“The Next Stock to Crash”

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The Stansberry folks are predicting another collapse in a stock’s share price, and urging you to get on board with a short position (or, one imagines, a put option). The last time they urged an aggressive short position in their ads was with General Growth Properties, the mall REIT that they predicted would go bankrupt back in December.

GGP didn’t quite go bankrupt, at least, not yet, but they were certainly right about the continuing decline — the shares were at about $1.80 when they predicted imminent bankruptcy, and they’re down about 75% from there (47 cents, last time I checked).

So, this is from a different analyst, and a very different rationale … but perhaps worth a look?

The ad is for the FDA Report, which we’ve seen teased before from Stansberry & Associates — it’s a relatively expensive trading service that aims to profit by predicting results of clinical trials, or at least trading on probabilities around those trials. In the past the expert they trot out for this has been George Huang, so I assume that’s who still does these trading recommendations, but I didn’t see his name in this ad.

So what do they promise?

“On April 30th, a Seattle drug company will announce the results of a prostate cancer vaccine in the final stages of clinical testing…

“If successful… it would be the biggest cancer breakthrough to date….

The medical community is so excited about this event; mainstream news sources are already brimming with anticipation as the date draws near ….

Sounds like a “slam-dunk” situation, right?

“But what if I told you that there’s overwhelming evidence that this vaccine is going to fail on April 30th?

“In fact, what if I told you it’s already failed clinical trials once before – a little-known fact about this “miracle” cure.

“But that’s not all… What if I told you that these clinical trials are so severely flawed, there’s no way patients participating in them will show positive results?

“On top of that, what if I said the FDA has never, ever approved this type of drug before? It other words, this class of drug has a 100% FAILURE rate.

“Look, there’s lots of uncertainty in the markets right now, but I believe—as strongly as I have believed anything in my financial career—that the FDA WILL NOT approve this new vaccine. ”

So that’s the setup — a drug that they tell us is expected by everyone to be a big winner, but their secret analysis has revealed that it will fail. [I'd argue that they're overstating the market's positive sentiment about this drug, but that's neither here nor there.]

And they tell us they’ve got a special way for you to bet against the drug, thereby tripling your money (or more) when the bad results come out in April.

There are several examples given to illustrate their ability to pick these “FDA losers” that will drop in share price — one of them is our old friend Electro-Optical Sciences (MELA), which was teased pretty heavily last year by some other newsletters …

“Several months ago, a company called Electro-Optical Sciences (MELA) began developing a device to better screen for skin cancer. Anticipation of the trial results pushed the stock to almost $10. Again, investors got excited… but our Ph.D. knew the device would never make it past the FDA. Sure enough, he made a quick 60% profit.”

MELA shareholders might dispute the “would never make it past the FDA” bit — it hasn’t yet, and it has been delayed, but many folks still appear to be optimistic (and since this is an external medical device/tool, not a drug, the approval process would usually be expected to be quite a bit less onerous). Undoubtedly, though, the huge ramp up in the share price last year created a nice opportunity for short term gains for short sellers.

And the examples really pile up — they make the point that 80-90% of new drugs fail in the clinical trial process, which is true, and that the industry is built around a “boom or bust” mentality that means companies try to develop as many potential compounds as possible so that one of them might become a blockbuster and pay for the failures of the others.

All certainly valid points, though we should note that most drugs fail pretty early in the approval process, when expectations are often fairly low — if they make it through to Phase III trials the odds of approval are certainly far higher than 10%. (That’s a kind of survivorship bias — sort of like the life expectancy boost you get when you’re older. A boy born in 2004 was expected to live to age 75, but a man who turned 65 in 2004 was expected to live to 82 … once you’ve survived through a lot of things that killed many of your cohort, your odds improve.)

There are several examples given of failed drug trials, and a bunch of charts of collapsing stock prices from biotech companies who saw their meal tickets rejected by the FDA. I think we can stipulate that yes, especially for small companies with relatively small pipelines of new drugs, the share price gets hammered if those drug candidates get rejected. Especially if they’re high profile drugs that have gotten investors excited.

Of course, all the examples are not necessarily gains that their “expert” has made — these are just examples looking back at failed drugs and the impact on a stock, examples that anyone could compile with a little time. The trick is predicting these in advance.

“The point is, it’s a lot easier to make money predicting the drug failures than successes.

“You can easily make a lot of money by betting against the success of these very sophisticated and risky clinical drug trials.

“And these opportunities are everywhere. You just have to know where to find them.

“In fact, if you simply bet against every single one in the stock market, then you’d be right approximately 80% of the time.”

