stocks, I stay away from these type of names - the stock market is difficult as it is, and small cap biotech stocks make the normal stock market gambling look like child's play. Of course after today's news I wish I had investigated further. Outside of the stock reaction, it is hopefully a promising new turn in medicine.

Reuters - Dendreon Cancer Vaccine Works

• An experimental medicine from Dendreon Corp improved survival in men with advanced forms of prostate cancer, the company said on Tuesday, bolstering chances of it becoming the first approved therapeutic vaccine for any type of cancer. Unlike traditional vaccines that prevent disease, the company's Provenge medicine treats it by stimulating the body's own immune system.
• Shares of Dendreon (DNDN) more than tripled in heavy morning trading to as high as $22.10 and were up 138 percent at $17.38 in afternoon trade as the study results suggested a revolutionary form of therapy is on the horizon for one of the most common cancers.
• The Phase III clinical trial met the main study goal of improving survival, prompting Dendreon to say it will seek U.S. regulatory approval of Provenge in the fourth quarter.
• Paul Latta, an analyst with McAdams Wright Ragen, said Provenge stood to be a $200 million product if it is approved only in the advanced prostate cancer patient group, but could expand to a $1 billion blockbuster if it is expanded to men with earlier stages of the disease.
• Aside from OrbiMed, other big institutional shareholders included BAM Capital, Barclays Global Investors, Visium Capital Management and Vanguard Group, according to Reuters data.
• On a conference call with analysts, Gold said the trial's results were "unambiguous" and "robust" but the company deferred giving detailed data until a formal presentation on April 28 at the American Urological Association annual meeting in Chicago.
• OrbiMed's Borho predicted Provenge, which is administered only once, would cost more than $50,000.
• Gold (CEO) in February told Reuters he was supremely confident the IMPACT study would succeed, saying, "We're on the 10-yard line and close to putting it into the end zone." Still, Wall Street was skeptical. Dendreon shares touched a 52-week low of $2.55 in March, and no analysts polled by Reuters Estimates had a "buy" rating on the stock. (the problem is EVERY CEO talks like this - a lot of crying wolf)
• "Nobody wanted to stick their head out because over the last 15 years no cancer immunotherapies worked in clinical trials," said Borho.

Sort of ironic story here re: our dear analyst group.

• Research analysts are often criticized for overly promoting companies they follow despite obvious risks, but they missed the boat with an uncharacteristically conservative stance on Dendreon Corp.
• Not one of seven analysts who published a rating on Dendreon's stock recommended buying it ahead of the release of positive results on the prostate cancer vaccine Provenge that more than doubled the share price on Tuesday. For a time the price more than tripled.
• To be fair, Provenge was an incredibly risky bet given the 100 percent failure rate of prospective cancer vaccines that had previously reached late stage testing. "If the result would have been negative, (the share price) probably would have dropped down to cash value, which is about $1 a share," said Paul Latta, an analyst with McAdams Wright Ragen, who rates the stock "hold." "It was kind of a roulette type of game here -- all or none." (i.e. right up the current mentality of Wall Street"investing")
• Merriman Curhan Ford analyst Joe Pantginis, one of two analysts who had a "sell" rating on Dendreon shares, admitted to getting it wrong. "While we were wrong on our call for the outcome of the story, seeing the risk as too high, today's news is a great outcome for Dendreon," Pantginis said. Yet Pantginis was not willing to go out on what now seems like a much less shaky limb and recommend buying Dendreon shares, instead joining most of his peers by bumping his rating up to "neutral.
• Other analysts with "hold" or "sell" ratings on Dendreon, who watched as the shares jumped from Monday's $7.30 close to as high as $22.10 before settling back to around $17, maintained their conservative stance.
• "Given the remaining regulatory hurdles for Provenge and in the absence of full presentation of the final data, we view Dendreon shares as fairly valued at the current level, which is a premium to the peer-group average that includes profitable companies," wrote Lazard Capital Markets analyst Joel Sendek, who has a "hold" rating on the shares.
• Brean Murray Carret & Co analyst Jonathan Aschoff was unmoved by Tuesday's news and remains downright bearish on Dendreon. "We remain unconvinced until details are provided," Aschoff wrote in a research note. (it's hard to say "I'm wrong") "We are sticking with our ("sell") rating and $1 price target given the lack of details and will revisit our rating and target price on April 28," he said.

No position