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How Wall Street Hoses Main Street

Written By Brian Hicks

Posted March 7, 2010

Welcome to the Wealth Daily Weekend Edition — our insights from the week in investing and links to our most-read Wealth Daily and sister publication articles.

"Sell! Sell! Sell!" shouted Mad Money man Jim Cramer in March 2007, advising thousands — if not millions — that an FDA advisory panel would vote Dendreon’s treatment unsafe and ineffective.

But what did he know?

The FDA voted unanimously that the drug was safe and very much effective the next day.

Of course, Cramer admitted to his mistake in confusing Provenge with Provaisic, a drug from the movies.

But this wasn’t the first time Cramer "made a mistake" with Dendreon… and it wouldn’t be the last.

It was September 2005 when Cramer announced news that Dendreon’s Provenge — a possible treatment for prostate cancer — was a flop. Here was a treatment that thousands of men were counting on… and Jim Cramer said the treatment was rejected by the FDA, that it’d never go to market. But Cramer had no idea what he was talking about…

Dendreon hadn’t even submitted an application for the FDA approval for Provenge. In fact, the drug was just making its way through Phase 3 clinical trials at the time. And anyone following Dendreon knew the chances for a favorable advisory panel review were good, as Phase 3 demonstrated that Provenge significantly increased patient survival with minimal side effects.

But in April 2009, Cramer announced "I don’t like Dendreon," shouting that it had no chance of FDA approval. Again, "Sell! Sell! Sell!"

This all transpired right before the underlying stock popped from about $6 to $25. (Options Trading Pit readers banked 338% when this stock ballooned.)

According to sources:*

On April 28, at 11:22 am — just hours before Dendreon’s triumph in Chicago — an anonymous message board author on Yahoo! Finance posted this message: "HIGH PROBABILITY OF MASSIVE BEAR RAID… DNDN [Dendreon] could easily drop 50% on a massive bear raid…it’s coming today@12:30 pm central."

Just minutes before 12:30 pm central, Dendreon’s stock price began to fall. It didn’t just fall it nosedived from $24 to under $8 … in 75 seconds. That’s correct, during a period of 75 seconds, more than 4,000 trades were placed, totaling 3 million shares, or about 50% of Dendreon’s (spectacularly high) average daily volume. Given that the message board poster knew what was coming, it is a safe bet that this was a coordinated, illegal naked short selling attack. And just in case you still didn’t get this — it caused Dendreon’s share price to lose more than 65% of its value — in just 75 seconds flat.


Who did it is anyone’s best guess. What we do know is that it wasn’t just the "trusted" Cramer making a mess of DNDN. Hedge funds, message board fanatics, naked short sellers — they were all over this stock.

But they couldn’t keep it down…

Look, we’re not talking about a magic formula here. But here was a drug that could fetch $2 billion a year; a treatment that, according to the company, lowered the risk of prostate cancer death by 22.5%, with little or no side effects.

But that’s not where the story ends…

More garbage rolled out against Dendreon this week, handing Options Trading Pit readers a quick one-day gain of about 68% on the long side.

Investors sent Dendreon (DNDN) down more than $2 Tuesday morning on news that Elliott Favus of Favus Institutional Research claimed 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.

(Note: 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?)

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?

Couldn’t be… Could it? For that, my friends, sounds something like outright stock manipulation…

And here’s something interesting we uncovered at

In April 2009, a few days before a Yahoo! message board poster predicted, almost to the minute, the"BEAR RAID" that shattered Dendreon’s stock price by 65% in 75 seconds, Lazard [Capital] put out a statement that said that an "investigator in the current Provenge study" had concluded that Dendreon’s treatment did not work. This was terrible news — assuming that the "investigator" was somebody actually participating in the "current Provenge study" or any other scientific study of Dendreon’s treatment.

But it turned out that Lazard had made "a mistake." When Dendreon supporters started hollering that there was no such "investigator," Lazard changed the statement to read that an "expert" had concluded that Provenge does not work. When Lazard was challenged to produce such an expert, it changed the message again. Now the expert wasn’t exactly saying that Dendreon’s prostate cancer treatment does not work. Instead, it was that Provenge was "mentioned cautiously" by this particular "expert," who remained anonymous.

Jim Cramer himself will tell you that stocks can be and are manipulated. In a 2006 interview, Cramer said "he regularly manipulated the market when he ran his hedge fund. He calls it "a fun game, and it’s a lucrative game." He suggests all hedge fund managers do the same. "No one else in the world would ever admit that, but I could care. I am not going to say it on TV," he quips in the video interview.

Infuriating, isn’t it? Even the FDA had been accused of ignoring conflicts of interest for two doctors from pro-Provenge groups.

And while there are similar, maddening stories involving Cramer, investors, hedge funds, and banks, we’re only pointing out some of the best stories — how some of Wall Street’s "most trusted" have hosed Main Street.

We believe DNDN to be a buy on dips ahead of the May 2010 PDUFA…

Just this past Wednesday, the company announced that Provenge "improved three-year survival of patients with advanced prostate cancer by 40 percent compared with a placebo. The results, based on just over three years of follow-up, confirm earlier 34-month data presented last year, which showed that the drug improved survival by 38 percent in men whose prostate cancer had stopped responding to hormone blockers. Patients in the 512-patient study who received Dendreon’s Provenge, also known as sipuleucel-T, lived an average of 4.1 months longer than those who were given a placebo."

And analysts believe that the drug has $1 billion potential in the first year and could pass $5 billion in sales after a few years.

This could be a huge stock… if it can survive the rumors and alleged manipulation.

What’s sad is that manipulation is part of Wall Street — it has been and will continue to be. We just wanted to point out a recent example of it, and show you why independent analysts like ourselves are the professionals you need to turn to for real market information.

We’re the only guys telling Main Street what’s really happening on Wall Street.

Stay Ahead of the Curve,

Ian L. Cooper
Wealth Daily

P.S. In case you missed any of the week’s top-read articles from Wealth Daily and our sister publications, you can catch up on them now…

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