Analyst says Dendreon recommendation "worst" of career, apologizes

Wed Mar 6, 2013 12:25pm EST

(Reuters) - Wall Street analysts aren't known to apologize for giving bad advice on stocks, much less admit they've made the worst call of their entire careers.

But that's exactly what happened on Wednesday, when a well-known biotechnology industry analyst apologized for getting it wrong on Dendreon Corp DNDN.O, after the company's latest caution on sales of the prostate cancer drug Provenge.

In a research note to announce that he was downgrading Dendreon shares to "hold" from "buy," ISI Group analyst Mark Schoenebaum added an apology - set off in stand-out red type - in which he agonized about giving clients a bum steer.

"Clearly this stock has not been a good call for me over the past about two years. In fact, it's been the worst call of my 13 year career - by far," Schoenebaum wrote.

"We all make mistakes, but this mistake bothers me more than all others since, in retrospect, I really did have all the information in front of me I needed in 2011 to be suspicious of eventual Provenge uptake," he continued. "But, alas, for reasons that will forever elude and haunt me, I missed it. And, for this, I apologize."

He was not immediately available for further comment.

Provenge, which is complicated to manufacture and administer, is tailored to each individual patient and works by stimulating the immune system to fight cancer. It costs more than $90,000 per patient and extended the life of advanced prostate cancer patients by about 4 months in clinical trials.

Dendreon management has suffered a string of credibility problems, beginning in 2011, when it pulled all its Provenge sales forecasts. There have also been questions about the veracity of the clinical trials that led to Provenge's approval.

The company has come up with a series of excuses for the slow sales of its lone product over the past two years, including physician uncertainty about reimbursement and the need for added manufacturing capacity. Some of those additional manufacturing facilities, after gaining approval, have since been shuttered in cost-cutting measures.

Since Provenge's 2010 approval, easier-to-use and more effective prostate cancer treatments have entered the market, making the road for the Dendreon drug even bumpier.

The move that prompted Schoenebaum's soul-searching came on Tuesday, when Dendreon's chief financial officer said Wall Street's consensus estimates for first-quarter Provenge sales were too high.

Provenge had fourth-quarter sales of about $85 million, and the company had said sales would be lower in the first quarter of 2013. Wall Street's consensus had been for sales to be roughly flat sequentially in the quarter, according to Thomson Reuters I/B/E/S.

Schoenebaum, known for the prolific number of research notes he produces and weekly videos to discuss companies he follows, said in his latest note, "the company appears to be saying that the decline could be far more significant than the Street is currently estimating."

Dendreon was not immediately available to comment. Its shares were flat at $5.73 in midday trade on Nasdaq. The shares traded at more than $50 when the drug was approved in 2010.

(Reporting by Bill Berkrot; Editing by Dan Grebler)