That’s a bit of an exaggeration, of course — there are many failed Phase 1 trials that don’t particularly shake the stock of companies, especially the larger pharmaceutical companies who are responsible for a large number of the drugs in development, and those Phase 1 and 2, relatively lower expectation drugs are certainly part of that 80% number, this is not an easy “drug companies are all destined to fail” calculus. Otherwise, of course, the easy thing to do would just be to short the biotech or the pharmaceutical ETFs.

The claim is also made that the “expert” behind the FDA Report recommendations is well connected, and often knows, to the day, when results will be released for specific drugs. Of course, most people have a very good idea when drug data will be released because companies announce that information, but it’s often not day-specific — more likely it would be something like “by the end of April” as is the case here. If they really had the exact day, and the company had not released the information, either they’re really good guessers or someone’s illegally divulging inside information, which is not particularly likely.

“Most recently, our expert obtained the official announcement date for the company developing the prostate cancer vaccine.

“April 30th… just a few weeks from today.”

So that’s what we’re working with — what are the clues for this specific company?

Three reasons why they say this trial will fail:

“Reason #1 – The clinical trials are severely flawed

“This new cancer treatment is specifically designed for patients in the early stages of prostate cancer. But here’s the thing. FDA regulations don’t allow early-stage cancer patients to even participate in clinical trials because there are BETTER treatments available!”

“Reason #2 – This drug has already failed an FDA trial.

“This new drug already failed a phase III clinical trial, the final step before government approval, in 2005. However, the drug was given another chance by the FDA.”

“Reason # 3 – The FDA has NEVER approved this type of drug before.

“Finally, the FDA, in its 72-year history, has never, ever approved a drug in this class. Considering the clinical trial flaws and past failures, our expert told us “I find it highly unlikely the FDA will approve this vaccine.”

“In fact, we found and FDA publication that backed up this fact: Pub No. FDA 04-1338C

“‘[The drug class] is experimental; none have been licensed by the Food and Drug Administration’”

You could find that FDA publication, too, if you wanted — it’s right here, to save you the search. It’s actually kind of interesting, if you want to get into what a “cancer vaccine” actually is.

So … you could sign up for a subscription to this newsletter if you like (if you do, make sure to review it for us so we know if it’s worthwhile). If you sign up, one of the things they’ll offer you is this ongoing “Crash List” of stocks that they think will fall because of upcoming trials.

But if you just want to know the name of this stock, which is supposed to collapse by April 30, that I can tell you … this is:

Dendreon (DNDN)

Sound familiar? This has been a teaser target before, though on the upside (that was back in 2007, and the stock of course collapsed after that teaser ad, which had promised a breakthrough). The teaser back then was all about the same vaccine, Provenge, which has, as this ad notes, been bounced around by the FDA for years and rejected or sent back to the drawing board before.

And yes, this is really a “cancer vaccine” — though it’s a therapeutic one, not a preventive one. It essentially stirs up the immune system to fight off the cancer, and yes, this trial is being conducted in a population of terminal prostate cancer patients. Prostate cancer is so imminently treatable in most cases that they wouldn’t allow you to give an unproven drug to folks who would otherwise get a great and probably life-extending treatment, whether surgery or radiation or something else, so they have to prove it first in the worst cases, which is one of the reasons Huang and his folks think it will “fail.”

Dendreon is one of the poster children for stock volatility, and Provenge is expected to have more data available by the end of next month — and if you believe the stock will collapse you’re in luck, because they released positive earnings numbers (they lost less than expected) yesterday and the stock is moving up smartly today, so if you think betting against Provenge is the path to riches, you can make your short sale (or buy your puts) at a higher stock price.

Here’s what they announced last night about Provenge:

“‘This is an exciting time for Dendreon as we await the completion of the final analysis of our IMPACT trial, expected by the end of April. The 20 percent reduction in the risk of death that we saw in the PROVENGE arm at our interim analysis is encouraging to us,’ stated Mitchell H. Gold, M.D., president and chief executive officer of Dendreon Corporation. ‘Our mission is to bring PROVENGE to the many prostate cancer patients seeking treatment alternatives that offer a meaningful survival benefit coupled with a more tolerable safety profile than current options, ultimately translating the success of PROVENGE into a platform of products that could benefit patients with many different types of cancer.’”

As for me? I ain’t a clinical trial expert, I’m afraid, so though the odds probably still favor Dendreon continuing to have trouble getting FDA approval because of the novelty of the drug, let me make it very clear that I have absolutely no idea what the results might be, or what impact those results might have on the stock price, which has already come down pretty heavily. And it’s always possible that the results will fail to be definitive, either way, and leave investors confused for a while. This is not an FDA decision that’s coming at the end of April, it’s just the release of the clinical trial results.

