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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: Twitter: Dereklowe

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April 30, 2009

Dendreon's Stock: What the Hey?

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Posted by Derek

We now have more data on Dendreon’s results for their prostate cancer therapy Provenge, and the numbers do, in fact, look good. This isn't a cure for refractory prostate cancer, but there seems to be a real statistical improvement in survival, with side effects no worse than the placebo group, and that should be enough for the FDA. In oncology you have to take what you can get.

What’s bizarre is the trading that went on in the company’s stock just before they started presenting on Tuesday. For reasons that are still unclear, a horrendous wave of selling hit within the space of a few minutes, and the stock went down as if hit with a club. Having risen to nearly $25 by about 1 PM, trading was halted in the stock at 1:27, with it now going for $11.81. As the company’s shareholders raved and cursed in utter consternation, the company was detailing exactly the results they’d been hoping to hear.

Wednesday, the stock shot straight back up to its former levels, but that doesn’t help the many people who (prudently, they thought) had put stop-loss orders in and had thus already been sold out. This Bloomberg story has a fellow who was cashed out at $9.31, which must make him wonder (1) just what the hell was going on, anyway, and (2) just what it means to halt trading in a stock, if you’re going to find yourself traded out of it at an even lower price.

I can’t help out with question (1) – I have to say, I’d like to know the answer to that one myself. But as for (2), that’s the problem with stop-loss orders, particularly in a stock that doesn’t have much of a float. Movements, especially downward ones, come suddenly and discontinuously, and the stock doesn't hit all the grace notes on the way down (as Fred Schwed
used to say).

So good luck to Dendreon, and to the patients who will use Provenge. Dendreon's investors, on the other hand, have probably been through the power-wash and spin cycle so many times that they hardly know what's hit them.

Comments (6) + TrackBacks (0) | Category: Business and Markets | Cancer


1. RandDChemist on April 30, 2009 9:09 AM writes...

The stock market is all too often a pack of lemmings. That and people manipulate and game the system.

The same rationale gets used for justifying a given stock's movement down or up. It's nuts.

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2. HelicalZz on April 30, 2009 9:14 AM writes...

I have never invested in Dendreon, but have followed the stock and story. It is a great model case for the perils and rewards of biotechnology investing. Biotech investing requires extreme discipline and ice-water for blood. Know what you want out of it, make modest bets, and have your exits planned ahead of time (price points, % of portfolio, whatever -- plan it before you buy). There will always be those trying for a quick score, some will succeed, many (most) won't, and many will feel manipulated.

The Dendreon story is long from over, and there are a number of stock swings to come. There is still the FDA and the whole question of reimbursement / market adoption ahead. Best wishes to investors who want play in this arena.

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3. retread on April 30, 2009 10:55 AM writes...

Shades of the Rothschilds. They had inside information about the results of the battle of Waterloo and knew that Napoleon had lost before anyone else did. Instead of buying British (I think) stocks they sold (and heavily). Others watched what they did and sold as well. The Rothschilds then bought what the others had sold.

I have no way of knowing if this is true, but it is one of the many myths an investor picks up.

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4. bradpalm1 on April 30, 2009 1:13 PM writes...

Alright. Statistical evidence of extending the life expectancy of men with advanced prostate cancer an average of 4.1 months and good safety profile, but this warrants a market cap of $2.1 billion? I think this is more an example of the market saying thank goodness one of these biologics is finally working as advertised. The upcoming ASCO meetings in Orlando the end of May should provide solid data on ongoing clinical trials of treatments much more exciting than this.

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5. CMCguy on April 30, 2009 3:16 PM writes...

There is a interesting piece in Forbes that only mentions the spike in passing.

The article contains following: Philip Kantoff, head of prostate cancer treatment at the Dana-Farber Cancer Center in Boston, says he agreed with the FDA--even though he was leading the biggest study of Provenge

"I looked at those studies and said, 'This is really interesting, and it is not enough information for approval,' " says Kantoff. "I'm not surprised it didn't get through the FDA. I think there was insufficient information at that time to support its approval by the FDA."

He also goes on to say 'results provide "the necessary confirmation" of the earlier experiments, providing firm evidence that Provenge provides "an incremental benefit" to patients with prostate cancer that has spread and doesn't respond to hormone-blocking drugs.'

The story notes this still must be submitted to the FDA formally (although with having a SPA in place should help the pathway forward).

As Derek said in his May 2007 blog when dealing with pharma/biotech stocks "betting on FDA rulings is rubber-nose, midget-car, rainbow-wig clown territory. No matter how tempting it looks. . ."

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6. Market Hound on May 1, 2009 12:00 AM writes...

After decades of watching stocks I can tell you the spike was unusual in magnitude, though not in occurrence. Market makers are tasked with maintaining liquidity. If asymmetries arise in "Sell orders" to "buy orders" the market maker(s)(now a computer program), will attempt to rectify. Yes, I think there is ALWAYS a degree of hanky panky out there.

If you think the stock is going to the moon then burning all those with limit orders by opening below the trigger price is the way to wipe them out and give the shares to yourself or your good customers. Usually (but not always) there are several Market Makers (who take the spread between bid and ask), that are technically supposed to compete for orders and prevent this from happening.

I suggest you analyze what has occurred with Pharma and the economy in general to assess whether the markets are rigged. Market makers are also charged with buying and selling large blocks of stock for clients.

NOTE: The SEC was tipped off several times by former Madoff employees who said 'THIS GUY IS RUNNING A PONZI SCHEME!'

The SEC did nothing.

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