UPDATED: Shaky Dendreon loses its CEO as debt payments loom

John Johnson

Looks like CEO John Johnson won't be around to go down with Dendreon ($DNDN) if the ship sinks. Johnson will give up his CEO post in mid-August, the company said Monday, a little more than two years after taking the job.

With big debt payments looming and Dendreon down to a skeleton crew, Johnson may be boarding a life raft just in time. The company owes $620 million in convertible debt due in 2016. The immediate threat, however, is a $27.7 million payment due in just a few days.

"The main issue here is math, and that doesn't change," Wedbush Securities analyst David Nierengarten told The Seattle Times.

In the meantime, the Seattle-based company's board has elected Douglas Watson, Dendreon's lead independent director, as chairman, and the biotech says it's working with an executive search firm to scout out Johnson's successor.

Johnson replaced Mitchell Gold as helmsman in 2012 after Provenge, a highly anticipated vaccine for prostate cancer, stumbled out of the gate. And Johnson did what he could to right the ship. He launched a new commercial strategy, pushed Provenge to European approval and cut costs, among other things. Johnson "has made many significant contributions to Dendreon," Watson said in a statement.

But Provenge continues to struggle for market share as its prostate cancer rivals soar: Xtandi, from Astellas and Medivation ($MDVN), and Zytiga from Johnson & Johnson ($JNJ) keep squeezing out the Dendreon drug. The company racked up just $284 million in sales last year, down from $325 million in 2012. And in the wake of Johnson's cost cuts, the company is looking rather slim. Its staff, once 2,000 strong, is down to about 820 after the latest round of job cuts. The company stripped out more costs in November 2013, too.

While some market-watchers suggest the cuts could be staging the company for a potential sale, others think they're taking Dendreon farther down the same downward path. And though they've helped stem losses--the company's first-quarter deficit was half of what it lost in the same quarter a year ago--they won't be enough to make up for that looming debt.

"They don't have the cash to repay it, obviously," Nierengarten told the Times. And with a market cap of about $350 million, Dendreon would find it difficult to sell enough new shares to pay off the 2016 notes, the paper points out.

All of that was enough to lead Nierengarten last summer to forecast a bankruptcy. While others analysts' outlooks have not been quite so dismal, few who peer into Dendreon's future come away with positive forecasts.

Still, Dendreon is searching for biomarkers to predict Provenge response and testing the immunotherapy in sequence with its prostate cancer rivals. And Johnson remains optimistic that the company will succeed.

"While now is the right time personally for me to transition from my leadership role, I am confident that Provenge will continue to be an important treatment option to help patients in their fight against cancer," Johnson said in a statement. "Dendreon has some of the most passionate and dedicated employees in the industry, and I know they will remain focused on the company's important mission."

- read the release
- get more from The Seattle Times

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Editor's note: This story has been updated to include debt information and an analyst quote.