This stock has been covered voraciously for quite some time, but if you want a little more background here’s one quick article that gets a bit into the specifics of this trial’s results. If that article is right that the drug has to show a 22% improvement and it’s currently showing a 20% improvement, then perhaps this is really a crap shoot as to whether the performance got slightly better after the initial results were computed.

We should, however, take a moment to think about the mechanics of making these kinds of bets, if that is something you want to do. Dendreon, after a nice bump this morning, is now trading at just a little less than $4 a share — pretty near all time lows, though the stock’s chart looks like a mountain range over the last five years.

There are basically two easy ways to bet against a stock — you can sell it short, or you can buy puts. In this case, if you want to “triple your money … or better” it would probably have to be a short sale, the puts are expensive enough that it would be tough to even double your money.

Selling a stock short means that you borrow the stock from someone else’s margin account (your broker does this for you) and sell the shares at today’s price — to profit from that trade, you then have to buy the shares back at a lower price at some point, so you can return those shares to the lender. In this case, you might sell the shares short at $4 today, and if they do go down to $1.50 on April 30 (just an example), you could buy them back and you’d have a $2.50 per share profit (not counting commissions or margin costs).

Short selling makes it easiest to benefit from a drop in the share price — if the shares fall 50 cents, you make 50 cents a share if you buy them back to “cover” your short position. Easy peasy. But with that relative ease comes theoretically unlimited risk — if this drug does happen to have spectacularly good results, and the shares go up 200% overnight before you have a chance to cover your bet, you might have to cover a huge loss.

A stock has no limit on the upside (on the downside, it can’t go below zero), it could go as high as investors want to drive it, so you can potentially lose really big. Of course, most of the time this probably wouldn’t happen — you would have stops in place, so if the shares went up 30% (or whatever) you’d cover your short bet and be out with that loss. In biotech, however, we should remember that huge moves, both up and down, are not all that uncommon, and if good results or other great news (like a buyout, for example) comes outside of trading hours, there’s always a chance that the stock will move way past your stop point before you’re able to cover.

This is theoretically true of any short sale, of course, and most short sellers are very careful traders who prepare for exigencies, but for super-volatile stocks like Dendreon (and especially, super volatile stocks that are already beaten down and face some news that could be “make or break,” it behooves one to be extra careful).

Buying puts, on the other hand, is a way to shackle your short bet a little bit and know, up front, what the maximum loss is. Buying a put option means you buy the right (but not the obligation) to sell a stock at a predetermined price before the expiration date. Unlike a short sale, where you bank the money from selling the shares (though your broker will hold those in reserve for you against your obligation), for a put option you have to buy it.

If you buy a put option, you can never lose any more than the price you paid for the option — so that’s how you can limit your risk absolutely. Of course, it’s more expensive, and it’s constrained by time. You can short a stock and, if you’ve got enough cash to meet margin calls if the bet goes against you, you can stay short the shares as long as you want if you want to stubbornly hold out for the return you expect. Put options have expiration dates, so you have to be right about timing as well as direction.

Buying puts is a little more of a forgiving process when share prices are relatively high — but of course, when a company is on its last legs, or when investors are very suspicious about their prospects (as is the case with Dendreon, despite the claim that this is a contrarian bet, and was the case with General Growth Properties, for example), then the share price will often have been driven down to the low single digits already, and put premiums will probably be high.

For example, if you want to bet that this late April announcement will be bad, you can buy a May expiration put on Dendreon shares — if you want to buy the right to sell the shares for $2.50 anytime before mid-May, the current price is right around $1.30. That’s a clear sign that there are lots of folks who want to bet against DNDN — if you buy this put option, you need the shares to fall to $1.20 for you to break even (you can sell them for $2.50, but you paid $1.30 for that right). So this is a bet, simplistically speaking, that DNDN will fall by about 60% in the next two months.

Possible, of course, but there’s not a huge margin for profits — and all that needs to happen for you to lose your whole $1.30 investment is for DNDN to stay about $2.50 (to fall by less than 30%).

You can invest more money to get a greater potential return, of course — you can buy “in the money” puts that are exerciseable today — you could, for example, buy the right to sell the shares for $7.50 a share. That option, also for May, would cost you $5.50. So you still need the shares to drop below $2 a share for you to make a profit, but if the shares just linger around $4 or so you might only lose half of your investment (ie, if the shares are at $4 and you can sell them at $7.50, you can cash out for about $3.50, thereby getting some of your initial $5.50 purchase price back).

