Dendreon: Countdown to FDA (DNDN)

Dendreon’s short interest actually grew again in April from 26.4 million shares in March to 33.9 million shares.  The short interest was listed as 16.8 million shares in February.  That is almost infathomable if you consider that some short sellers probably were killed and crushed after being wrong for more than a 200% loss in the short sell.  So much for the rule of "Don’t fight the tape."

The company has a "by May 15th" date indicated by the FDA for the approval decision of Provenge for prostate cancer, and the options activity is still substantial along with the open interest.  Stock options in May expire on May 18, 2007.  Here is the open interest for the MAY CALLS and PUTS:

Call Strikes and Open Interest
10.00    49,014
12.50    22,349
15.00    49,225
17.50    41,927
20.00    56,825
22.50    16,594
25.00    44,336
30.00    28,548
35.00    11,915
Put Strikes and Open Interest
2.50    58,718
5.00    38,375
7.50    70,000
10.00    73,633
12.50    82,954
15.00    77,144
17.50    38,018
20.00    24,989
22.50    6,481
25.00    4,653
30.00    2,946
40.00    19,548

Just yesterday Forbes ran a piece showing a doctor’s efforts urging the FDA to delay the approval of Provenge.  The funny thing is that open interest for the JUNE Put and Call options is very small.  The interpretation of that would be that there is no expected delay in the review by speculators and investors. Literally only the JUne $20 Calls have an open interest with more than 1,000 contracts; all others are under 1,000 in the open interest. 

If you want to go back over what was said on March 29 after the FDA Panel Backing, here is a link to that call.

Here is how the stock has been trading this week:

Day            Close    Volume
April 26    $15.45    20,855,900   
April 25    $16.80    11,412,400   
April 24    $17.07    24,417,500   
April 23    $16.78    36,770,800

Shares have traded "only" 4 million shares today and are down 1.2% at $15.25 in late-morning trade.  You can expect a pick-up in the interest and trading on this probably starting at the end of next week.  The trading range on this one is amazing because its shares were as low as $3.57 a week or more before the FDA Panel backing, and shares traded up to $25.25 in the onslaught after the news went in their favor.   

The fact that insiders took some money off the table right after the panel backing is probably not a shock.  But investors who trade this stock need to keep in mind that the company does have an active shelf registration that would allow the company to sell what was up to $146.8 million in securities at the time and the company has already telegraphed that a) it would need to raise cash to further the sales and development of Provenge, and b) it would sell securities after the FDA decision.  The actual shelf registration denotes that only a portion of this will be equity sales.

Jon C. Ogg
April 27, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.