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Dendreon: A Future Buyout Candidate?

Written By Brian Hicks

Posted March 2, 2010

You’ve got to love the rumor mills… especially the fake ones that seem to manipulate stock prices.

While we don’t have evidence of outright manipulation, it sure smells of it.

Investors sent Dendreon (DNDN) down more than $2 this morning on news that Elliott Favus of Favus Institutional Research claimed that his group had been in contact with doctors who were “contacted to participate in an advisory review for Provenge,” one of the most watched treatments in front of the FDA today.

You see biotech investors don’t like outside FDA panels. They can translate into delays and drug uncertainty, which no one needs with Dendreon right now.

And you’d think any responsible journalist would’ve fact-checked an obvious rumor… Not only did the FDA discount the news, the company said it was news to the company and they hadn’t been told to expect any new advisory panel reviews of Provenge.

It’s odd, though… I can no longer find the original article. Seems it was pulled and replaced… I won’t name the site, though. I wouldn’t want to embarrass Cramer or any of his staff.

But I do wonder: Did the journalist even think of checking the facts, as most professionals do? Did he verify the information? Was Dendreon called to verify? If these things had happened, the journalist would have come across as fair and honest, and some one that does some due diligence.  Is that too much too ask?

But maybe the traders involved wanted a cheaper part of the action before the company presents updated data from its Phase III Provenge study at the ASCO Genitourinary Cancers Symposium? Or before the May 2010 PDUFA?

Nah… couldn’t be… That’d be outright stock manipulation. Too bad the SEC is asleep at the wheel…

But with all of this behind the company, could Dendreon be in line for a buyout? It’s just speculation on our part, but feasible. Here’s a company that can reportedly help men with terminal forms of prostate cancer, with minimal side effects. Why wouldn’t a bigger company want a piece of a potential multi-billion dollar treatment?

For all we know, other companies may be waiting on a May 1, 2001 FDA decision. The data has been nothing short of amazing and the FDA, which has rejected the approval of Provenge, is now expected to give the thumbs up for approval. Though, nothing is guaranteed. But we still believe the near-term reward far outweighs the risk.

Options Trading Pit, for one, just bought DNDN calls yesterday on spikes into this week’s ASCO meeting… And we’ve already banked a one-day gain of about 68%.