And expectations aside, there were two other underlying problems with Provenge that caused those disappointing sales: (1) it’s ridiculously expensive, and (2) when it’s all said and done [and bear in mind a cancer patient may not see things from the same perspective], the drug only extended a patient’s life by a little more than four months, on average.
In other words, Dendreon isn’t nearly as bullet-proof or well-positioned as first touted.
As ugly as the reality is, Dendreon isn’t dead in the water and the stock isn’t something you should necessarily steer clear of now, for a couple of reasons. In no certain order:
- The stock’s 90%+ drubbing since early 2011 has pretty much “right-sized” the company relative to Provenge’s trailing and potential revenue. The company’s current market cap is $531 million, which is in-line with the market norm for company’s generating $200 million in annual sales. While sales may shrink this year, the fact that Provenge is supported by insurers suggests at least some revenue is there for the taking.
- Dendreon has other drugs in the pipeline — three in all. It’s also aiming to add to the number of indications Provenge is approved to treat. Each of these developments could add significant revenue. Not all the take-aways are company specific, however. A couple of broad investing lessons are also packed into this story.
- Just like you would never bet your entire portfolio on one stock, investors can’t afford to be blind about the risks of owning a company with only one marketable product. That’s especially true when that product is a drug as hyped up as much as Provenge was then.
- Riding out a habitual loser is the cardinal sin of trading. DNDN gave shareholders plenty of warning of catastrophic losses, and plenty of chances to bail out at a loss that was much smaller than 90%. Granted, the one day move from 2011’s peak around $40 to $13 was a big, impossible-to-evade whack. The deterioration from there to the current price of $3.37, however, took two more years. Yet some stuck with it the whole time.
Neither of those last two lessons are new ideas … but both are too easy to forget in the heat of the moment.
In the meantime, given how the stock’s been completely shattered, now may be a decent time to go bargain shopping. Just don’t get married to it.
As of this writing, James Brumley did not hold a position in any of the aforementioned securities.