Dendreon ($DNDN) shocked investors by admitting that its cancer vaccine Provenge isn't selling as quickly as expected. Sales growth is so mild, in fact, that the company yanked its 2011 sales forecast and announced plans to slash costs, partly through layoffs. In one fell swoop, expectations for Dendreon went from hot--even overheated--to cold.
The numbers are staggering, really. The company had predicted $350 million to $400 million in 2011 revenue, with much of that backloaded as it ramped up manufacturing to meet demand. But Q2 revenues came in at $49.6 million, short of analyst estimates of $57.7 million. July Provenge sales amounted to only $19 million. And CEO Mitchell Gold warned that he's expecting only modest growth quarter-over-quarter for the rest of the year.
Predictably, the company's stock tanked on the news; in after-market trading Wednesday, shares fell by more than 60%.
Gold is blaming the slowdown on reimbursement questions from doctors. It's true that the Centers for Medicare and Medicaid Services did mount a national coverage review on the drug. But for several months, we've known that CMS had proposed a full thumbs up for Provenge. July 1, that became official. It seems to us that CMS is just a convenient scapegoat; after all, pointing the finger at government officials is a spectator sport these days.
We're more inclined to side with Cowen & Co. analyst Eric Schmidt. "There's something wrong here and I don't think anyone really knows exactly what it is," he said, as quoted by Reuters. With Dendreon speaking vaguely about "gradual" growth rather than in hard numbers, Schmidt adds, "[T]here's little visibility about where this drug is going over the next several quarters." As The Street points out, it's hard to imagine the company bringing in much more than $200 million by year's end.
Muddying the waters further is that Gold unloaded $1 million worth of Dendreon stock last month--about the time the company scheduled its earnings release. Some of those sales were automatic, BNet Pharma reports, but not all.