Of course, if the absolute opposite happens, and the stock shoots to $20 overnight, you can only ever lose what you put in ($1.30 for that first option example, $5.50 for the second). If you had sold the shares short and couldn’t cover in time, you’d owe somebody $20 and would have only $4 set aside to pay them back (the $4 being the initial cash you got for selling the shares short).

Phew … sorry of that was too elementary for many of you, or too confusing for others — I just wanted to provide some actual examples to clarify for those who haven’t done short selling before. Remember, I’m not telling you to do this, just trying to explain what it seems the S&A FDA Report folks are touting.

If you’ve got any thoughts about Dendreon, or betting against clinical trials, or whatever else, feel free to share with a comment below.

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45 Responses to “The Next Stock to Crash”


  1. There is lots of opinions on this stock and wether Provenge will get approved by the FDA. I personally think the drug will be approved but it is a long shot. The upside is a lot bigger than the downside potential. I personnaly have bought the stock and sold covered call May 10s.

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  2. I own this and do believe that they will get FDA approval. I bought cheap and am rolling the dice because this type drug is needed and some reports are good. Charts are bad, so take caution.

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  3. I agree with John Mattingly, keep the “pig farm swill” in the hog pen where it belongs Rob, are you sober??? Nobody has the right to come onto a FREE resource site & take a frigin’ cheap shot like that, GROW UP!

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  4. Excellent description of short-selling versus puts.

    Gumshoe, could you direct your formidable investigative skills to screening out people who may represent the companies discussed here and who crash the site merely to generate controversy with their vulgarity? The only reason someone would make such hostile remarks as “you guys are slimeballs,” etc. is clearly to disrupt intelligent discussion and analysis.

    Biotech is a very difficult investing universe. Your discussion is superb and lucid.

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  5. Please make sure Stansberry’s “Ph.D Expert” has a Ph.D in a hard science, e.g., genetics, biology, biochemistry, immunology. Back in his “Pirate Investor” days I lost a ton of money on his Vaxgen recommendation. He had a “Ph.D Expert” back then too touting for him called David Lashment. Only later did I find out that this fellow’s Ph.D was in the history of science from a diploma mill!

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  6. You are clueless. Shorting a $3 – $4 stock with the upside that this company represents is politely my friend assinine. If and or when this drug gets approved you are going to lose your farm. Stick to farming and not picking stocks that can put you in the poor house quicker than a drought.

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  7. You may not be advising your “readers” to short this, but what exactly is your goal by using the title “The Next Stock to Crash”?

    If I were you, I’d go middle ground. Provenge has a very good chance of hitting statistical significance. If it does, you’re going to look like a pretty big fool and few will take you seriously, let alone visit your blog again.

    I order you to get rid of this title and replace it with something a little less hostile.

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  8. another way to play such a stock is to short it, and buy a call on the stock as insurance against a big loss in case it takes off upward.
    I haven’t checked the costs of various calls here, but – again as a cost of speculation and as insurance – shorting the shares gives you a great way to capture gains on a drug failure. the call goes to zero or near zero, assuming little time value, on a big drop, so watch the premiums don’t eat all your short profits…

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  9. After reading thru – if you are neither sure that the drug will pass or fail, but feel certain that some stock triggering event is going to happen on 30th, then you can simultaneously buy puts & calls – one will end up wothless, the other will be your path to retirement & riches. it wont matter to you which is which.
    good luck

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  10. Gumshoe – Very good explanation on the risk/reward outlook bewteen puts vs shorting a stock. For a while I was carrying calls on this specific stock. I think the term has been ‘expire worthless’. Krishna has a good suggestion for someone wanting to play this hand.

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  11. I am working in this field of prostate cancer and might have a few remarks that could be helpful [although let's keep our expectations low]. This vaccine is autologous — meaning it is produced from the patient’s own cells and is custom-made for each person. So it is not like a mass-seller as Celbrex. Those who took it on the previous trial lived on average 26 months compared to 21.4 on the placebo so that’s 21% longer life. Gemzar a big seller for pancreatic cancer is in this numerical league and was approved. But one of the disputes is the absurd position by one powerful opposition group that the prostate cancer continued to progress — so no delaying of progression. However a very heavy hitter, Dr. Small who led the prior Phase III study said such a criticism is nonsense. The desire is to prolong life. The point of this is to show that the approval process depends as much on who is on the review committee as the actual results of the trial. This medical approach is very politically charged! A major Hopkins doc says the trial population was too small. In fact much smaller populations have been used, and the FDA approved the design and the population size. Again, how you stack the review committe will impact the approval process. So it is NOT a clear trial failure. But it is not a clear trial winner either, based perhaps more on “medical attitude” than actual data. I have no ability to know the outcome, but if I guessed, they’ll hedge and say that they want more data and a longer use of it and such … leaving it hanging in the air longer without a clean yes/no outcome. If so, it won’t be the first time, on that you can be sure.

