Bank of America Downgrades Dendreon to Underperform

Shares of biotech firm Dendreon

have plunged on Wednesday after

downgraded the stock from Neutral to Underperform. The analysts titled the report, "Not comfortable short term or long term," sending shares skidding more than 6% in mid-day trade. In downgrading the stock, the analysts cited "concerns that Provenge demand will underperform expectations for the next several quarters, that the business will not reach profitability unless demand picks up meaningfully from current levels, and that a take out valuation on this base assumption does not represent significant upside risk from current levels." Dendreon's sole marketed product is Provenge, a prostate cancer treatment. In the past, Provenge had been hailed as a revolutionary treatment, but concerns over the company's ability to market the drug and its high cost have dampened enthusiasm considerably. In the wake of Provenge being approved by the FDA on April 29, 2010, the stock hit an all-time high above $50.00. Today, DNDN shares trade hands for around $6.25. Bank of America lowered its price objective on the stock from $13 to $6 and the analysts wrote that their probability weighted DCF model puts Dendreon's estimated take out valuation at $8 per share. In justifying the new $6 price objective, the analysts said that in their view, the probability of Provenge reaching peak sales of $600 million in the United States has fallen from 70% to 50%. Year-to-date, DNDN shares have lost over 17% and the stock continues to have a heavy short interest, with more than 22% of the float sold short.