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Dendreon's "Naked Shorts" Running For Cover?

Wednesday, 17 Sep 2008 | 3:15 PM ET
CNBC.com

Some readers will accuse me of finding any old excuse to write about Dendreon, which as I've blogged before always results in a spike in page views.

But on a day when nearly all of biopharma is under pressure again due to market forces, it's truly worth calling attention to the fact that volatile shares of DNDNare sustaining a decent-sized rally on much higher-than-normal volume.

About a third of the outstanding shares are sold short. In other words, they're held by investors who think the stock is going down. A couple of analysts I talked to think some of the shorts might have been spooked this morning when the SEC announced its crackdown on a certain type of short-seller provocatively known as "naked shorts."

Indeed, the shares spiked right around the time Jim Cramerwas on CNBC talking about the significance of the harsh new rules.

The only news today out of DNDN is that CEO Dr. Mitch Gold is going to present at the UBS Global Life Sciences Conference next Monday. His appearance comes just days or weeks ahead of the highly anticipated and controversial mid-term study results that DNDN says it'll release sometime next month.

This is the major clinical trial of the company's prostate cancer treatment Provenge. If enough men in the test live long enough, DNDN has said the Food and Drug Administration might approve the therapeutic vaccine based on the interim data. Otherwise, investors and patients will have to be patient at least until next year when the final results could come in.

The analysts I talked to say there will be trading days like this one as the DNDN D-day approaches and that the shares could continue to rally as more shorts take cover and other investors buy the stock outright on a bet the interim results might be good enough. I'm not aware of a single analyst who thinks they will be. So, as always, caveat emptor.

Questions? Comments? Pharma@cnbc.com

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