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  12. DNDN stock price is down, for reasons of impatience of being quickly approved. DNDN has been trying to get approval for 3-4 years now I believe. Anyone out there, Please correct me if it’s been longer. I could see shorting AIG at 50/share back in 2007 a potential good short. A 4 dollar stock presently is not. My position is that DNDN is buy right now. Basically the chart says there are more buyers of the stock than sellers. Respectfully

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  13. These cancer vaccines are a very tricky business so I think there is great uncertainty about the outcome. It is very difficult to trick the body into mounting an immune response against its own cells. 2 of the 3 companies who were targeting vaccines against Non-hodgkins Lymphoma have produced poor results and gone out of business. I do wish this company well as I have prostate cancer in my family and would love nothing more than a successful treatment.

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  14. i own this stock as such i wud like to point out that dr sher who sits on the fda committee has been instumental in delaying fda approval its also be noted that he had a financial interwst in a competing drug .tom murphy has put out a by on this stock with a forecast of $40 p.s.

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  15. Thanks to Travis for your ongoing great work, taking the mystery out of newsletter come-ons!

    I’ve followed the Dendreon/Provenge story for a while, and it is an amazing story, first of a potentially tremendous breakthrough in cancer research, second of the several blatant conflicts of interest in the FDA, third of the financial manipulations by hedge funds and other money interests (sadly including some in the prostate cancer arena). A great place to start looking into this story is the Care To Live site. CareToLive is an advocacy group for patients with late stage prostate cancer. The Investor Village DNDN Message Board is an excellent place to keep up with everything related to Dendreon, Provenge, and DNDN.

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    • To ForensicPenguin2,I have been rnniung Linux mint LXDE, most recent version on an older Asus eeepc (1000H), I am more thanhappy with it, much faster/responsive than the originalwindows xp and screams ahead of windows7.I tried Linux Mint XFCE; a disaster on the eeepc’s, toomany updates and with such a slow processor and slowinternet speeds, I ended up with a corrupted O/S. It mightbe better on a fast CPU and fast internet.cheers.

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  16. Gumshoe… you’re the best! Nice education on short selling as well as the unethical teasers that we keep on getting.

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  17. FYI, I had a PSA of 7.4 in Nov 02, Gleason score of 6 or 7 in Jan 08, discovered thru research on internet that for PSA’s under 10 surgery was an option with best place Johns Hopkins with 10 year published cure rates and Radio Thearpy Clinics of GA, RCOG Atlanta, had published 9 year cure rates for radioactive seed implantation followed by radiation treatments. If I remember corrrectly, cure rate for my PSA/Gleason score was about same for both options of approx. 90%. I went with ROG, completing treatments in May 03, PSA as of Sept 08 less than 0.1. RCOG.com now has 10 year published cure rates. I now take ESSIAC, red rasberry extract, as preventive for whatever.

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  18. Setting the emotional elements of cancer aside.

    I’m very skeptical. I think they are mixing up the release of the results of a clinical study with the FDA approval. By the time an approval decision comes, the clinical trial results have long been common knowledge (because the company has already press released them months ago). Being able to time the really dramatic stock price moves can only be based on the kind of insider information that I don’t think S&A, George Huang or this group would be able to (legally) guess any better than anyone else… See how they fare at the April with Dendreon…

    j

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  19. Well, big news from Dendreon this morning — and if anyone decided to buy puts on Dendreon or sell the shares short, I imagine they’re quite unhappy this morning. Instead of the shares collapsing, as seemed to be predicted by Huang, the premarket trades are giving DNDN almost a 200% jump. Things could always change after they release more details, but investors are clearly now expecting not just FDA approval, but big sales (or a buyout before that happens).

    http://biz.yahoo.com/ap/090414/dendreon_study.html?.v=1

    Serves, at least, as a reminder about the danger of short selling — if you had sold Dendreon short you might be looking at a margin call from your broker this morning if you hadn’t been stopped out earlier, since you wouldn’t have had a chance to cover before the news came out … if you had bought puts, you’d only be out what you paid for them. Both, of course, would have been the wrong bet — but with very different risk of loss during a big move like today’s.

    Premarket indicators are showing us that the “absolute opposite” that I noted in the article above can always happen (the $20 price I mentioned was just an example, I’m not prescient — unfortunately) — there’s a reason why short sellers generally have been known for doing more research (and more worrying) than other investors.

