Discouraged by Dendreon, Investors Shy From Drug Launches

Since when does a new drug launch equate to a black eye? Since Dendreon's (NAS: DNDN) bad-news sales report on its cancer drug Provenge. Analysts say drugmakers in the middle of introducing new meds -- or preparing for a potential launch -- have been tarred with Dendreon's Provenge-disappointment brush. It's the "Dendreon Effect," MarketWatch says.

In fact, short sellers have been targeting companies simply because they're putting new drugs on the market. "People tend to short the launches," Lazard Capital Markets analyst William Tanner told the site. "They figure they'll go worse than expected."

In some cases, they would have been right. Savient Pharmaceuticals (NAS: SVNT) is one company that's suffered from the Dendreon Effect, and it certainly has had trouble with its launch of the gout drug Krystexxa. Savient reported just $1.4 million in sales from the drug so far. It's hoping some new data will help goose revenues upward, but that's by no means certain.

But then there's Vertex Pharmaceuticals (NAS: VRTX) , which somehow got hooked into the Dendreon slide, according to Leerink Swann's Howard Liang. And Vertex's Incivek has trounced early sales expectations in the hepatitis C market. Such are the emotional reactions investors can have to news -- any news.

"Pretty much every company that had just launched a product or was about to launch a product got crushed" by the Dendreon Effect, Liang said. As for Dendreon itself? Liang figures the company shouldn't have put numbers to Provenge's launch in the first place. "Most companies don't," he said.

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