On the heels of Dendreon's (DNDN) first quarter earnings announcement on Monday that was - for the most part - in line with expectations, DNDN shares spiraled downward throughout the trading day on Tuesday and closed twenty five percent lower than the previous day's closing price. The quick drop returned shares right back to near the bottom of the stock's trading range over the past few quarters and dampered the expectations of investors looking for a revival of the 'Golden Age' of Dendreon that would ignite another price run and possibly challenge the $40 levels seen shortly after the FDA's approval of Provenge a couple of years back.
The first quarter saw Provenge sales rise by over six percent from the previous quarter, for a total of $82 million in revenue. In line with the revenue growth were the stated expectations by company officials that growth would continue in the low to mid single digits for the foreseeable future. That combination of news may have shaken investors who were banking on a surprise flush of earnings strength or revised guidance to the plus side, but in reality the numbers were not too far off from the general consensus of street estimations and were certainly not disappointing enough to justify a twenty five percent decline in share price.
Emphasis circulating in the headlines has stressed Dendreon's losses for the quarter of $103.9 million, or 70 cents per share, but again - those numbers are not too far off from what analysts expected beforehand.
The more likely cause for the quick drop in price than the numbers that were released in conjunction with earnings is the fact that today's volatile markets has stocks such as this one playing in a trading range that benefits those looking to get in and out, even if the committed longs are willing to hold through the storm.
DNDN's return to over the eleven dollar mark from below nine also came quick last month, allowing for some nice short term gains, but no news or expectations justified that rise - just like the first quarter numbers being in line with estimates did not justify the drop.
While the drop may have investors uneasy about playing the Dendreon game anymore, the truth is another buying opportunity may have opened up because - as we've seen many times since the company's historic drop last summer when the first round of revised guidance was issued - just as easily and quickly as a move south materializes, another move north could be in the works.
Such is the result of playing in a volatile market.
Ancillary news reported by the company was positive enough to believe that an all-out Dendreon recovery can take place. The key factors behind slumping Provenge sales after the commercial launch was the price of treatment and the expected time waiting for reimbursement. While the price factor cannot be alleviated, the time for reimbursement has been, as noted by the sub-30 day wait period announced in conjunction with the earnings report. Given the high price of treatment, a quicker reimbursement time will have Doctors more inclined to prescribe Provenge knowing that the 'out of pocked' period won't be all that long.
The sailing is not all clear, as market competition and other factors continue to slow Dendreon's forward moves, but actions are being taken to improve margins and keep costs under control while Provenge gains steam in the market.
Cancer immunotherapy is still the likely 'next generation' of cancer treatment and Dendreon is still considered the grand-daddy in the sub-sector, so the over-emphasized dip this week should, in my opinion, have investors considering getting in, rather than getting out.
Disclosure: No position, but may initiate a position within the next 72 hours.
Disclosure: No position, but may initiate a position within the next 72 hours.
Contact VFC's Stock House: vfc@vfcsstockhouse.com
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