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  20. Lol
    all the shorters hope u didnt lose it all. I bought in cause of all the back and forth banter and bought the may 5 put and 2,50 call and a some share cuz i like and underdog. Since then obviously i have a little more pep in my step and been following biotech religiously. there is another one that is taking off, i got in at 2.20 less than a month ago and now it shy of 5. They have phase 3 fda fast track for a colon cancer treatment. could be next dndn

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  21. “Rob” and his childish comments obviously derive from a punk kid; they are not worth reading or acknowledged.

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  22. Tom, I like your thinking with this one.
    I just ran the numbers on your May $10 covered call and at today’s closing price, with a cost of $282 per contract (100 shares) you would lose $32 if the stock got cut to $2.50 and you would gain $218 if the stock went to $5, $468 if the stock went to $7.50 and you max out at $718 if the stock hit the annual high of $10.
    The risk/reward ratio looks pretty good. Certainly a much better scenario than buying the puts. You could theoretically own the shares for free if you didn’t get called out and kept up this strategy for the rest of the year!

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  23. Alright i see how you do not believe this drug will be approved. But you fail 2 see that the trial that they failed was trying 2 show regression in the cancer this is almost impossible 2 show thats why they switched the trial 2 lifespan. AND THE ONLY TREATMENT FOR THIS STAGE OF PROSTATE CANCER IS TAXOTERE WHICH IS A HORRIBLE DRUG I PERSONALLY BELIEVE YOU KNOW NOTHING ABOUT MEDICINE AND SHOULD STICK 2 FINANCE…. AND THE TRIALS ARE NOT FLAWED THEY ARE DESIGNED FOR PATIENTS IN LATE STAGE PROSTATE CANCER….LMAO THIS STOCK IS GOING 2 BLOW UP IN YOUR FACE…. AND WHY NOT SAY ANYTHING POSITIVE ABOUT THE STOCK HOW THE FDA HAD 2 PEOPLE WITH CONFLICTS OF INTEREST OR HOW THERE ARE NO SIDE EFFECTS JUST DONT MAKE BLOGS ABOUT THINGS YOU KNOW ABSOLUTELY NOTHING ABOUT…!!!!!!!!!! :-P

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  24. To Rob,
    Is really necessary to make comments that are terminologically inexact? Please elaborate without hyperbole as to what, precisely, you intend to impart by the term “slime ball,.” as, among gentlemen, this is disparagingly vague.

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  25. Thanks for the opinion — just so it’s clear, since it clearly wasn’t to you, I’m not telling anyone to short this — just explaining what someone else is recommending in an ad.

    I have no idea whether it will go up or down, and I hope I made clear that shorting a beaten-down, news driven stock certainly carries risks.

    I hope it works, incidentally — anything to fight cancer is a boon in my book. Though if Provenge does turn out to work spectacularly, Intuitive Surgical might want to look over its shoulder a little.

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  26. The headline to this teaser ad comes directly from George Rayburn
    Executive Director, Stansberry & Associates

    What are you Rob, a newbie? You owe Travis an apology, & where did you get the idea that Stock Gumshoe was a blog? That w/b news to me.

    ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~!

    Dear S&A Reader,

    We wanted to make you aware of an approaching situation…

    On April 30th – just a few weeks from today – we believe a major stock crash will take place.

    There are 2 things you need to know about this situation:

    First, make sure you don’t own any shares.

    And second, you might want to consider a unique way to make money on the call.

    How do we know it’s going to happen and when?

    S&A’s Editor in Chief, Brian Hunt has the full details below.

    Good Investing,

    George Rayburn
    Executive Director, Stansberry & Associates

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  27. Rob,
    You have no right, nor privilege, to ” I order you to get rid of this title and replace it with something a little less hostile. ”
    There are MANY of us, who appreciate and admire the diligence, intelligence, and conciseness that Mr Johnson, “The Gumshoe”, puts into these articles. Were you to read some from the beginning, you would begin to appreciate the time and effort he has put into this “blog”, as you termed it, and would realize it for the teaching and research tool that it is~!
    My advice to you, sir, is to gain some maturity and insight into what you are denigrating so flippantly, and GROW UP~! You don’t like this site, then find one you do.
    EYoung

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  28. I order you. . . . Who is this person to order anyone? It has been my experience that a great number of people tend to react emotionally rather than intellectually to a particular issue. They’d rather jump up and down and resort to intimidation rather than debate the issues. These are the guys that will slam you in the face rather that debate opinions over coffee, etc. I suppose this is an outlet for the release of their anger. I don’t always agree with Gumshoe, but he is certainly entitled to express his opinion, free to us, of course. I find Gumshoe to be very objective and I believe he always attempts to clearly express the pros and cons on any stock issue. While I don’t always agree, I always respect his opinion. Do the follow-up research. . If I have a serious issue with his interpretation, I would feel free to establish a polite dialog. For crying-out-loud it’s a free Web site. YOU AIN’T PAYING FOR THIS! If a subscriber can’t compose an intellegent counterpoint, the rest of us can’t benefit from the space he/she consumes.

