The beleaguered prostate cancer vaccine company filed for voluntary federal bankruptcy protection Monday and reached an agreement with holders of $620 million in convertible debt in which the bondholders will receive equity for the debt owed, potentially wiping out current equity shareholders. Dendreon will also try to sell the company. During the restructuring, Dendreon will continue to sell Provenge, the prostate cancer vaccine.
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) .
Provenge revenue reached $287 milliion 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.
Monday, Dendreon filed for Chapter 11 bankruptcy protection in a Delaware federal court.
The company listed debts of more than $664 million and assets of more than $364 million in the bankruptcy filing, cited by Bloomberg.
Ahead of the bankruptcy filing announcement, Dendreon shares closed Friday at 94 cents. The stock has lost 97% of its value since the January 2011 debt offering.