Dendreon (DNDN) Is Not Yet a 'Buy', But It's Getting Close
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Price: $4.01 --0%
Rating Summary:
5 Buy, 15 Hold, 12 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 17 | Down: 31 | New: 11
Rating Summary:
5 Buy, 15 Hold, 12 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 17 | Down: 31 | New: 11
Trade DNDN Now!
Investors might not believe it but something positive may be going on at Dendreon (NASDAQ: DNDN).
Baird analyst Christopher Raymond said he is getting "incrementally positive" on the stock after hosting management meetings in New York, although he is also quick to point out he is keeping his rating at Neutral.
With the stock down more than 60 percent since February, Provenge sales down sequentially, significant management turnover, and a still-outsized cost structure, it is understandable why investors have a distaste for Dendreon. However, according to Raymond, "we think management articulates a credible turnaround plan both on the revenue and expense lines."
The analyst cited three specific points on why he is feeling better about the stock:
First, he said near-term Provenge under-performance seems fixable,. "While our surveys have indicated some Zytiga impact, we think Provenge's June downtick was less related to ASCO's Zytiga pre-chemo data than with DNDN's own sales vacancies (~18% of territories end of Q212). Given the high-touch nature of this product we are not surprised vacant territories (-30% Q-Q) would see a drop-off. With the sales force back at full-strength, we do think a near-term rebound will do much to assuage concerns."
Second, he said MDVN's enzalutamide may help, not hurt Provenge. "Many have speculated two new therapies (Zytiga now, enzalutamide November 22) will relegate Provenge to niche-status in the chemo-naïve CRPC market. DNDN contends there is significant thought-leader excitement over running a large Provenge/enzalutamide combination trial, given enzalutamide's better combinability with Provenge (no co-administered steroid) and potential immunotherapeutic synergy (enzalutamide increases T-cell counts).
Third, he cites cost efficiency programs. "Beyond the already-announced restructuring (bringing COGS to 50%) significant opportunity exists around automation (at the hood and in release testing) which could bring COGS closer to 20-30% - a threshold we believe could make DNDN a more attractive take-out candidate."
As far as a possible upgrade of his rating, Raymond said he will look for tangible signs of revenue uptick before making such a move. Although he said "exposure to this name may be warranted here."
On valuation, he notes shares are trading at just 2X 2012E revenue.
Raymond is maintaining his Neutral rating and price target of $8.00.
For an analyst ratings summary and ratings history on Dendreon click here. For more ratings news on Dendreon click here.
Shares of Dendreon are up 2.9 percent to $4.95.
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Baird analyst Christopher Raymond said he is getting "incrementally positive" on the stock after hosting management meetings in New York, although he is also quick to point out he is keeping his rating at Neutral.
With the stock down more than 60 percent since February, Provenge sales down sequentially, significant management turnover, and a still-outsized cost structure, it is understandable why investors have a distaste for Dendreon. However, according to Raymond, "we think management articulates a credible turnaround plan both on the revenue and expense lines."
The analyst cited three specific points on why he is feeling better about the stock:
First, he said near-term Provenge under-performance seems fixable,. "While our surveys have indicated some Zytiga impact, we think Provenge's June downtick was less related to ASCO's Zytiga pre-chemo data than with DNDN's own sales vacancies (~18% of territories end of Q212). Given the high-touch nature of this product we are not surprised vacant territories (-30% Q-Q) would see a drop-off. With the sales force back at full-strength, we do think a near-term rebound will do much to assuage concerns."
Second, he said MDVN's enzalutamide may help, not hurt Provenge. "Many have speculated two new therapies (Zytiga now, enzalutamide November 22) will relegate Provenge to niche-status in the chemo-naïve CRPC market. DNDN contends there is significant thought-leader excitement over running a large Provenge/enzalutamide combination trial, given enzalutamide's better combinability with Provenge (no co-administered steroid) and potential immunotherapeutic synergy (enzalutamide increases T-cell counts).
Third, he cites cost efficiency programs. "Beyond the already-announced restructuring (bringing COGS to 50%) significant opportunity exists around automation (at the hood and in release testing) which could bring COGS closer to 20-30% - a threshold we believe could make DNDN a more attractive take-out candidate."
As far as a possible upgrade of his rating, Raymond said he will look for tangible signs of revenue uptick before making such a move. Although he said "exposure to this name may be warranted here."
On valuation, he notes shares are trading at just 2X 2012E revenue.
Raymond is maintaining his Neutral rating and price target of $8.00.
For an analyst ratings summary and ratings history on Dendreon click here. For more ratings news on Dendreon click here.
Shares of Dendreon are up 2.9 percent to $4.95.
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