DNDN Outlook for next week

Let’s recap on Fundamentals and Technical of DNDN

Fundamentals

DNDN upside from here

As evidenced by the prostate cancer patient advocacy groups at the March 29 Cellular, Tissue, & Gene Therapy Advisory Committee as well as by physicians interviewed on every media outlet in the recent days, the demand for Provenge seems to be very high right off the bat, so assuming a 65% penetration rate 3 years after approval could be a fair assumption here.

Peak revenues (US market): 65% x 50,000 * $45,000 = $1.462 billion

Discount the peak revenue by 12.5% per year for 3 years and one arrives at $1.0 billion.


Biotechs with promising pipelines typically trade at 7 to 20 price/sales, so by taking the low end of the above range we can conservatively assume that after Provenge's approval, the price per share of Dendreon will eventually reflect a market cap of at least $7 billion.


DNDN has 82 million shares outstanding, ~$100 million in cash as of 3/31, and can sell up to $200 million worth of its common stock on its current shelf. Assuming another dilution round (possibly as part of a RoW partnership deal), another 10-15 million shares could then be added to the float for a total of around 100 million shares.

Hence, a price per share of $70 within several months post approval is not out of the question.

Based on its current price per share of around $19
, one could easily argue that DNDN's share price is much undervalued, considering that Provenge is highly likely to be approved by May 15. The FDA usually follows the recommendation of its Advisory Committees, and especially so when the indication is a terminal one and the advisory panel has recommended that the therapy is both safe and substantially effective. Thursday’s CTGTAC voted 17 to 0 that Provenge was safe and 13 to 4 that it showed substantial evidence of efficacy.

My views

On top of the above, there is about “41% of short interest” that could double or triple DNDN share price from here.

Technical Analysis

DNDN share price keep on rising from May 1 to May 4, four days rally in anticipating May 15 approval. It was normal for traders to lock their gains on Friday after decent increase in DNDN share price last week. There could be profit taking in early AM Monday and the share price will gradually rise in the afternoon trade.

Consolidation in uptrend stock is the opportunity for traders and investors to buy on weakness upon market open on Monday. The rally will continue until next Friday. This is the type of trade that promise one to make a huge gains in one stock, build up capital and confidence, and also the beginning of the new era as a successful trader.

See latest chart attached
.