Dendreon's Provenge Problems Reach Terminal Stage
Updated with new stock price.
Ouch! A painful second quarter. Yes, Dendreon announced the big expense cuts, including the shutdown of a Provenge manufacturing facility, for which Wall Street clamored. But (isn't there always a "but" with Dendreon?) Provenge sales in the quarter tanked, falling more than 2% sequentially to $80 million and instantly raising legitimate questions about slowing demand for the prostate cancer immunotherapy in the face of new competition.
Dendreon shares sank 19% to $4.99 in Tuesday mid-day trading amidst multiple analyst downgrades. The last time Dendreon traded this low was in 2009 before Provenge was approved.
Give Dendreon's new CEO John Johnson some credit for rightly calling his company's performance unacceptable. But what followed from there on Dendreon's conference call were a litany of lame excuses and sketchy turnaround plans that only served to underscore Dendreon's precarious perch in the biotech universe.
Amazingly, we are just four days shy of the one-year anniversary of Dendreon's last epic fail. Does anyone remember second quarter 2011 when former CEO Mitch Gold admitted that Provenge's sales growth was being hampered by "cost density" and insurance reimbursement problems?
David Miller of Biotech Stock Research -- a stalwart Dendreon bull -- remembers well but says Monday's issues are far worse:
"Well, that was ugly. To our ears, this conference call was much worse than the one we endured last August," wrote Miller in a research note to his investor clients. "The debacle last August was unexpected to most, but we saw a clear path towards fixing it… Now let's move forward a year. We have a new CEO and, apparently, a brand new commercial team from the top down. We've ping-ponged from a commitment to urology to a commitment to everything. Another 600 people have lost their jobs and were down one manufacturing plant. Worse, Dendreon is shooting for break even instead of a blockbuster. Well, they'll be lucky to hit breakeven after what we heard today."
So, how bad off is Dendreon? So bad that the company actually managed to drive away the one analyst -- Miller -- who knows more about the company than just about anyone and who's stuck with them through the worst of times. That's how bad.
A few more thoughts and questions: