Dendreon Takes Huge Hit, Stock Tanks 60% on Sales Shortfall
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a patient’s PSA score, and then had to endure lots of uncertainty about whether they’d get reimbursed for an expensive medicine, Gold said. And while Dendreon has insisted that the $93,000 price is in line with other cancer drugs, many of the other products reach that price over months or years, not a single expensive month, like Provenge does. The phenomenon, in which so much of the cost is at the front end of the treatment process, makes Provenge a product with high “cost density” which has made physicians wary, Gold said.
This is a big deal for Dendreon, because it will need to win over community physicians in a much bigger way, and go far beyond a few rarefied academic centers, if it wants to reach the multi-billion dollar sales potential that many analysts have predicted. Gold insisted that the market size hasn’t changed, just that it will take longer to grow than the company predicted.
“We see this as a shift of the growth curve to the right,” Gold said.
Dendreon didn’t say how deep its cost-cutting will have to go, or how many people it will need to axe from the payroll to counteract the slow product launch. The company said in its most recent quarterly report that it had about 1,915 employees as of June 30.
Analysts will surely start penciling out how deep the cuts will need to go in order to preserve Dendreon’s existing cash position. The company had about $674 million in cash and investments on hand at the end of June, and burned through about $106 million of its cash reserves in the most recent quarter ended June 30, according to Greg Schiffman, the company’s finance chief. Assuming a cash burn rate of about $30 million a month, if nothing changes, the company has about six quarters worth of cash on its books to run the business, he said.
The cuts will come during this quarter, to provide clarity as soon as possible for investors and employees, Schiffman said.
Dendreon, in its summary of the quarter, pointed the blame mostly at itself. The company needs to educate physicians about how the reimbursement process has been streamlined, it needs to do more to help doctors identify the patients who are candidates for the product, and it needs to “streamline the customer experience” to make it easier for doctors and patients, Gold said.
David Miller, an analyst with Biotech Stock Research in Seattle, summed up the situation in a line. “Docs are not prescribing Provenge until they are certain they are going to be reimbursed.”
And analysts on the call made it clear they aren’t going to be making bullish sales projections anymore, at least until they start seeing real evidence that more doctors around the U.S. are prescribing the new treatment with confidence that they will get paid.