Cadence shares have moved higher to around $8.60, still not back to the $9-plus level before the drug's approval but a definite improvement from when the stock was mired in the low $7s earlier this year.

Ryan thinks I should eat crow for my November column. We'll agree to disagree.

Via Twitter, @5redheads asks, "Any reason for the poor price action on $DNDN? Only see good news on the horizon but shorts only ones willing to commit $$."

Investors are focused most on real patient demand for Dendreon's ( DNDN) prostate cancer therapy Provenge. What happens when the supply constraints that cap Provenge sales today are lifted in the middle of the year? Will demand for Provenge from doctors and patients take off? And if demand spikes, can Dendreon handle the increased logistical and manufacturing load?

A look at consensus sales estimates for Provenge in 2011 underscores the importance of the back half of the year for Dendreon. Provenge revenue is expected to hit $28.6 million in the first quarter; the Street's consensus forecast increases to $59.4 million, $97.7 million and then $177.4 million in quarters two, three and four, respectively.

To meet its own forecasts, Dendreon has to receive on-time approval from FDA to boost Provegne manufacturing capacity. The FDA approved an expansion of Dendreon's New Jersey facility Thursday. After that, the FDA needs to approve the two additional Provenge plants in Atlanta and Southern California, expected midyear.

Investors are not concerned about the Medicare National Coverage Decision expected at the end of the month.

It's a long wait for fourth-quarter Provenge sales so in the interim, watch closely to see if Dendreon can meet or beat the consensus estimate for second-quarter sales. With the N.J. plant at full capacity, Dendreon can roughly triple Provenge manufacturing capacity and therefore should be able to triple sales (roughly) from the first quarter to the second quarter -- $28.6 million to $59.4 million.

Accomplishing this feat would demonstrate that supply constraints are a true gating factor on Provenge revenue, not patient demand. Investors would also have more confidence that when Dendreon triples manufacturing capacity again in the middle of the year, Provenge sales will follow suit.

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