Well, it was a biotech and investing education while it lasted. Since 2003 I was invested in Dendreon. I bought my first shares of DNDN back when their cancer treatment, Provenge, was still in clinical trials. I hung on as long as I could, through the medical trials, the FDA approval process, the retrials, the second pass through the FDA, the approval, the trials of commerce, and finally the trials of finance. My investment served me well, but not as well as I’d hoped. The treatment is serving patients well, but not as many as it could and that has much more dire consequences.
Here’s a primer for those unfamiliar with Dendreon’s technology.
Dendreon has a process that teaches the patient’s immune system to fight a cancer it was ignoring. The technique pulls a molecule from a sample of the patient’s blood, attaches it to another molecule that the immune system recognizes, and then the combined molecules are injected back into the patient. A few days or weeks later the immune system may begin fighting the cancer. The treatment, Provenge, has been approved for prostate cancer. In use it is more effective than the standard treatments, has few side effects, and costs less. The cost is high, but the cumulative cost is lower. The side effects exist, but they are like getting the flu for three days in contrast to the effects of chemo and radiation. The effectiveness was only a few months based on the clinical trial data, but the more it is used the better the survival data looks. (A longer description is in a previous post, “Wrong About Dendreon“.)
Hard work and good results are supposed to be enough. I hear a lot of that in the political debates. Dendreon’s experience and my own experience make me scoff when I hear that. I’d probably cuss and curse, but I don’t use language like that so I just scoff, vigorously. You may think my scoffing is comical, but the consequence is that one more person loses faith in our political, financial, and health care systems.
Dendreon is not doing as well as I had hoped, but simply by achieving FDA approval they greatly distanced the company from my worst fears. For the patients that respond to the treatment, the company is greatly improving their lives. In a reasonable world, the company’s treatment would have been judged effective enough the first time they went to the FDA. (From some points of view that was the case, and conspiracy theorists have a lot of evidence to play with through that episode.) In that better version of history, the company would be making hundreds of millions of dollars (which they are) and become profitable enough to extend the treatment to other cancers. (Which they are, but only bladder cancer after a great delay, while the other candidates are shelved for lack of funds: lung, renal, colo-rectal, ovarian, breast, etc.) This would have revolutionized the multi-billion dollar cancer industry and become the D-Day invasion of the decades-long War On Cancer.
Oh well. So much for a reasonable world.
I’ve followed Dendreon because my investment strategy is based on Long Term Buy and Hold (LTBH) of small cap companies (< $2B market cap) that are on the cusp of profitability with disruptive goods and services. I’ve been investing since 1976, have tried many investing styles, and found that is the one that worked for me. It even allowed me to retire at 38. (Details in my book: Dream. Invest. Live.) I’m also a fan of diversification and rarely relied on only one stock. Even now I have a diversified portfolio, but it has the worst string of luck and bad timing I’ve ever experienced. (Details through this blog since August 2011, “Triple Whammy“, and summarized and updated in “Semi Annual Exercise Mid 2012“.)
Hard work and good results are supposed to be enough. That should be true for Dendreon, and it should be true for me. It should be true for any of us. If it was true for Dendreon they would’ve only had to go through the approval process once. Tens of thousands of lives would have been improved. If it was true for DNDN, the company would’ve been able to fill the pipeline and I would’ve continued my retirement. Unfortunately, DNDN’s price/sales ratio is less than two. That’s appropriate for a stodgy, mature industry with no future for growth, not an innovator that is a major breakthrough in a massive industry with a large unmet and vital need.
Unfortunately, life isn’t fair; or if it is fair, the fairness is currently hidden. What goes around comes around, but can someone give the schedule for that route? If the work and success are eventually rewarded, that is good, but in the meantime there are casualties and consequences that are irreversible. I’ve benefited as a stockholder, but today I sold my last shares because I must pay bills. Maybe my finances will recover some other way. Others who won’t get the opportunity to benefit from Dendreon’s technology may, well, may suffer the ultimate consequence.
I’ve paid my bills by selling shares of DNDN for the last three years. Yes, I had a lot of shares; but, living a frugal life also helps a lot. (Disclosure: I am Board Secretary for New Road Map Foundation.) But as most business consultants know, cutting costs is not enough; revenue must be made and growth is desirable. I sympathize with Dendreon’s long term employees. Hard work and good results haven’t been enough for them. Layoffs happen. Hard work and good results haven’t been good enough for me. Behind Plan A, which was my diversified portfolio, is Plan B, which is my consulting and art business, which isn’t doing well enough yet, so I am also working on Plan C, which is looking for a job (My Jobs Report Month 13), which has been unsuccessful, which is backed by Plan D, which is selling my house (Home For Sale Alas), which hasn’t had an offer despite being on the market since May.
The stock markets are up. Unemployment is down. Yet, witnessing Dendreon’s trials and experiencing my own turmoils have taught me that generalizations, abstractions, and theories don’t describe reality. Pundits and politicians debate, but imperfections, oversights, and injustices have real consequences that can be irreversible. A resurgent DNDN can not make my portfolio recover unless someone gives me shares. Allow me to repeat a passage from an earlier post (Wrong About Dendreon);
“In response to a question about the stock price, the CEO noted that no one else in the room wanted the price to go higher than he did. I almost said something out loud, but then remembered the rules for expulsion. In large part because of DNDN’s collapse I have been looking for a job (see My Jobs Report Month 9), am having to sell my house (see Home For Sale Alas), and have never had more uncertainty in my life (see Too Many IFs). I contend that he is not having to sell his house to find money for living expenses, is not looking for a job, and has not had to sell off 66% of his shares and most of an IRA in the interim. I strongly suspect that returning DNDN to $60 would have a much greater affect on my life than it would on his.“
That 66% sell off is now 100%. The worse consequence is that lives Dendreon that could have been extended were lost. Small businesses are a great opportunity for investors and a great resource for our country, but if their hard work and good results are no longer enough, then we are poorer and weaker. I have no more DNDN and wonder how I’ll get by because the other small companies aren’t doing better either. If we discourage such innovative small companies I wonder how the country will get by. What would we do if there was no more Dendreon?