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  29. Thank YOU, for this helpful insight. I hope you will post more in the future, Doctor. You insights could prove very helpful as well as informative!
    EYoung

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  30. Welcome to the board Doc, I just happen to have an enlarged prostate since the ’80′s as a matter of fact! I’ve had PSA readings as high as 11.5, but never lower than 5+! Yet the one biopsy I’ve had about 5, 6 yrs ago came back negative as are the dozens of digital exams I’ve been through.

    I’m certainly no expert of pharmaceutical therapy but I also don’t take any RX for my prostate, not ever! None of my several urologists give me more than 8, 9 yrs to live, & that’s been constant since the ’80′s.

    It’s no secret, I take supplements, with the recent beta sitosterol being extremely effective in reducing nightime visits to the head, which improves the quality of my sleep & so on.

    Being long-winded was necessary here, because I’d like to ask you why the AMA/PHARMA/FDA trio are so dead set against us Srs. trying to improve our health & longevity w/o excessive RX?

    mannasage@gmail.com is my email addy if you’re so inclined Doc.

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  31. There will be no review committee. Provenge already went to a Biologics division advisory committee on March 29, 2007 that recommended approval. The FDA, under intense pressure from the Oncology division that was angry because Provenge did not go before their committee, insisted on seeing this third Phase III trial data before making a final decision. Dendreon is under a special protocol assessment agreed to by the FDA on May 29, 2007 with specfic targets. If they hit the targets, they get approval.
    I really appreciate your knowledge and comments on the length of time it could take for serious revenues. There is one more big positive between approval and revenues: A major partnership agreement, at least for Europe and Asia. There is so much DNDN stock sold short that I expect it to trade to $30 to $40 after the trial results are announced, and it probably will be a good idea to sell there, buy back in the high teens/low twenties and ride it back up on the partnership deal.

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  32. Thanks Doug — given the very emotional reactions here to this story, its clear that there are a lot of investors who are angry about the shorts in this stock (and probably plenty of shorts who are angry at the boosters of the stock, just to be fair).

    That’s part of the reason for the volatility of the stock, though it’s also not that often that you find a high profile stock with such a clearly identifiable “binary event” that will either crush or boost the company dramatically. In such cases, there are just about always strong words on both sides.

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  33. Gumshoe, thanks for your reply. I understand and appreciate your unbiased view. That’s why I follow your work.

    I am admittedly long DNDN and very pro Provenge, but I would just ask anyone who’s interested in the story, if a new therapy is very clearly safe, very probably effective, there are no alternative treatments other than vicious (and less effective) chemo, and the therapy would only given to terminally ill patients, why was the drug not made available to those patients? The answers are available, and they’re not pretty.

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  34. With trepidation, I will try to add some useful information in this charged area. Let me address just the issue of the potential revenue stream that might arise from this vaccine. As a long-time cancer researcher, I can identify some possibly useful issues from the case of our correspondent SageNot whose case provides some useful insights. Just as SageNot is wisely doing, most prostate cancer patients [probably 95% or so] are in the watchful waiting category. Very smart move. There are not that many [percent-wise] terminal prostate cancer patients. So most prostate cancer patients would not be wisely put on this vaccine. One of my research patients has had a stable PSA of 65 for seven years now [with a Gleason score of 6-7] and I believe it likely will stay that way the remainder of his life. My advice to him is that he should continue to stand pat for now. The much rarer terminal patient has a PSA perhaps rising 20% per week, compounded weekly, can hit values into the thousands, has bone metastasis, etc. These are relatively quite few of the case load. They would gain about 3.5 months of added life — which is nothing to sneeze at, I fully appreciate — but this is not a “drug” they will take the rest of their [long] life. Again this just addresses revenue stream. Also since it is a vaccine that must be tailored-made for each patient, physicians will be hesitant to invest in any equipment, and the vaccine “process” will involve working with the company to make each patient’s vaccine. This requires an expensive interface of company professionals and the docs. This is a significant fixed overhead to the company. So my point is only that the revenue stream as I see it could be initially quite modest if it is approved. And it could take quite a long time to ramp up to expanded revenue. I am in no way casting judgment on the product or the outcome — only trying to give neutral assessment regarding expected revenue if approved. I do not have any products in this area in which I have any financial interests nor work for any pharmaceutical company nor have any financial “dog in this fight.” I am just trying to provide some realistic evaluation of the potential revenue stream one could hope for, based on my own direct experience in related areas. A corollary to this discussion might be that if there were approval and a great bounce in price, sell on the good news rather than wait for the big bucks to immediately roll in from the product! I hope this is helpful.

