Dendreon CEO jumps ship as foundering company faces debt pileup

John Johnson

Things haven't been pretty for Dendreon ($DNDN) since its highly anticipated prostate cancer vaccine Provenge stumbled out of the gate. Now that disappointing sales, increased competition and cost-control struggles have taken their toll, the Seattle-based company is up against a mountain of debt. But CEO John Johnson won't be around to help right the company's course.

As Dendreon announced Monday, Johnson will exit the CEO role in mid-August, just over two years after taking the reins from predecessor Mitchell Gold. Lead independent director Douglas Watson will step into the chairman's spot as Dendreon searches for someone to fill Johnson's shoes.

Whoever that is will have their work cut out for them, with $620 million in convertible debt due in 2016--a sum Dendreon just doesn't have the cash to repay, Wedbush Securities analyst David Nierengarten told The Seattle Times.

"The main issue here is math, and that doesn't change," he said. And a market cap of about $350 million will make it difficult for the biotech to sell enough new shares to pay off the notes, the paper points out--especially considering that there's another payment, this one for $27.7 million, due in just a few days.

Dendreon has become somewhat of a cautionary tale for cancer vaccine makers, proving that success in the clinic doesn't necessarily equal success with investors. Despite its status as a pioneer of immunotherapy, Provenge's whopping $93,000 price tag, as well as its so-called "price density issue"--the notion that cancer doctors would be on the hook for those costs until reimbursement came through--helped do the vaccine in. Ill-timed competition from oral competitors Zytiga from Johnson & Johnson ($JNJ) and, later, Xtandi from Astellas and Medivation, hampered uptake further.

While Johnson did what he could for the company--including "launching a new commercial strategy, gaining marketing authorization in the European Union, increasing manufacturing efficiencies, significantly lowering costs, and advancing our clinical pipeline," Watson said in a statement--it wasn't enough to get sales going. Dendreon's top line tallied $284 million last year, down from $325 million the year prior.

In addition, cost cuts and layoffs have more than halved the company's workforce, and rumors late last year said the company was scouting around for a buyer. All of this has led Nierengarten to stand by his August 2013 prediction that bankruptcy lies in the company's future.

Still, Dendreon is searching for biomarkers to predict Provenge response and is testing the vaccine in sequence with its oral rivals. And Johnson, for one, 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."

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