"Dendreon Approaching End Of Road, While Other Immunotherapies Thrive
August 1, 2012 | 18 commentsby: Amy Baldwin | about: DNDN, includes: GALE After announcing quarterly earnings, Dendreon Corporation (DNDN) has solidified its position as the dog of the market. As already-lowered expectations have been drastically cut, the company still can't reach the most reasonable of goals. In the process of its fall, there are other stocks that have felt the pain of an association with Dendreon's cancer vaccine platform. During this specific quarter, the company feeling an undue amount due to its association is Galena Biopharma (GALE), which is a small Phase 3 biotechnology company focusing on a vaccine to prevent the recurrence of breast cancer. However, what's interesting is that these two companies have very few similarities, and few connections other than both trading in the biotechnology space. Thus it raises a few questions when investors sell Galena stock because of weakness in Dendreon's earnings, seeing as how it is a weak association.
In the market when a company announces bad earnings, lowers guidance, or announces a major restructuring plan (such as Dendreon), it usually creates some weakness within its sector. Yet, besides the immunotherapy connection, Galena and Dendreon have no partnerships, market share, or catalysts that involve the other. That is why the pullback in shares of Galena is a bit of a head-scratcher, as Dendreon is on an exclusive list as being one of the worst performers of the last 12 months, and appears to face several problems in the months that lie ahead. Meanwhile, Galena has been a momentum play of 2012, returning over 250% YTD, thanks to strong clinical data for a large market indication, the issuance of patents, and upside potential that far outweighs its current valuation. Hence, these two stocks that were seemingly connected on Tuesday show all the characteristics of two companies on completely different long-term paths.
Let's face it: Dendreon's ride may be over. The company is cutting 40% of its workforce, it can't meet earnings expectations, it has lost the support of investors, and the logistics of Provenge make it near impossible for the company to achieve profitability. The COGS for Dendreon is what the company hopes to improve by cutting 600 jobs and closing its facilities in New Jersey, as COGS between 50% and 75% will not lead to profitability. With Provenge having a short shelf life once manufactured, requiring several blood draws, and having an off-the-shelf product cost of nearly $20,000, I don't see how the company could possibly achieve profitability at any point in the near future."
