A.G.Edwards has initiated the recently volatile and controversial Dendreon (DNDN-NASDAQ) with a Hold/Speculative rating.  The summary points are that it is starting the biotech as a Hold rated stock for Speculative investors. 

It sees significant risks surrounding the May 15th PDUFA action date for Provenge for prostate cancer.  This notes that Provenge was the subject of a recent panel meeting where committee members voted unanimously on the Safety and 13-4 on the Efficacy of Provenge. 

A.G.Edwards notes that beyond a positive panel vote, there may be political forces within the Center for Biologics Evaluation and Research that increases the odds of Provenge being approved.  It notes that, however, given that Provenge failed to achieve primary or secondary endpoints in either Phase II trial and that the primary statistical analysis for comparing overall survival was not pre-specified.  A.G.Edwards believes that additional confirmatory data may be required by the agency.  After surveying 16 oncologists and 14 urologists, the brokerage firm found that oncologists were mixed 50%/50% on whether Provenge should be approved and that urologists favored approval 71.4% to 28.6%.

The A.G.Edwards’ summary ends with "Nevertheless we recommend that investors stay on the sidelines."

Furthermore it notes that Dendreon is not profitable and is not expected to be profitable until 2011.  A.G.Edwards notes that an "Approvable Letter" and request for more data could be an outcome of the PDUFA, but also notes the flipside that the agency would be viewed as not looking out for the interest of patients’ best interest if they hold this up.  That’s a coin toss there.

It is worth noting that Needham reiterated their Buy rating with a $22.00 target, and that was what energized the shares today.  Shares of Dendreon (DNDN-NASDAQ) closed up 6.3% at $17.20 in regular trading.  Remember that two analysts can look at the exact same data and take away opposite opinions, and that appears no different here.

As far as looking at options for any direction, a MAY08 $17.50 Straddle (own Put and Call) to play volatility would cost you $10.30 based upon last look at the end of the day.   Here is what we noted just last week on this one, and it has links to several prior issues as well.

Jon C. Ogg
May 2, 2007

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

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