Dendreon failed to live up to expectations for its new prostate cancer drug, and now it is facing some brutal consequences. The Seattle-based biotech company (NASDAQ: [[ticker:DNDN]]) saw its stock plummet about 60 percent in after-hours trading today after it issued a surprisingly bad second-quarter financial report.
The loss, if it holds up in tomorrow’s trading, would erase more than $2.5 billion of the company’s market valuation.
All that turmoil roiled the market after Dendreon said it has to withdraw its forecast of $350 million to $400 million in full-year sales for sipuleucel-T (Provenge), and that it was unable to offer any revised projection in its place. The company generated $49.6 million in sales in the quarter ended June 30, plus another $19 million in the month of July, which was “substantially” lower than its internal forecasts, CEO Mitch Gold told investors on a conference call. As for guidance, the company only said it expects “modest quarter-over-quarter” growth. The shortfall means that Dendreon is now planning to cut costs, including make some staff layoffs, this quarter.
Dendreon’s CEO obviously had a lot of explaining to do on this call to a group of surprised and frustrated analysts. The company’s sales trajectory has been limited since FDA approval in April 2010, largely because of manufacturing constraints. But those supply limitations are easing now, and Dendreon said it is still unable to quickly ramp up sales because many doctors are cautious about whether they will get reimbursed, and whether they will get reimbursed in a timely manner, when they prescribe the new drug for $93,000 per patient. Even though Medicare said on June 30 that it has agreed to fully reimburse doctors, and it established a special code to speed up the process, many doctors in community treatment centers are still unaware that the process has been streamlined, and they are taking a wait-and-see approach one patient at a time before they get comfortable with the new reimbursement methods, Dendreon said.
Gold, who is well known for bold, even brash statements about the company’s ability to change the lives of patients with this new drug, sounded almost contrite in his conference with analysts. Still, he insisted that it is only a matter of time before Dendreon fixes this situation, and fulfills its potential.
“Many of you have followed Dendreon for a long time,” Gold said. “You’ve seen us overcome challenges many other companies have never had to face. We will overcome these challenges as well.” He added: “We appreciate your support in the past, the present and the future.”
After the company was done explaining itself in a 90-minute conference call, Dendreon stock fell $22.48, or about 63 percent, in after-hours trading to $13.36 at 6:47 pm Eastern time.
The problem, Dendreon said, is primarily happening with small community-based physicians, not the usual top academic centers that have been familiar with the product for years in clinical trials. The product, prescribed by both urologists and oncologists, essentially requires the physician to adopt a new process with an infusion given three times in one month, and that works unlike any other prostate cancer drug on the market. It requires physicians to get more aggressive about treating patients who previously haven’t gotten much therapy, Gold said.
“In many ways, we are building an entirely new market,” Gold said.
There was also an unusual amount of reimbursement uncertainty. Doctors in the first year were required to go through a lot of red tape, recording diagnostic markers like
