By VFC’s Stock House
Investors may be wondering if Dendreon Corporation (NASDAQ:DNDN) can ever catch a break. A few years ago positive Phase III results for the company’s immunotherapeutic prostate cancer treatment defied the critics and set the stage for an historic approval by the FDA in May, 2010, which sent shares soaring towards the forty dollar mark, but since that time the company has been plagued by slumping Provenge sales, questionable reporting practices, and continued attacks from what some would consider the ‘peanut gallery.’
In the instances where big media becomes involved, the timing of negative Dendreon reports often leaves investors wondering whether or not such reports are mere coincidence or more aptly-timed to take advantage of pending milestones or trading opportunities. As noted in the above-linked CNBC report of a couple of years ago, the financial news giant made an ‘honest mistake’ and published information that it later in the day declared inaccurate, but the damage was already done as DNDN shares dropped significantly on the original report. Those who took advantage of that dip, however, were proven winners later on down the road as the share price rebounded - albeit only temporary, as retrospect shows us that the original report, while still untrue at the time, was proven to be right over the longer haul.
A similar event has recently unfolded that may have Dendreon shareholders positioned to take advantage of another share price dip that could result in an eventual DNDN rebound.
In an ”exclusive” report, Reuters cited information stating that the benefits of Provenge may have been “artificially inflated” as the result of how the data was eventually analyzed, further arguing that researchers analyzed some of the Phase III data “differently from how the company told U.S. regulators they would.”
The report contained information and a viewpoint that may be familiar for some, as detailed in another Seeking Alpha article published earlier in the week, but the ensuing price action nonetheless resulted in a drop to the four dollar mark from prices closer to five. The report again raised suspicious questions from investors as to the timing and relevancy of such an article, given that Provenge has now been long-approved and — although sales are still not even close to meeting previous expectations — has a foothold in the market.
Additionally, the argument made is essentially a reprocessed one and begs the question from investors, “Why beat a dog while it’s already down?”
At this point, however, the damage is done to the DNDN share price and investors will be looking at the potential of the stock as a rebound and/or growth play from this point forward. While the share price could rebound on pure speculation alone, it will take increasing sales numbers for DNDN to register as a potential growth play with investors. That puts a significant amount of eyes on the company’s next quarterly report, which is slated for the end of this month. Revenue missed the mark for the second quarter, with only $80 million in Provenge sales coming in versus the expected $86 million, and some investors note that the going will not get any easier for the company in gaining market share, given expected competition from Medivation’s (NASDAQ:MDVN) recently-approve Xtandi and Johnson & Johnson’s (NYSE:JNJ) Zytiga.
On the other hand, the arguement can be made – and has been made in earlier statements from the company — that Provenge sales have suffered from unfamiliarity by patients and doctors regarding reimbursement and broad-based coverage by insurance companies. Dendreon and officials have addressed the former concern through “education” members by its sales force while the latter concerns are also slowly being addressed.
Some headway on the insurance front was made earlier this month with a key announcement of expanded coverage of Provenge by Aetna Inc. (NYSE:AET), the third-largest health insurer in the United States. Aetna had already covered Provenge under stricter conditions.
Investors will also watch this month’s earnings report for signs that recent measures of restructuring are having a positive effect on the bottom line. After las summer’s crash the company announced numerous plans to cut costs and just recently laid off over one hundred workers from its Seattle facilities. These measures reflect a more realistic view of the company’s challenges and could have an immediate effect on the company’s recovery.
It’s also worth noting that the depleted share price that is only a fraction of what it once was could attract the attention of a larger company looking to scoop up Dendreon, if only for its technology, pipeline and potential for the global expansion of Provenge. The lower the share price goes, and the longer it stays there, makes such a scenario more likely, in my opinion, although that is based on pure speculation on my part. Although the future of immunotherapeutic treatments is shifting to technologies involving cheaper and more convenient logistical considerations, including ‘off the shelf’ immunotherapeutic treatments, Provenge is still recognized as the grand-daddy of cancer immunotherapies, is already approved, and my eventually pick up some steam on the market as the sales and marketing force regains its footing.
While a dip into the threes is a possibility, DNDN could again be considered a potential rebound play after having again been beaten down by the presses — when the stock was already beaten down anyway.
Disclosure: Long DNDN
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VFC’s Stock House offers investing opinions, insight and ideas on a variety of different stocks, options and ETFs, as well as commenting on news that affects the market.