Valeant Pharmaceuticals (VRX) announced late Thursday a tentative deal to acquire the assets of Dendreon -- mostly its prostate-cancer vaccine Provenge and manufacturing facilities -- for $296 million in cash.
Dendreon filed for Chapter 11 bankruptcy protection in November because Provenge sales of around $300 million annually were not sufficient to generate profits or repay $620 million in convertible debt due next year. The bankruptcy wiped out Dendreon's equity shareholders. If the Valeant deal goes through, even Dendreon's creditors will be only partially repaid.
I wrote Dendreon's obituary in November after the bankruptcy filing. Here it is again, for those who missed the sad story:
The end of Dendreon was forged in January 2011 when CEO Mitch Gold and his team decided to raise $540 million in convertible debt to finance the commercial launch of Provenge, including the construction of new manufacturing facilities in the U.S. and Europe. The company chose to finance growth with debt instead of raising money by selling more stock, which was trading in the mid-$30s at the time.
Big mistake. By August 2011, Dendreon had already blown up, announcing a shortfall in Provenge quarterly sales and renouncing long-term sales guidance. The problem wasn't necessarily Provenge's $93,000 price tag but a quirky billing process which put doctors on the hook for the full cost of the prostate cancer vaccine before reimbursement from insurance companies. For this reason, doctors never fully embraced Provenge and sales disappointed. Dendreon wasn't helped by the introduction of competing and more effective prostate cancer therapies from Medivation (MDVN) and Johnson & Johnson (JNJ) - Get Report .
Provenge revenue reached $287 million in 2013 but was never enough to fund the company's growth plans and service the debt. CEO Gold left shortly after the August 2011 blow up, replaced by John Johnson, who promised a turnaround. He never delivered and left the company earlier this year without ever dealing with the debt issue. In August, Dendreon warned the debt, ballooned to $620 million and coming due in 2016, might wipe out shareholders.
Despite its failure, Dendreon was a cancer immunotherapy pioneer, and so it's interesting to note that the company's assets are being bought in what amounts to a rummage sale while investors elsewhere are going ga-ga and paying top dollar for other cancer immunotherapy stocks such as Juno Therapeutics (JUNO) . Even crazier, Juno is run by Hans Bishop, the former chief operating officer of Dendreon. Juno's executive in charge of research and development, Mark Frohlich, is also a Dendreon alum.
The circle of life.
Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback;
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