Why Dendreon Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of biotechnology company Dendreon (NAS: DNDN) popped higher by as much as 12% after it received a favorable price target from a research firm.

So what: With Dendreon closing at just $6.25 on Tuesday, shareholders have to love research firm Summer Street's initiation of the stock with a buy rating and a price target of $18 -- nearly triple its current levels. That comes in stark contrast to research firm Wedbush Securities, which earlier this month reiterated its underperform rating on Dendreon with a price target of just $4.

Now what: I've said it before and I'll say it again: Ignore these one-day white noise events from analysts. Ratings and price targets are short-term event movers and have little bearing on the overall fair value price of a stock.

What really matters is whether Dendreon's Provenge prostate cancer treatment system can compete against a myriad of new drug hopefuls. Johnson & Johnson's (NYS: JNJ) Zytiga has proven statistically more effective than Provenge in clinical trials and is priced at just $5,000 per month compared to Dendreon's $93,000 treatment. Also, Medivation's (NAS: MDVN) enzalutamide has breezed through clinical trials with minimal side effects. I feel Provenge may find itself more effective as a combination therapy than a stand-alone, but only time will tell if that's a prophetic or pathetic prediction.

Craving more input? Start by adding Dendreon to your free and personalized watchlist so you can keep up on the latest news with the company.

At the time thisarticle was published Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.The Motley Fool owns shares of Dendreon and Johnson & Johnson. Motley Fool newsletter services have recommended buying shares of, and creating a diagonal call position in, Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.