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I want to conduct a postmortem on my



call. I was right on the Provenge interim analysis, but came up wrong on the stock.

As I expected, the interim analysis of the


study failed: The data were not strong enough to stop the study early. The stock should have dropped. Instead, Dendreon shares rose 33% Monday because the company surprised us all by releasing what looked like promising Provenge survival data from the study.

In Tuesday trading, Dendreon was down 13.5% to $6.

At the interim analysis, prostate cancer patients treated with Provenge had a 20% reduction in the risk of death compared with patients treated with a placebo. This certainly looks like Provenge is helping these patients, and if so, the odds that Provenge will be a winner next year (when the final analysis of the study is announced) have increased.

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To declare victory at the final analysis, Provenge must reduce the risk of death by 22% compared with placebo. Looks like a slam dunk, doesn't it? Provenge is already at 20% and only needs to get to 22%. Easy!

Not so. Yes, the odds that Provenge will win next year have increased, but there is still a lot of failure risk here. I covered the Dendreon short in the model portfolio, but I wouldn't consider going long the stock at this time.

I could bury you under bio-statistical mumbo jumbo to explain all this, but I'll spare you the misery and instead employ a sports analogy.

Let's say you're running in the Olympic marathon and you're in the lead. You're about to enter the Olympic stadium to run the last quarter mile, and the guy in second place is still on the road at mile 24. Your gold medal is guaranteed, right?

Yes, if this marathon were a typical race. But this marathon is being run under different rules. To win, you not only need to cross the finish line first, but you also have to beat the guy in second place by 12 minutes. If the guy behind you can run the last two miles in under 12 minutes, he wins the race, not you.

Under these rules, your place on the gold medal podium is far from assured.

The bio-statistics of the Provenge study are a lot like this far-fetched marathon example. By all outward appearances, Provenge looks close to the finish line. The cancer vaccine only has to lower the risk of death by another 2% to declare victory.

But to get that last 2% survival benefit, the surviving Provenge patients in the study must live longer than those who have died already (and were therefore counted in the interim analysis).

Unfortunately, many of these latter Provenge patients are in much worse condition (they have more advanced prostate cancer) than those who came before them because Dendreon loosened the entry criteria of the study in midcourse to accelerate enrollment. The interim analysis was also probably performed with well over half the deaths of the study already recorded (perhaps as many as two-thirds), which means that there are fewer patients left alive to significantly accelerate the survival benefit.

To go back to my marathon analogy, the runner who entered the stadium first is suffering from bad muscle cramps, while the guy in second place looks great and has a strong finishing kick. The winner is still anyone's guess.

Perhaps the most reasonable outcome to expect from the Provenge study next year is an equivocal result. Let's say Provenge produces some survival benefit for prostate cancer patients compared with a placebo (say an 18%-20% reduction in the risk of death), but that's not enough to reach the level of statistical significance. Technically, the study fails, but there is still evidence that Provenge is benefiting patients.

This is exactly what happened in 2007, the last time Dendreon sought FDA approval for Provenge. The turmoil, volatility and controversy resulting from that mess isn't something most investors will soon forget.

Déjà vu?

Adam Feuerstein writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet.com. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback;

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