Dendreon drug delayed; layoffs may be coming

Seattle-based Dendreon could face layoffs now that the approval of its prostate-cancer drug has been delayed for as long as three years.

Analysts predicted the company would cut anywhere from a handful of marketing employees to half of its 250-person work force.

Dendreon's shares plunged nearly 65 percent Wednesday, wiping out almost $1 billion in market value, after the U.S. Food and Drug Administration said more information is needed to approve Provenge, the company's first potential product.

The news pushed Dendreon's stock down $11.41 to close at $6.33. It started the year at $4.17 and climbed as high as $23.58 April 9, after a panel of FDA advisers recommended approval of Provenge.

About 132 million shares of Dendreon traded Wednesday, a volume 1 ½ times the total number of shares issued.

Dendreon said in a statement that it's seeking clarification on the FDA's request for more proof of Provenge's effectiveness. But company officials did not say how the delay will affect its strategy or work force.

Dendreon anticipated hiring up to 125 people to sell Provenge but had not made most of those hires yet, spokeswoman Monique Greer said. She wouldn't comment on the possibility of layoffs.

Analyst Liisa Bayko with Next Generation Equity Research in Chicago said it's likely the company will shrink both its sales force and its research-and-development spending. She downgraded Dendreon's stock from "buy" to "sell" and lowered her price target from $25 a share to $5.

Dendreon said it had $106 million in cash and investments at the end of December. That's enough to last the company until it can get an interim look at results from an ongoing survival study in the second half of 2008, said David Miller, president of Biotech Stock Research, an independent equity research firm, in a note to clients today.

Miller said the company will probably conserve cash by cutting half of its work force of 250 employees.

But analyst Paul Latta of McAdams Wright Ragen in Seattle said if the company cuts any workers at all, it will likely be only a few people in its marketing department.

If the FDA wants to see data from Dendreon's ongoing clinical trial before considering approval of Provenge, the company would need to increase its research-and-development spending instead of cutting costs. That trial is enrolling, with final results not expected before 2010.

"It's a setback, but I guess the important thing to remember here is the drug is not rejected," Latta said.

Provenge is part of a new family of immunotherapy drugs that trigger the immune system to attack malignant tumors. While Provenge prolonged lives in advanced cases in one study presented to an FDA advisory panel this year, the drug didn't meet the trial's primary goal of slowing the spread of the disease.

"We are disappointed that this decision will cause a delay in the availability of Provenge for patients who suffer from advanced prostate cancer," said Mitchell Gold, president and chief executive officer of Dendreon.

"We are committed to working closely with the FDA to resolve these questions in a timely and efficient manner."

Steve Fleischmann, a Seattle prostate-cancer patient and advocate of Provenge, said he was so upset by the news of the drug's delay that he plans to organize a campaign to change the FDA's decision.

Fleischmann said he'll set up a Web site to gather e-mails from people across the country who think the drug should be given immediate approval. He'll then send those e-mails to the FDA.

"The fact that this didn't get approved takes so much of the wind out of my sail," said Fleischmann about the effort to get immunotherapy drugs approved.

The FDA also asked Dendreon for information on the chemistry and manufacturing of the drug. In a statement, FDA spokeswoman Karen Riley said some members of the advisory committee "raised issues about the strength of the data" supporting the drug's effectiveness.

Analysts estimated that Provenge had U.S. sales potential of about $1 billion a year. Dendreon's only other product in clinical development is an immune-stimulator against breast cancer.

Many investors had been betting Dendreon would fail to win approval. About 33.9 million shares were held in a short position in April, more than double the number in January, according to data compiled by Bloomberg News.

Short-sellers try to profit by borrowing stock, selling it, buying back cheaper shares later and pocketing the difference.

Dendreon CEO Gold sold 202,000 of his shares in the company April 2, after an FDA advisory panel voted 13-4 in favor of approving Provenge on March 29. The sale was worth about $2.7 million, at prices more than double from the previous week before the advisory panel's vote.

The stock sold represented about 20 percent of Gold's holdings in the company, spokeswoman Greer said. It was the first time Gold has sold shares in the company, she said in April.

Provenge extended patients' lives with few side effects in smaller clinical trials, and Dendreon had hoped it could become an immediate new option for the disease, which kills 27,000 men a year in the U.S.

This report was written by Seattle Times reporter Kirsten Orsini-Meinhard and Bloomberg News reporter Luke Timmerman.

Kirsten Orsini-Meinhard: 206-464-2391 or kmeinhard@seattletimes.com