The steep fall in Dendreon's ($DNDN) share price appears to be sending investors running scared from some other biotech stocks, causing what MarketWatch's Val Brickates Kennedy called the "Dendreon Effect."
It works both ways. Dendreon's FDA approval of prostate cancer vaccine Provenge last year gave people faith in the risky biotech sector, but recent disappointing sales of the drug might have stoked fears about other companies advancing new treatments. MarketWatch reports that biotechs whose stocks have taken heavy hits include those that, like Dendreon, are at early stages of marketing new treatments. Those companies include Human Genome Sciences ($HGSI), InterMune ($ITMN) and Savient ($SVNT).
"Pretty much every company that had just launched a product or was about to launch a product got crushed," Leerink Swann analyst Howard Liang told MarketWatch.
Even Vertex's stock ($VRTX), despite the firm's successful launch of hepatitis C drug Incivek, was down about 7% for the month of August, according to data from Google Finance.
The red flag raised in Dendreon's quarterly report comes at a particularly bad time, as there are already fears in the market about the overall economy. And jitters about the economy have generally hurt biotech stocks, which are viewed as risky on Wall Street. This is evident in the NYSE Arca Biotechnology Index's 18.5% drop this month, when the S&P 500 is down 11.7%, according to MarketWatch.
- read the report from MarketWatch