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Dendreon Looks Like a Buy After Meltdown

Plus, the stock's slide sheds light on important investing lessons

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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.

The Takeaways

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:

  1. 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.
  2. 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.
  3. 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.
  4. 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.

Article printed from InvestorPlace Media,

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