Dendreon ( DNDN) dropped a liquidity warning bomb in its latest 10-Q filed Monday night:
Here's the relevant passage, under the heading " Liquidity Risks and Uncertainties":
Based on our currently anticipated operating results, however, and even assuming the realization of future expense reductions that we plan to make and product revenues that we forecast, there is a significant risk that, while we believe we have sufficient cash to meet our ordinary course obligations for at least the next twelve months, we will not be able to repay or refinance the 2016 Notes. Accordingly, we are currently considering alternatives to the repayment of the 2016 Notes in cash, including alternatives that could result in leaving our current stockholders with little or no financial ownership of Dendreon. Our Board of Directors will consider any strategic alternatives that might be presented by third parties, though there can be no guarantee that any such alternative will provide value for the Company’s stockholders. [Emphasis mine.]
Dendreon's balance sheet is burdened by $620 million in convertible debt maturing on Jan. 15, 2016. The conversion price for the debt is $51.24, which is obviously well above Dendreon's current stock price of $2.12 per share. With sales of Dendreon's Provenge prostate cancer therapy continue to struggle, the company will need to repay the $620 million in debt using cash -- or find an alternative that will wipe out the equity of current shareholders.
Consider yourself warned.
Hat tip to the blog Credit Bubble Stocks for first highlighting Dendreon's new debt disclosure and for Michelle Leder of Footnoted for tweeting about it.