Ahead of the Bell: Dendreon cuts deemed necessary

AP News
Posted: Sep 09, 2011 8:38 AM
Ahead of the Bell: Dendreon cuts deemed necessary

Dendreon Corp.'s announcement that it will cut 500 jobs was a necessary step, but long-term concerns remain regarding the drug company's only marketed product, the prostate cancer therapy Provenge, according to a Citi analyst

The Seattle company said after the markets closed Thursday that it will eliminate more than a quarter of its work force as it reduces costs to compensate for disappointing sales of Provenge, which is designed to train the immune system to fight cancer.

Dendreon said sales of Provenge grew to $22 million in August from $19 million in July. Net sales were about $120.5 million through August.

The company once expected sales to reach $350 million to $400 million in 2011, with most of that revenue coming in the fourth quarter. It now expects much slower growth and said concerns about government reimbursement are hurting sales. A round of treatment with Provenge costs $93,000, and Medicare only recently confirmed it will cover the therapy.

Analyst Dr. Lucy Lu said in a Friday morning note that Provenge's issues also stem from a lack of demand given the treatment's complex administration and difficulties identifying appropriate patients, among other concerns.

"In the long term, we believe (Provenge) may face competition as treatment for prostate cancer is changing and patients will have alternative treatment options with comparable efficacy, lower cost, easy administration, and ability to monitor the treatment effect," Lu wrote. "Therefore, we continue to stay on the sidelines awaiting more clarity on the ultimate market share the product will have."

Lu rates shares of the company "hold/speculative."

Dendreon shares slipped 24 cents, or 2.2 percent, to $10.64 in premarket trading. They are near the lower end of their 52-week range of $9.22 to $43.96.