Small-Cap Spotlight: A Look at Crocs and Dendreon

After today's announcement, management anticipates that it will have interim survival results for its Provenge study in 2008. While shares are up about 40% on this news, it does not mean the study will yield positive results -- so the stock may be a little ahead of itself. Also, Dendreon will probably need to raise additional capital sometime this year. This is when I would be a buyer.

Looking at the financials, (something usually not associated with the biotech sector), Dendreon has $77 million in cash as of last quarter. Management anticipates that its capital expenditures for 2007 will be approximately $95 million and only $55 million in 2008 -- due to costs already incurred to prepare for the commercialization of Provenge.

With only $77 million in cash, and roughly 18 to 24 months (by my estimate) before the interim data is presented to the FDA, the company will likely need to raise capital -- which should not be a problem based on the potential for Provenge. Recent data supplied by numerous sources, including a 4.5 month survival difference in patients taking the drug, has me convinced that Provenge will eventually be approved by the FDA.

But based on today's recent move, I would wait until after Dendreon announces that it will raise capital. Shares are likely to sell off, as was the case back in November when the company said it would sell 9.9 million shares to institutional investors; then I would buy and hold. This is a speculative call, but given the enormous potential of Provenge, it could prove to be rewarding when the time comes.