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  35. If I have cancer I would not wait for a magic bullet to be discovered. A good start would be to subscribe to Health Science Institute (HSI)which entitles subscribers to archive reports. The advisory Board compose of brilliant researching type doctors who practice alternative medicine. For example HSI had identified a prominent doctor in Vietnam Dr. Kha Hoang and his family of doctors who are successfully treating prostate cancer with herb called crinum latifolium. German clinics are successfully treating cancer with various alternative means. The difficulty is traveling far and staying in Germany for 3 to 4 weeks. In contrast here in the USA doctors hands are tied by FDA allowing only chemo, surgery, and radiation. After all the $Billion spent on cancer research this is all they come up with in more than 50 years. Personally I would not submit to this invasive and brutal treatment. My PSA was 6.4 but I refused biopsy. Instead I went for an AMAS test and was found negative. If the main issue in cancer is that of a depressed immune system then I would go for boosting it to fight the cancer. For a good education on alternative cancer treatment Bill Henderson book is an excellent read.

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  36. There are plenty of options strategies available that offer much better rewards than simply buying puts or calls, depending on the outcome one expects.

    However, when one goes through the options premiums for selecting a strategy one thing becomes overly clear: The options market seem to expect the stock to tank. Just look at the May options, for instance. If you bought the may 2.5 call and sold the May $5 call you pay about 70 dollars for the position. If the stock were to stay at 4.22 (current price) by expiration in May you would make 100$ in net profit as that spread would then be worth about 170$. On the other hand, if you bought the May $5 Put and sold the May $2.5 Put you would have to pay 185$ (for a maximum potential gain of just 65$). The stock would have to fall by 1$ from here for you to even break even, not to talk of a profit.
    Anyone may draw his/her own conclusion from that – just food for thought.

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  37. Gumshoe – one minor correction to your options vs. shorting primer. You said: “In this case, if you want to “triple your money … or better” it would probably have to be a short sale, the puts are expensive enough that it would be tough to even double your money.”
    No matter where you short a stock, if it goes to zero (best case) you can only make 100% on your investment. You cannot “triple your money.”
    I believe S&A is utterly wrong on the DNDN results and have recommended the stock in my newsletter, but even if they are right there is no way to triple your money either shorting (mathematically impossible) or buying puts (too expensive).
    Also, note that Dr. Huang says: “This new cancer treatment is specifically designed for patients in the early stages of prostate cancer.”
    That is breathtakingly wrong. Provenge is for RECURRENT prostate cancer – it’s back after previous treatment – in men who have failed hormone treatment. That is very late stage cancer.
    Finally, to bolster the reader’s confidence in his technology prowess, Dr. Huang repeats his call on Electro-Optical Sciences (MELA): “our Ph.D. knew the device would never make it past the FDA. Sure enough, he made a quick 60% profit.”
    On February 13, a full month before your Gumshoe report, MELA announced superb results in their pivitol clinical trial for early detection of melanoma, and everyone involved expects fast FDA approval. This is another stock I have recommended.
    More comments on specific Dendreon issues below. As a newsletter editor who does not use these stupid “10,000% By Next Friday, But Only If You Whip Out Your Credit Card” ads, I really appreciate your work. You might want to include the trailing 12 month Hulbert performance figures for each newsletter your discuss.

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  38. Thanks — and good point on the “triple,” though I think bypassing the fact that you need to put up collateral for a short sale is probably not the worst of their marketing sins.

    MELA has been riding a rollercoaster over the past year or so, thanks in some part to all the touting by the late Georges Yared and Marc Lichtenfeld. I hear pretty frequently from both fans and skeptics on this one, I have no idea whether it will get approved or not (or whether, once approved, it will have adequate sales to become profitable). Will be checking in on it every now and then.

    And a good point about performance — unfortunately, Hulbert only tracks about 200 of these newsletters and I often write about ones that aren’t in his universe. I try to mention it when I can, and to point folks to the Reviews site to get subscriber opinions when I can’t.

    I appreciate the comments — and that you’re able to make a living in this business without making crazy promises, best of luck to you.

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