Dendreon slashed its sales forecast for 2011 Wednesday after reporting lower than expected second-quarter net revenue of $49.6 million.
This year was supposed to be one of meteoric growth for Dendreon.
Seattle’s largest biotech company already had rocketed in less than two years from 180 employees to about 2,000.
It was in the midst of rolling out its prostate-cancer treatment, Provenge, after years of gains, setbacks and delays.
JPMorgan’s biotech team proclaimed the stock “our top pick for 2011.”
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Then Wednesday, it fell swiftly out of favor.
Dendreon slashed its 2011 sales forecast, said layoffs are coming and posted second-quarter gross revenue of $51 million, about $7 million short of analysts’ expectations.
Investors quickly lopped $3.2 billion from the market capitalization of what had been Seattle’s most valuable biotech, as well as its latest hope for a local industry star to replace the bygone Immunex and Icos.
Dendreon’s shares plunged in after-hours trading after the news, dropping $22.24, or 62 percent, to $13.65.
The company will have layoffs “across the board,” although most will be at manufacturing facilities in New Jersey, Georgia and California, said CEO Mitch Gold.
Getting details about layoffs is “the most important question to employees, and we’re working to resolve that rapidly,” he said.
Gold declined to say how many people work at Dendreon’s headquarters and research offices in Seattle.
In February, the company laid the groundwork for expected growth by leasing eight floors near the top of downtown’s prominent Russell Investments Center, formerly the WaMu Center, and 97,000 square feet of research space at the Earl Davie Building in South Lake Union.
Dendreon received federal approval in April 2010 for Provenge, an immunity-boosting treatment for late-stage prostate cancer that involves goosing up a patient’s own blood with the company’s proprietary technology, then reinjecting it.
Provenge costs about $93,000 for a three-stage course of treatment that on average extends life by four months.
On Wednesday, Dendreon withdrew its earlier guidance to investors of $350 million to $400 million in revenue for 2011 and said it instead expects only “modest” growth. For the first six months of the year, its gross revenue was $79.9 million.
Sales are slow because, although doctors are signing up at a fast clip to prescribe Provenge, they aren’t actually using it at the pace Dendreon expected, officials said.
A look at 17 large urology and oncology practices found 1,000 patients eligible for Provenge but only 10 percent receiving it, Gold said on a conference call with analysts.
Some doctors are concerned about whether and how quickly they will be reimbursed by insurance companies, Gold speculated.
Some also need help deciding which patients are eligible, he said. And Dendreon needs to improve customer service so that Provenge is easier to access.
During a question-and-answer session, a couple of analysts said they found it hard to believe that reimbursement issues are just now surfacing.
Gold said it’s because of doctors outside academic research centers, who are new to Provenge and particularly how it is handled by Medicare.
The doctors treat one or two patients to see how the reimbursement works before ramping up to more patients, he said.
“It’s an interesting medical-ethics issue,” said David Miller, CEO of the Seattle investment research firm Biotech Stock Research, who owns Dendreon shares. “Dendreon can make enough Provenge to serve anyone who wants it, but because of [medical] practices’ cash-management issues, they’re not getting this drug that could potentially extend their lives.”
In a phone interview, Gold said medical practices are under a lot of financial pressure and have to remain economically viable.
Medicare recently made reimbursement for Provenge faster, among other things. Gold said that will increase the number of patients who receive it.
But no one expects Dendreon to reach earlier projections of more than $1 billion in sales in 2013.
Christopher Raymond, an analyst at Robert W. Baird in Chicago, told investors in a note that Dendreon was previously expected to double Provenge sales in the third and fourth quarters to reach its target of more than $350 million.
“Depending on the definition of ‘modest,’ this new guidance could infer revenue of under $200 million for fiscal year 2011,” he wrote.
Bloomberg News contributed to this story.
Melissa Allison: 206-464-3312 or firstname.lastname@example.org