BOSTON ( TheStreet) --I typically write the bulk of the Biotech Stock Mailbag on Thursday, so as I type, the markets are in meltdown and a conflagration has consumed the biotech sector. Memo to Dendreon ( DNDN) CEO Mitch Gold: Nice timing, my friend. Real nice.

It's unfair to lay all the blame for the "end of biotech as we know it" at Dendreon's doorstep, but I don't believe we'd be experiencing such a sharp, swift and broad selloff had Dendreon pulled off a normal quarter. The Provenge miscue spooked a lot of biotech investors who were already on edge.

In my Dendreon column Thursday, I wrote, "The ill effects of the Dendreon debacle will unfortunately spread beyond the company's stock price and its shareholders to infect the entire biotech sector."

To which Brandon M. comments, "Disasters of this magnitude raise the question of whether the biotech sector is even investable for individuals/home gamers because even if you pick the right company, right drug and get the timing correct through the myriad of approvals with the FDA etc., the follow-on execution risks are just as daunting…

"How many times does lightning have to strike in a biotech stock for people to make enough money to offset all the misses? Well, for those who play on the wrong side, the ratio just went the wrong way ... again. Doesn't this raise a fundamental question as to whether the commercial development model needs tweaking as far as capital markets are concerned? If Provenge is a miracle drug but withers on the vine because it costs $93,000, where are we?"

I've reached a point at which it feels safer not to recommend, write about or even whisper the name of a biotech company about to embark on a drug launch. Dendreon may turn out to be the biggest biotech drug-launch flop in history, rivaling the Medimmune Flumist disaster (thanks for reminding me of that one, Lazard's Joel Sendek); or if you want to extend the category, there's the Pfizer ( PFE)- Nektar Therapeutics ( NKTR) Exubera fiasco.

Biotech investing is hard, but biotech investing after a drug approval and/or right before a drug launch has become impossible, unless you're short, which seems as risk-free as investing in T-bills, with much higher returns.

I thought Amag Pharmaceuticals ( AMAG) would do well launching Feraheme. Wrong! I was bullish on Allos Therapeutics ( ALTH) going into the Folotyn launch. Wrong! More recently, I thought Optimer Pharmaceuticals ( OPTR) would hold up well as preparations for the Dificid launch gets under way. Wrong again!

I finally learned my lesson and got one right with Seattle Genetics ( SGEN), warning folks that the stock was expensive ahead of the likely approval of Adcetris later this month.

Brandon raises a good question. The relationship between the capital markets, i.e., investors and companies entering the commercial phase of their lifespan does seem broken. Why? I don't know for sure, but it may relate to the shortsighted or short-term nature of biotech investing these days. Long-term investing seems extinct, with investors morphing into traders only interested in the next catalyst -- clinical trial results, FDA advisory panels, drug approval decisions.

Spend time on Twitter with "bio run-up" traders, and you'll see even more esoteric catalysts being invented for quick trades -- stuff like New Drug Application (NDA) submissions, FDA acceptance of NDAs or announcements of Special Protocol Assessments.

What you don't see or hear are people interested in owning biotech stocks that are launching drugs. Heck, maybe there are valid reasons for not owning "commercial" biotech stocks, especially if valuations get too plump before actual sales (and profits?) are recorded. Does that sound a bit like Vertex Pharmaceuticals ( VRTX)?

What I do know for sure is that drug launches today are NOT a tradeable catalyst, and that's a very bad thing not to be. I miss the old days, but they seem long gone. Ignoring the new reality doesn't seem smart, unless you enjoy being pummeled over and over.

@pjkorman tweets (with some snark, which I appreciate), "Waiting for your take on SPPI report tomorrow. I know you're a fan."

Spectrum Pharmaceuticals ( SPPI) rates a "meh" for its second-quarter earnings report. The company was once again profitable, earning $7.2 million, or 12 cents a share, but gross margins, operating margins and net profit margins were all down sequentially due to higher expenses. Selling, general and administrative costs were up substantially, even accounting for non-cash charges in the quarter.

The performance of the colon cancer drug Fusilev is what we all focus on these days, and sales were down 2% sequentially to $33.9 million. Given Spectrum's big marketing push and continued shortages of the generic competitor leucovorin, I expected sequentially higher sales of Fusilev.

Spectrum said it was very happy with Fusilev sales in the quarter, noting that the company had supply issues of its own, which meant full demand for the drug could not be met. Spectrum signed on new Fusilev suppliers at the end of the June, so with continued leucovorin shortages, Spectrum better turn in a stronger performance in the third quarter.

If Fusilev sales once again fall or remain flat sequentially in the September quarter, it could mean that leucovorin resupply is eating into Fusilev sales, which is what Spectrum bears expect to happen. For the record, Spectrum said on its call that it expects equal or higher Fusilev sales in the third quarter.

If Spectrum had real visibility into Fusilev's performance, especially vs. cheaper, generic leucovorin, it would give sales guidance. The company still chooses not to do so.

Zevalin sales totaled $8.4 million in the June quarter, up 42% sequentially. That's a nice turnaround, but I would also mention that Zevalin sales are now only just back to fourth-quarter levels. Spectrum continues to forecast "modest" Zevalin growth.

I'm a stubborn Spectrum bear and I see no reason yet to change my stance, particularly around the Fusilev vs. leucovorin issues. The main risk to the bear thesis is if Spectrum is successful in signing up enough physician practices to long-term Fusilev supply agreements to ensure the drug's continued growth even if or when generic leucovorin supplies are more fully replenished.

