Drugmaker Dendreon files for Chapter 11 bankruptcy protection

MarketsAssociated Press

Prostate cancer drug developer Dendreon is seeking Chapter 11 bankruptcy protection with a plan that leads to either a sale of the company or a takeover by its lenders.

The Seattle company listed more than $664 million in total debts and $364.6 million in assets in a U.S. Bankruptcy Court filing on Monday. Its largest creditor is Bank of New York Mellon, which holds $620 million in notes.

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Dendreon Corp. makes the prostate cancer treatment Provenge. It said Monday that its restructuring will allow for the continued delivery of the drug to doctors and patients. The drugmaker also said it has enough cash to support all operations during its restructuring.

The company said it has reached agreements on the terms of a financial restructuring with investors holding about 84 percent of $620 million in notes due in 2016.

The company will attempt to sell itself to a buyer that would continue to produce Provenge. If it receives no qualifying bids, the lenders will convert their debt to equity and take over Dendreon, which will become a privately held company.

The drugmaker's financial troubles stem from Provenge, its first commercial product approved by the Food and Drug Administration. Analysts expected the drug to ring up billions of dollars in annual sales after it was launched in 2010.

Likewise, Dendreon racked up debt as it bulked up to produce a drug that generates billions in revenue. But those sales never materialized. Provenge generated $283.7 million in revenue last year and $325.3 million in 2012.

Provenge, which trains a patient's immune system to fight cancer, has been hurt in part by its cost, limited benefit and reimbursement rates.

The drugmaker went through a series of staff and cost-cutting measures over the past few years after it became clear that revenue growth would take more time than it anticipated, said Executive Vice President and General Counsel Robert L. Crotty, in a declaration filed in U.S. Bankruptcy Court.

By early summer, the drugmaker realized that while it had managed to cut costs significantly, those reductions alone would not make the company "independently viable with its existing capital structure," Crotty wrote.

Dendreon warned shareholders in August about its debt load and said then that it was considering alternatives that could wipe out their ownership. The company said then that there was a "significant risk" that it would not be able to repay or refinance the 2016 notes.

The drugmaker also changed leadership last summer when it named former Discovery Labs leader W. Thomas Amick president and chief executive officer. The company had said in June that former CEO John H. Johnson planned to resign for personal reasons.

Shares of Dendreon shed most of their value Monday before markets opened, sinking 67 cents to 27 cents. The stock had slipped below $1 earlier this fall and has tumbled most of this year after closing 2013 at $2.99.