set of existing data. Short-sellers, who intend to profit on a falling stock price, placed huge bets with millions of shares that said Dendreon was bound to fail.
By March 2007, the FDA, as it often does with new drugs, sought the advice from an expert panel of cancer physicians, statisticians, and immunologists on whether to approve the drug.
This hearing-which I covered live from a hotel in suburban Washington D.C.—was a riveting drama. After panelists debated the effectiveness of the drug for an afternoon, with analysts on the edge of their seats in suspense, the panel voted 13-4 in Dendreon’s favor that Provenge demonstrated “substantial evidence of effectiveness” and 17-0 that it was safe. One panelist from the National Cancer Institute told me after the meeting that he voted in favor, partly because he was hopeful this would spark a new day in immune therapy research.
Since the FDA almost always follows the advice of its expert panels, investors wagered that Dendreon had actually achieved the impossible. Its stock boomed from $5.22 before the panel to close at $12.93 the day after this vote, as 92 million shares changed hands that day. This little company from Seattle, without a product on the market yet, was the most active stock in the entire NASDAQ that day, with even more activity than Microsoft or Cisco Systems.
But there were even more plot twists to come. The four members of the advisory committee who voted no apparently felt strongly that the panel had made a mistake that could set a dangerous precedent for the FDA, essentially lowering the required standards for approval. Letters from two of these panelists, Maha Hussain of the University of Michigan and Howard Scher of Memorial Sloan-Kettering Cancer Center in New York, were eventually published in The Cancer Letter, a trade publication.
The market essentially blew this off as a minor academic dust-up for a while, as Dendreon shares reached a peak of more than $24 a share, making it briefly worth more than $1 billion in market value. During this extraordinary run-up, many people chose to sell their shares at a high point-including a few Dendreon board members and CEO Mitchell Gold. (The Dendreon CEO sold 202,090 shares on April 2, 2007, at $13.46 apiece, for gross proceeds of $2.7 million, according to this filing with the SEC.)
Nobody seemed to mind much if Gold or the Dendreon directors made some money. After all, so were a lot of other people. I heard stories of low-paid nurses in Seattle-not the usual biotech investors-buzzing to all their friends about how they made a bundle on Dendreon stock.
Then came a bombshell.
Before markets opened on May 9, 2007, Dendreon announced the FDA had turned down its application. Regulators demanded the company produce more evidence from the ongoing clinical trial of 500 men, designed from the outset to answer the question of whether the treatment can prolong lives. This meant Dendreon would have to wait another two years, at least, to achieve its dream
