Macro Tsimmis

intelligently hedged investment

Dendreon (DNDN) update #4

Posted by intelledgement on Wed, 28 Mar 07

OK, let’s review the bidding. We have 248 shares of DNDN purchased 10 January at $4.01 that have been as high as $5.35 and closed yesterday at $4.62. We have nine UKODA ($5 Apr calls) purchased 9 March at $1.05 that have been as high as $1.65 and are presently worth $1.10. And we have five UKOPA ($5 Apr puts) purchased 9 March at $2 that have been as high as $2.25 but which are presently worth $1.75. So our total cost counting commissions is $3,068 ($2,066 for just the options) and the total present value of the DNDN positions is $3,121 ($1,975 for the options).

DNDN closed yesterday up eight cents on a muted reaction to the release of the Briefings documents, which were posted on the FDA website. As expected the FDA staff noted that Provenge failed to meet the primary endpoint (time to progression) of their major Phase 3 study—meaning Provenge infusions failed to significantly slow the progression of tumor growth within set time parameters—but that conversely there was a statistically significant survival benefit for Provenge patients over placebo patients.

The one new piece of data was that Provenge patients suffered a 3.9% incidence of strokes compared with a 2.6% rate among the placebo patients. Up to now, the consensus was that the toxicity of the treatment was negligible, so this is obviously a net negative, although it appears not to constitute a major issue.

Basically, we are looking for a panel recommendation on Thursday to reject Provenge by any vote (which should tank the stock and cause the value of our puts to soar) or a lopsided vote to approve (10-5 or better should create the expectation of likely approval by the FDA by 15 May which would at least double the price of the stock and cause the value of our calls to soar). A narrow vote to recommend approval is apt to maintain the status quo: sustained suspense leading up to the FDA ruling. In this event, the stock is not likely to move much in either direction and we will cash our options in at a loss. If the vote  is negative, we will probably sell our stock at a loss as it will be dead money for two or three years—pending the outcome of the third Phase 3 study, presently enrolling—should the FDA reject Provenge; if the vote is positive, we will hold the stock at least through the FDA decision due by 15 May.

We expect trading of the stock and options to be halted tomorrow, the day of the advisory committee hearing. But likely the volume Friday will make up for the day off.  🙂

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