Dendreon's sudden fall from grace offers biotechs a tough lesson
Last year Dendreon was one of the biotech industry's leading examples of the kind of transformational change that can occur at a drug developer when it hangs on to U.S. rights to an innovative new treatment. Today, it's more of a cautionary tale about the perils of drug marketing and over-promising results. The company has shocked analysts and investors alike with soft sales figures and an uncertain forecast for its breakthrough prostate cancer vaccine.
Dendreon had surprised some industry observers with an aggressive, $93,000 sticker price for a full course of Provenge. The biotech now says that price has also caused second thoughts among the community oncologists who have to buy the high-priced drug--even though Medicare has clearly signaled that the drug will be reimbursed. In a less-than-satisfying explanation, Dendreon claimed the docs are feeling uncomfortable about the possibility of being left on the hook. And they can't afford that kind of hit.
Minutes after the stock started trading in after-market hours, its shares went into a meltdown, eventually plunging 64% and erasing $2.5 billion in market value as analysts tried to figure out where they stood and what had prompted such a complete shift in tone.
"Given management's confident tone just weeks ago, and our own checks, this is a shock," Robert W. Baird & Co.'s Christopher Raymond told the Wall Street Journal.
As Forbes' Matthew Herper notes this morning, some like Brad Loncar have fretted about Dendreon CEO Mitch Gold's penchant for bullish remarks. Now they're dropping the last three letters from bullish.
Wall Street hates a nasty surprise. For ambitious biotechs looking to follow along Dendreon's path, that's a lesson they should take to heart.