As Walldiver pointed out, there is a lot of evidence that the growing hedge fund strategy of going short developmental biotechs (especially one in an area with no approved drugs) has led to a huge misinformation campaign that has successfully held down the price of the stock. I don’t understand all of the trading nuances to know how badly they will get burned if they get burned at all on 3/29, but it really has been a concerted effort. To summarize it I’ve borrowed a Walldiver post, which was inspired by a David Miller post, and updated it with the latest info and some thoughts.
(From Walldiver/Miller)
<<The huge jump in short interest occurred after the limited release of the 9901 results in late October 2004. The initial argument was that DNDN mgmt was lying about the results. Then in early December, the argument became "a few patients in the Gleason 7 or less subgroup lived a long time."…the UBS analyst was incorrect concerning the Gleason score imbalance. There was actually a greater relative benefit for Gleason 8 and 9 patients. Of course, everyone familiar with advanced prostate cancer already knew that UBS was wrong about the issue of soft tissue mets vs. bony mets. The presence of bone metastases indicates MORE advanced PC, not less, especially when those soft tissue mets are not present in the viscera. This means that the Provenge arm had a tougher set of patients than the placebo arm, and still showed a stat sig survival benefit.After the ASCO presentation, it has become "9902A will not be stat sig, so DNDN won't file the BLA." If DNDN files the BLA after supportive but non-stat sig 9902A survival data is announced, then it will be "FDA won't allow pooled data, and the trials failed the primary endpoint, and 9902A was not stat sig." If DNDN files the BLA after stat sig 9902A survival data is announced, the bear argument will be "trial size too small, and the trials failed primary endpoint.">>
This is exactly what has happened, and the argument continued with announcement of the panel. When the announcement was made that the Cell Tissue and Gene Therapy committee would be the advisory committee to which Provenge would be presented, the stock went over $5 a share. It has since dropped a dollar, partly due to the quotes by Jonathon Aschoff of Brean Murray Carret that were picked up by every news service that covered the story.
From AP: “Aschoff reasoned that Dendreon's application relies on two clinical trials that didn't meet their primary endpoints.”
Jonathon Aschoff knows that it is the supportiveness of 9902a, not the primary endpoint argument, that is the only thing that might derail approval, but he also knows that that is a little harder to understand in a soundbite than “missed primary endpoint.” For a glimpse into Aschoff’s moral compass, consider this from a Wall Street Journal article exposing Achoff as the doctor-impersonator Dr. Rosen(Rosen).
“He acknowledges lying about being a doctor but says it was for the greater good of unearthing the truth….Mr. Aschoff says he won't misrepresent himself in the future because ‘it's not appropriate for an NYSE-certified firm.’” Notice it doesn’t say that he sees unethical about it.
There has now been about a dozen instances in the past year and half that good news has been followed by comments from these analysts that has driven the stock down. Back to Walldiver/Miller for how this will likely continue to play out….
<<If the FDA approves Provenge, it will be "DNDN has to spend a lot of money for sales force, there will be losses for years, and doctors will use Taxotere instead." If Provenge sales take off at the expense of Taxotere, the shorts will say "competition is on the horizon.">>
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