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Dendreon Perfect Storm
NB: This is an object lesson, not a recommendation.
Today DNDN traded at 25 and released such good news on a potential blockbuster prostate cancer drug that its shares collapsed to $7.50 and then halted trading.
Whoa – What happened?
This is a good example of buying the rumour and selling the news. It is also a good argument for consulting informed experience rather than reacting to headlines. It is further proof of the value knowing what we are doing in the markets before we do it.
DNDN stock went from $2.55 on 9 March 2009, to 25 today, almost a tenfold 1000% move in less than 7 weeks.
DNDN was a speculator’s dream and an uninformed investor’s nightmare.
DNDN offers the compelling case for investigating before we invest and using trailing Stop Sell Order seat belts to protect money and profits.
A public Dendreon news story follows. Herewith our object lesson:
Dendreon’s biotechnology business plan is to discover, develop, and commercialize novel therapeutics that harness the immune system to fight cancer. This is a very crowded field with mixed results.
Most three phase clinical double blind random drug trials end in failure.
Seven weeks ago Dendreon was a $300 M company with 380 shareholders, $102 million in cash and an annual loss of $70 million. The earliest it might have earnings was at least a year away if DNFDN obtains FDA approval for what could be a blockbuster drug.
Like many other Drug R&D companies, DNDN did have a drug in trials with a killer name: Provenge.
Two years ago in March 2007 a panel of FDA experts voted 13 to 4 that DNDN’s drug was effective. DNDN soared to 25.25 from 3.57 in three weeks.
