Nov 10, 2014 9:23 AM

Dendreon files for Ch. 11 bankruptcy protection

The Associated Press

Prostate cancer drug developer Dendreon is seeking Chapter 11 bankruptcy protection with a plan that leads to either a sale of the company or a takeover by its lenders.

The Seattle company listed more than $664 million in total debts and $364.6 million in assets in a U.S. Bankruptcy Court filing Monday. Its largest creditor is Bank of New York Mellon, which holds $620 million in notes.

Dendreon Corp. makes the prostate cancer treatment Provenge. It said Monday that its restructuring will allow for the continued delivery of the drug to doctors and patients. The drugmaker also said it has enough cash to support all operations during its restructuring.

The company has reached agreements on the terms of a financial restructuring with investors holding about 84 percent of $620 million in notes due in 2016, it said.

The company will attempt to sell itself to a buyer that would continue to produce Provenge. If it receives no qualifying bids, the lenders will convert their debt to equity and take over Dendreon, which would then become a privately held company.

The drugmaker's financial troubles stem from Provenge, its first commercially approved drug. Analysts initially expected the drug to ring up billions of dollars in annual sales after it was launched in 2010.

The drug represented a first-of-a-kind treatment in that each dose is customized to use the body's own immune system to fight cancer. That contrasts with traditional chemotherapy drugs that attack cancerous and healthy cells at the same time.

Dendreon racked up debt as it prepared introduce what many expected to be a blockbuster, yet the sales never materialized. Provenge generated only $283.7 million in revenue last year, which was less than the $325.3 million the drug generated in 2012.

The tremendous cost of the drug paired with limited benefit and reimbursement rates have proven significant headwinds.

The drugmaker went through a series of staff and cost-cutting measures over the past few years after it became clear that revenue growth would take more time than it anticipated, said Robert Crotty, the company's general counsel, in a declaration filed in U.S. Bankruptcy Court.

By early summer it had become clear that cutting costs alone would not make the company "independently viable with its existing capital structure," Crotty wrote.

Dendreon warned shareholders in August about its debt load and said then that it was considering alternatives that could wipe out their ownership. The company said then that there was a "significant risk" that it would not be able to repay or refinance the 2016 notes.

Shares of Dendreon shed most of their value Monday, sinking 70 cents to 24 cents in afternoon trading. The stock had slipped below $1 earlier this fall and has tumbled most of this year after closing 2013 at $2.99.


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