Another Biotech Bomb

Dendreon shares plummeted 60 percent on Wednesday after the company's experimental cancer drug met with a hesitant reaction from the Food & Drug Administration.

The stock was off more than 60 percent to $6.86 in afternoon trading. The company's market capitalization fell to $571 million, down from a high of $2.1 billion just a month ago, when the stock was at its six and a half-year high.

Provenge, a pioneering prostate cancer vaccine, is the biotech company's only drug to date. The Wall Street Journal reports that the therapy, if approved, could be worth $1 billion in global sales.

The F.D.A. has not ruled out approval; the future of the drug depends on what the regulator makes of additional information requested on the drug's efficacy. However, the outcome of the meeting came as a surprise after an F.D.A. panel recommended approval last month by a margin of 13-4.

Dendreon's stock doubled in a single day after that earlier recommendation, and had increased its value by five times since then. The surge seems to reflect optimism about the treatment, but heavy short selling also shows that many were skeptical regarding approval.

Reuters reports that short sales of the stock have climbed to 33.9 million in April. As of March, nearly 33 percent of outstanding shares were sold short.

The debate surrounding Provenge centers on the fact that although it yielded relatively minor side effects in trials, it failed to meet its primary goal of reducing the advancement of cancer. The small size of clinical trials to date was also of concern to the F.D.A.

Dendreon's news should also raise flags for the other companies relying on single drug pipelines, specifically those developing cancer immunotherapy treatments like Provenge.

Stock in those companies -- such as Cell Genesys and Antigenics -- that benefited from the F.D.A. panel recommendation that Dendreon received in March and have already retreated on the F.D.A.'s latest news.

by Liz Gunnison