How Dendreon's Good News Could Spread Around Biotech (DNDN, HGSI, IBB, FBT)

Dendreon Corporation (NASDAQ: DNDN) is living up to something we showed late in December.  It was one of the Top Biotech Upside Stocks for 2012 by Wall Street Analysts.  Now, the question is whether the analysts were even too cautious. While the stories are very different, this could be very good for Human Genome Sciences Inc. (NASDAQ: HGSI) as well since it was named as a stock which could double.

Today’s news is driving the iShares NASDAQ Biotechnology (NASDAQ: IBB) and First Trust NYSE Arca Biotech Index (NYSE: FBT) higher as well.  This is a case where the tails can really wag the dogs.

On December 28, 2011 we showed Dendreon being on of the highest upside stocks with over 45% implied upside.  It was another implosion story due to lower adoption rates of PROVENGE for prostate cancer, although some are hoping and expecting that the new reimbursement rates (and physician clarity) may help the company regain some of its lost footing.  Today’s guidance from the company is showing that is the case.

Shares were at $7.58 when it was highlighted and now shares are up 40% in a single day at $10.65.  That $11.05 consensus price target is likely to be far higher by the middle of next week after analysts change their estimates. To show just how bad this one has gone, the 52-week trading range is $6.46 to $43.96.

Human Genome Sciences Inc. (NASDAQ: HGSI) is up almost 9% on the day as investors are hoping for some of the same.  While lupus is far different from prostate cancer, the pattern and disappointment has been much of the same.  At $7.65, its 52-week trading range is $6.51 to $30.15.

While the broad markets are lower today, the biotech sector is up on this news. The iShares NASDAQ Biotechnology (NASDAQ: IBB) is up 0.9% at $105.83 and First Trust NYSE Arca Biotech Index (NYSE: FBT) is up 2.7% at $33.73.

JON C. OGG