) --



will announce a business update this afternoon that is expected to include cost reductions, including employee layoffs, aimed at helping the company reach break even with lower sales of its prostate cancer therapy Provenge.

The surprise disclosure in August that

Provenge sales were weaker than expected

forced Dendreon to pull its revenue guidance for the remainder of the year and restructure the company.

Dendreon's stock price was punished severely for the Provenge mishap, with shares down 68% since the company reported disappointing second-quarter results. Dendreon closed Wednesday at $11.61.

Dendreon is holding a conference call Thursday after the market close to update investors for the first time since early August.

"We believe Dendreon needs to make layoffs primarily in manufacturing headcount to lower SG&A from current $390-$400 million run rate down to $300 million annually and eventually hit annual sales of $500-$700 million to become cash-flow break even," writes RBC Capital Markets biotech analyst Michael Yee, in a note to clients Thursday.

Dendreon blames the "cost density" of Provenge for the setback, which is jargon for doctors unwilling (or unable) to shell out $93,000 for a treatment course of Provenge before receiving reimbursement from their patients' insurance companies.

Provenge is certainly not the only high-priced cancer drug, but when prescribing Provenge doctors are on the hook for a lot of money ($93,000) in a relatively short period of time.

That's the "density" issue. By contrast, the cost and reimbursement risk of other high-priced cancer drugs --



Avastin, for example -- is spread out over many months, even longer.

Dendreon hopes that a recently implemented Medicare "Q code" will accelerate Provenge reimbursement for doctors. In August, Dendreon said many doctors were not yet aware of the new Q code and that one of the company's main tasks moving forward would be to educate doctors that Provenge need not be a financial burden on the business side of their medical practices.

Many investors and analysts, however, believe sluggish demand for Provenge and not reimbursement issues is what's really causing Dendreon's problem. Recent doctor surveys have shown lukewarm interest in Provenge by doctors, some questioning Provenge's efficacy and survival benefit claims.

Sanford Bernstein biotech analyst Geoff Porges initiated coverage on Dendreon Wednesday with an underperform rating and an $8 price target, in part because of less-than-encouraging feedback on Provenge from doctors he consulted.

"While we did encounter some high-volume prescribers of Provenge, the general trend we find is that urologists see the limited indication, high price tag, reimbursement risk, complexity of treatment, and lack of PSA response as major hurdles for prescribing the drug," wrote Porges in his research note. He added, "Oncologists, more comfortable with using infused and often expensive therapies, are more positive about Provenge but also see more severe patients many of whom are


from Provenge treatment."

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Emphasis his.

Provenge is also facing competition from other prostate cancer drugs, most notably

Johnson & Johnson's

(JNJ) - Get Johnson & Johnson (JNJ) Report

Zytiga. On the horizon as a potential competitor is



prostate cancer drug MDV3100.

On its conference call Thursday, Dendreon may also provide a more detailed update on Provenge sales for the rest of the year. The company previously disclosed July sales of $19 million and said August sales were higher than July.

Dendreon withdrew its guidance calling for Provenge sales in the range of $350 million to $400 million for 2011, saying only that the company expected "modest" growth in Provenge during the third and fourth quarters.

The current analyst consensus calls for Dendreon to post Provenge sales of $64 million in the third quarter and $220 million for 2011. Before the blowup, the Provenge sales consensus for 2011 was $370 million.

--Written by Adam Feuerstein in Boston.

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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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