Dendreon Options Trading: Hope or Hearsay?

Dendreon (DNDN-NASDAQ) is trading up almost another 2% pre-market after Tuesday options activity had shares up $0.47 to close at $7.70 per share.  The shares actually hit as high as $8.30 on Tuesday, which would be the highest levels since July 11.  Tuesday’s close of $7.70 was the highest close since July 12.

Traders are said to be expecting some positive report on Provenge, although it should be noted that recent research brokerage reports have noted that Dendreon may now want to or need to seek a larger partner to help see Provenge through.  To date the company has taken the go-it-alone stance.  Here is the JULY Call Option trading activity from Tuesday:   

Strike        Volume  Open Interest
$5.00        11,152    7,348
$7.50        27,974    65,990
$10.00      34,559    68,613

There is an interesting piece on Biohealth Investor noting that Provenge’s blockage from the FDA may have been flawed in that the focus was on lack of tumor shrinkage rather than based on an increase in survival.  Here is the crux of the note:

As expected, shares of Dendreon jumped more than 6% on Tuesday on the study findings, and deservingly so….
Imaginecalling a clinical study a failure because the tumor size did notsignificantly decrease, yet the average survival rate of patientsincreased!… Is it not the survival of patients the real aim of medical treatment?… Provenge deserves a second hard look by the FDA, and Dendreon stock still has a lot of room to the upside; deservingly so.

The truth is that this remains a battleground stock.  You can find a number of critics and you can find a group of backers with nearly the same fervor, although a group of cancer patients and activists wanting and demanding FDA approval will probably be able to make more noise than critics. Until this stock has real news from inside or outside that directly pertains to Provenge and until the stock closes closer to intraday highs on ‘trading activity,’ we’d be more inclined to treat any vague or complex trading as reaction to hearsay rather than a story with real meat to it.

Jon C. Ogg
July 5, 2007

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