Gediminas Jasionis

Gambling with Dendreon Corporation (NASDAQ: DNDN)

by Gediminas Jasionis October 7, 2008
dendreon_logo.standard.gifDendreon Corporation (NASDAQ: DNDN) stock gained 33% shortly before yesterday's open and closed at $6.93. The fuss was created by news announcement stating that it has completed the study on the effect of its experimental drug Provenge. The drug proved to reduce the risk of death by 20% for men with advanced prostate cancer.

Joel Sendek, analyst at Lazard Capital Markets, commented on the results: "We maintain our view that any meaningful survival advantage of Provenge treatment would become apparent only upon final analysis. We assume a 50-50 likelihood that the trial may demonstrate a survival benefit upon final analysis."


Still, it seems like a long way to go yet. The company wants to reach 22% death probability reduction by mid 2009. Despite huge quarterly losses, Dendreon still has enough cash to operate for at least another year so money is not an issue in achieving their goals. The tough part here is that FDA will not approve this drug (even if it is effective) until the company achieves the 22% reduction. If however Dendreon will not manage to increase the percentage, the company will most probably get into a serious trouble.

A 50-50 likelihood of success is a gamble and this stock surely makes investors feel it. The stock already lost some of its "rally after the news" gain. And it will probably dip lower in the near future. The historical trading patterns show a tendency for that. Until the company will have an approved drug investors should expect harsh ups and downs with no clear long term trend forming.


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