Dendreon Rally a Brief Vacation From Reality

Updated from 11:52 a.m. EDT

Dendreon's(DNDN Quote) stock price has now officially separated itself from reality.

If anything, Thursday's news is a setback for die-hard Dendreon longs. For the clear thinkers out there, it's entirely expected.

The Food and Drug Administration will require more clinical data on Provenge before the prostate cancer vaccine is considered. That data will come from the ongoing phase III trial known as Impact.

An interim analysis of the Impact data could happen in 2008, Dendreon said Thursday. Exactly when in 2008 the company won't say, but the expectation is for the middle of the year. The fact that Dendreon won't say that explicitly should give investors some pause.

So, as I wrote correctly last week, Dendreon is facing a two-year delay in Provenge approval.

If the interim analysis is positive in the middle of 2008, it will probably take another four to six months for the data to be gathered, cleaned up and submitted to the FDA. Let's assume Dendreon re-files Provenge toward the back end of 2008. If the FDA then takes another six months to review the new data, an approval decision would come in the middle of 2009.

This is good news?

I had been given the impression that the howls of protest coming from prostate cancer advocates were going to force the FDA to reverse course and approve Provenge with alacrity.

Today's news pours ice cold water all over that idea.

So, why are Dendreon shares up almost 44%? A short squeeze? Crazy momentum trading? Dendreon longs who are so blinded by hope that they can't face facts?

Maybe it's a combination of all the above. Whatever the reason, a rational investor sees this news for what it is -- an acknowledgement that Provenge has another long road ahead of it before approval.

Not much to cheer about, if you ask me.