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Dendreon Drama Subsides; More Data to Come

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Bears may have a case, but over the long-term I'm bullish.

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It was an "exciting" day for investors in Dendreon (DNDN) yesterday. In what many people are now calling a clever marketing ploy, a previously unknown research vendor released a two‑sentence research "report" that claimed doctors it had spoken with were being asked to participate in a FDA panel for Dendreon's prostate cancer drug Provenge. The second sentence of the report was a recommendation to sell the stock.

Wall Street has been abnormally fixated on whether Provenge would go in front of a panel in this review cycle. I've never quite been able to figure out the agita about this. After all, in the 2007 review cycle, the panel voted 13-0 that the drug was safe, 13-4 that the drug was substantially effective, and by my unofficial count 9-8 (or 10-7) that the FDA should approve the drug. The FDA subsequently asked Dendreon for data from the ongoing IMPACT study. The problem wasn't the FDA panel, it was FDA leadership that delayed this lifesaving drug.

The two sentences in this report were worth about five percentage points each at one point in pre-market trading, as Dendreon shares swooned 10%. Those of us with some track record who cover the stock (for 10 years now in my case), got 5 a.m. calls from freaked out clients. Thus began yesterday's circus.

By early morning, a Dendreon spokesperson was on record reiterating what the company had said last week -- it was in constant contact with the FDA and there was still no indication of a panel. If you look at Dendreon's chart, you'll see an obvious inflection point in early February. This was the result of the Provenge review moving inside the 55-day mark. The 55-day mark was seen as important by investors because FDA guidance is to alert management if they are expected to prepare for a panel no later than 55 business days ahead of the approval date.

By mid-morning, FDA spokespeople were on the record saying Provenge would not be in front of a FDA panel before the May 1 FDA decision date. Bears sniped back this was consistent with their view that the May 1 date would be pushed back. The FDA spokespeople didn't rule out a panel, according to the revised bear story, only that there wouldn't be one before May 1.
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