Spectrum mentioned these customer agreements on the call, so it's definitely worth noting if you're short the stock, and it's a reason to be optimistic if you're long.

One buy-side source whom I respect recently took a long position in Spectrum based on his belief that Fusilev sales will grow even with increased competition from cheaper leucovorin. I'll let him explain:

"We believe this business Fusilev will last and grow from accounts we have spoken to. Economic reasons play a part and also dosing error phenomenon is now playing a role in why doctors are fed up with switching back and forth from generic leucovorin… This is something doctors are telling us is a sticky issue in their practice," this buy-side investor tells me. He's long Spectrum but is not allowed to speak on the record to the media.

One drop-dead rule for biotech investing (any investing, actually) is to read closely a company's regulatory filings. What a company discloses to the Securities and Exchange Commission in an 8-K, 10-Q or 10-K is much more important than what's trumpeted in a press release.

Don't ignore press releases. Instead, compare the language and details scripted in the press release to what's disclosed in the SEC filings. If the two documents differ, i.e., if the press release leaves out salient yet less-than-positive details, you can infer that management may be more interested in spin than transparency.

A classic illustration of this investing rule popped up Wednesday with NuPathe ( PATH), developers of a migraine headache patch. On Wednesday morning, NuPathe issued a press release announcing a new common stock purchase agreement in which Aspire Capital Fund had agreed to purchase up to $30 million in NuPathe stock in installments spread over 24 months.

NuPathe, in its press release, said Aspire made an initial investment of $500,000 by acquiring 70,721 shares of NuPathe common stock for $7.07 a share, or a 19% premium to the stock's closing price on Tuesday, Aug. 2.

The impression NuPathe's press release leaves with investors is that Aspire is so confident in the company's future that it was willing to buy stock in the company at above-market price.

Except that's not entirely true, according to NuPathe's materially different disclosure in an accompanying 8-K SEC filing.

NuPathe discloses in its 8-K (but leaves out of the press release) that the company issued 84,866 shares of stock to Aspire in addition to the 70,721 shares purchased. NuPathe calls these 84,866 shares "Commitment Shares." In other words, NuPathe gave Aspire "free" stock valued at $505,000 as an inducement for Aspire to enter into this equity purchase agreement.

The 8-K filing paints a different -- and less rosy -- picture of this equity purchase agreement than what's explained in NuPathe's press release. It's fair to say that Aspire, when the free stock is added to the purchased stock, didn't exactly invest at an above-market price.

In response to questions about the discrepancy between NuPathe's press release and its 8-K filing, CFO Keith Goldan told me that by phone Wednesday that the company could have done a better job with disclosure in its press release. In the company's defense, however, Goldan pointed out that companies routinely pay fees or financial inducements as part of financings or public offerings of stock. With the Aspire deal, Nupathe was able to negotiate a relatively low fee paid in stock rather than cash, said Goldan.

Sure, it's common practice for companies to sweeten the pot for investors in equity or debt financings. Often, a company offers discounted warrants, for example. My counter-point to Goldan, however, was that if NuPathe felt it necessary to trumpet the fact that Aspire purchased stock at an above-market price, the company should have also felt obligated to disclose the inducement it paid Aspire to make the deal happen.

Regardless, NuPathe had lousy luck since it timed the announcement of the financing with Wednesday's volatile stock market action. NuPathe fell 25% Wednesday and another 15% Thursday. I wonder how Aspire feels about those $7.07 shares now?

NuPathe is waiting word from the FDA on an approval decision for its Zelrix migraine headache patch. That announcement from FDA is expected on Aug. 29. I wrote about Zelrix in a previous Mailbag.

Back to Dendreon, Martine P. asks, "Is this a buying opportunity in Dendreon the way it was back when FDA rejected Provenge in 2007?"

Provocative question! I don't have the guts to give you a direct answer, but I will point out that Dendreon opened Thursday at $12.71, and as I type this, the stock looks like it will close around $11.94. That's not a good sign, even on a terrible, horrible, miserable day for stocks like Thursday.

I laid out most of the issues pertaining to Dendreon and Provenge in my Thursday column, but here are a few more thoughts:

As much as Dendreon insists that it's dealing with a reimbursement issue, I'd hazard to say that a majority of investors believe slacking demand for Provenge is as big a problem, if not more so. It should really worry you when you hear Dendreon say that doctors aren't identifying enough Provenge-eligible patients. That either means Dendreon's sales team is incompetent (not good) or doctors don't believe in Provenge enough to bother screening patients (really not good.)

Assuming the "cost density" of Provenge is a problem, how will getting doctors more comfortable with reimbursement make this issue go away? Even if a doctor knows that he can reimbursed quickly, he still has to lay out $93,000 for every patient he puts on Provenge. ISI Group biotech analyst Mark Schoenebaum thinks Dendreon needs to consider cutting Provenge's price (not likely) or coming up with a way to offer doctors more generous payment terms. Whether the latter solution helps solve this cash-flow problem is not clear, he adds.

Dendreon failed its first major test in the "non-supply constrained" Provenge era, and Wall Street is not likely to be in a forgiving mood for a very long time. Management credibility -- zero. That's not to say investors aren’t responsible for their own mistakes, just that it's hard to regain trust when you've lost it.

Someone, at some point soon, is going to make a brave contrarian call and buy a bunch of Dendreon. If the company manages to right its ship, that call will be profitable.

Just don't ask me when.

--Written by Adam Feuerstein in Boston.

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Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.

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