Dendreon Corp. (DNDN), maker of the prostate-cancer drug Provenge, fell the most ever in Nasdaq trading after the company withdrew its 2011 revenue estimate and said sales of the medicine didn’t meet projections.
The Seattle-based company plunged $24.15, or 67 percent, to $11.69 at 4 p.m. New York time in Nasdaq Stock Market composite trading, the biggest single-day decline since the company’s initial public offering in June 2000. The company was the worst performer on the Russell 3000 Index. (RAY) Analysts at RBC Capital Markets, Robert W. Baird & Co. and Brean Murray Carret & Co. downgraded the stock.
Chief Executive Officer Mitchell Gold said in a statement yesterday that Dendreon was educating doctors about the $93,000 treatment and a decision last month by the U.S. Medicare and Medicaid programs to pay for the drug. The announcement was “a shocking about-face,” said Christopher Raymond, an analyst at Robert W. Baird in Chicago, in a note to investors today.
“Management now highlights significant headwinds that hadn’t been seen or discussed just weeks ago,” said Raymond, who lowered his rating to “neutral” from “outperform.” “We still believe in Provenge long term, but shorter-term, prefer to watch the real trajectory on the sidelines.”
Dendreon previously estimated annual revenue of $350 million to $400 million. The company believes the market size for Provenge is substantial, though it expects only modest increases in sales each quarter for the remainder of the year, Gold said in the statement.
The main stumbling block for Provenge is the lack of knowledge about insurance coverage, he said. The Centers for Medicare & Medicaid Services issued a final ruling in June saying the $93,000 treatment is “reasonable and necessary” for men with advanced, prostate tumors resistant to hormone therapy who have minimal or no symptoms.
The agency’s decision “will have a significant impact on increased physician adoption,” Gold said in the statement. “However, we believe this will take time, and for the remainder of 2011, the launch trajectory will reflect a more gradual adoption of Provenge as physicians gain confidence in this positive reimbursement landscape.”
Provenge, the first approved therapy that trains the body’s immune system to attack cancer cells as if they were a virus, generated $48 million last year. Analysts surveyed by Bloomberg forecast revenue hitting $370 million this year if the company boosts its capacity by expanding a New Jersey plant and adding new manufacturing sites in Los Angeles and Atlanta.
“Dendreon is a clear disappointment,” said Eric Bernhardt, head of health care at Bellevue Asset Management AG, a biotechnology investment firm in Kuesnacht, Switzerland. “I think it’s a bit short-term but in this market people sell now and ask questions later.”
Tricia Larson, a spokeswoman for Dendreon, declined to comment on today’s share performance.
Dendreon will reduce its expenses and eliminate positions to meet the lower demand for the product, Gold said yesterday. The company didn’t specify how many jobs would be lost.
The company reported a second-quarter loss of 79 cents per share, greater than the 71 cents average estimate of 20 analysts surveyed by Bloomberg. Sales of Provenge were $49.6 million, short of the $57.7 million analysts expected.
Falling short on earnings was disappointing and pulling the forecast for the entire year is worse, Raymond said in a note to investors. The previous estimate assumed sales of Provenge would double in the third and fourth quarters, he said.
“Depending on the definition of ‘modest,’ this new guidance could infer revenue of under $200 million for fiscal year 2011,” he wrote.
Dendreon had gained 5.9 percent in the past 12 months before today’s trading.
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