Friday, August 15, 2014

Inovio, Dendreon, and Mylan

I made two trades this week. I sold Dendreon (DNDN) and bought Mylan (MYL).

Before explaining the trades, I'd like to direct you to my newest Seeking Alpha article, just published:

Will Inovio's Deal With Roche Lead To A Cancer Blockbuster?

The article includes some data from Dendreon, as the target disease is now castrate-resistant prostate cancer. Since Roche is paying for the trials and also paying Inovio milestone payments, the risk is not very high for Inovio (INO), though the payoff will also be less if the therapy ever reaches commercialization, just a royalty. I own Inovio stock.

Dendreon? What can I say? I first bought Dendreon stock in 2005. I made a good return when it ran up to bubble levels, and sold most but not all of it at a great profit in 2010. I started accumulating it again in 2011. I sold all my stock for a paltry $1.40 a share on Tuesday. Wish I had sold on Monday. So what happened?

Rather than following the normal course of issuing a press release giving the date Q2 results would be reported, along with the time of the analyst conference, Dendreon simply issued a 10-Q to the SEC late on Monday. They did not even issue a press release saying they issued a 10-Q. So naturally everyone went and looked at the 10-Q as soon as they found out. With a suspicious eye.

In many ways Q2 2014 was Dendreon's best quarter ever. But even with an insurance refund, improved Provenge sales, and further cost reductions, they lost money in the quarter.

Dendreon owes about $600 million due in 2016. They warned that saving the company likely means the note holders will get the company, leaving the stockholders out in the cold. They apparently have lost faith that even with the addition of European sales in 2015 that the company can generate enough cash to convince someone to refinance the loan.

Well, it happens sometimes. That is why corporate bonds are safer than stock. But the bondholders may find that they have a black hole to manage, not a profit stream. On the other hand, a merger, or better than expected cash flow between now and 2016, could save the stockholders. I sold because I had better use for even the pittance I got at $1.40 per share.

So what did I do with the cash? I thought about sitting on it, and all the companies that I find attractive, both in my portfolio and out. I bought more Mylan (MYL), a generic drug maker. My best guess is Mylan's stock price will double by the end of 2015, but as Dendreon shows, I could be wrong.

Meanwhile, I cheer myself up with some stocks I remain right about: Gilead, Celgene, Amgen, Biogen, and Applied Materials.

More than ever:

Keep Diversified!