Plus, if Dendreon were to be purchased, its creditors would likely negotiate on the debt, he said.

Dendreon made several mistakes. It failed to recognize and prepare for the effects brought on by its high cost, limited reimbursement and robust competition.

Not only that, but patients and physicians had trouble embracing the drug. Prostate cancer patients like to see their PSA (prostate-specific antigen) numbers decline after treatment, and even though Provenge is working, it doesn't reduce that biomarker at first.

Sermo, a social network for physicians, conducted a survey of oncologists and urologists asking what they thought of Provenge in 2011. Respondents said the most influential factors determining whether they would use the drug were the high price tag, high copays for patients, the logistics around administering the drug, and that the clinical benefit just wasn't enough to outweigh the drawbacks.

Provenge's clinical trials showed that it beat placebo in overall survival by more than four months, but it did not show an improvement in progression-free survival.

When doctors in the Sermo poll were asked what kind of survival benefit they'd like to see in a therapy to treat late-stage prostate cancer, two-thirds said at least seven months. About one-third said one year or more.

In September, Dendreon gained approval through the European Union centralized system to market Provenge. But it hasn't got the funds to go it alone. Even though it has tried to interest a big pharma or biotech with boots on the ground in the EU in a commercial collaboration, there hasn't been any interest.

In addition to looking for partners, Dendreon's management has tried various strategies to boost its use. But, Kolbert said, the direct-to-consumer approach championed by chairman, president and CEO John Johnson, "treats Provenge too much like a small molecule drug."

"TV commercials will not turn Provenge around," Kolbert contends.

Johnson, a veteran of Eli Lilly & Co.'s oncology unit and a handful of small biotechs, joined Dendreon in August 2011.

Another major problem Dendreon encountered, and hadn't prepared well enough for, was reimbursement. It had to go through a lengthy Centers for Medicare and Medicaid review process to gain the Medicare coverage. But prior to that decision, analysts and investors were saying that it's likely Dendreon could be used off-label for other cancers. Medicare's decision was narrow, saying that it would only pay for on-label use.

Kolbert this week increased his target price on Dendreon to $10 per share, reflecting an enterprise value of about $1.5 billion. Dendreon is due to report its third-quarter sales Nov. 12.

Dendreon's shares were trading down 4.27% at $2.69 mid-day in New York.

-- Written by Pamela Taulbee in New York

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