Dendreon Plunges on Restructuring News; Stock Downgraded

The share price of biotech firm Dendreon

plunged on Tuesday after the company released its second-quarter earnings results and announced a restructuring plan that will trim 600 jobs. In afternoon trading, Dendreon was down around 23 percent. The company hit a new 52-week low earlier in the session at $4.75. The strategic restructuring will cut 600 jobs, or 41 percent of the company's workforce. Under the plan, Dendreon's Morris Plains, New Jersey facility will be closed. The restructuring is projected to result in annual cost savings of about $150 million, and Dendreon's goal is to reduce its cost of goods sold to less than 50 percent of revenue. The full implementation of the plan is expected to take around 12 months. "We believe the strategic restructuring plan announced today will accelerate our path to profitability and future growth as we execute on our core mission of providing PROVENGE to patients around the world," Chairman, President and CEO John Johnson said in a statement. For the first-quarter, Dendreon reported a net loss of $96.14 million or $0.65 per share, versus a loss of $115.99 million or $0.79 per share in the year ago period. On an adjusted basis, which is comparable to analysts' consensus, the company reported a net loss of $60.21 million or $0.41 per share, from $85.04 million or $0.58 per share in last year's second-quarter. This compares to analysts' consensus EPS estimates calling for a loss of $0.59. Revenues in the period were up 66 percent to $79.99 million versus $48.16 million in last year's corresponding quarter. Despite the strong growth, Dendreon's revenues missed Wall Street consensus expectations of $85.78 million. In the wake of the revenue miss, analysts at both JP Morgan

and Deutsche Bank

downgraded the stock. The JP Morgan analysts slashed DNDN from Overweight to Neutral and also lowered the price target from $15.00 to $8.00. Deutsche Bank analysts lowered its rating on the stock from Buy to Hold with a $7.00 price target. They wrote, "Q2 introduces infrastructure risk -- no need to accumulate now." The firm also lowered its estimate for peak Provenge sales to $600 million. The potentially harshest analysis of Dendreon came from Jonathan Aschoff at Brean Murray Carret & Co. He reiterated his Sell rating on the stock and cut the price target from $4.00 to $2.00. The report was titled, "[Dendreon] Reports 2Q12 Results and Restructures: Still Not A Contender -- Not Now, Not Later."