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Analyst makes a dramatic apology, abandons last line of Dendreon defense

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Dendreon is running out of friends. ISI Group's Mark Schoenebaum has been one of the few optimists when it comes to the biotech's ($DNDN) struggle to sell Provenge. But even Schoenebaum couldn't stay upbeat in the face of Dendreon's first-quarter numbers for Provenge, which has proved a tough sell in the prostate cancer market. And Schoenebaum responded with a remarkable mea culpa for a Wall Street analyst.

Technically, Schoenebaum moved from a "buy" to a "hold" strategy on the stock--a distinct vote of no confidence. As for his earlier support, Schoenebaum called it the "worst call of my 13 year career--by far." Here's the note, in full:

"Given DNDN's disclosure yesterday that 1Q consensus Provenge sales estimates are too high, we think it's prudent to move to a Hold rating. As a reminder, the company's CFO yesterday explicitly said that 1Q consensus sales estimates need to come down. Previously, the company had commented that 1Q sales would be sequentially below 4Q sales - but the company appears to be saying that the decline could be far more significant than the Street is currently estimating. In fairness, the company has said that they expect Provenge to return to a state of growth post-1Q (e.g. DTC ads to begin) - however, at this point, we feel we have limited visibility into 2Q and beyond sales (competition is only intensifying, for example) and, thus, we can't in good conscience continue to carry a Buy rating. Our new model yields a stand-alone DCF fair value of ~$4-$5; in a take-out situation, the stock could be worth ~$10 - however, we don't think an acquisition is likely in the near term. But the longer-term possibility of a take-out could help support the stock a bit. Clearly this stock has not been a good call for me over the past ~2 years. In fact, it's been the worst call of my 13 year career - by far (yes - even worse than NABI in 2005). We all make mistakes, but this mistake bothers me more than all others since, in retrospect, I really did have all the information in front of me I needed in 2011 to be suspicious of eventual Provenge uptake. But, alas, for reasons that will forever elude and haunt me, I missed it . . . . And, for this, I apologize." -- John Carroll (email | Twitter)

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