Dendreon plunges on restructuring news

The stock is downgraded by JPMorgan and Deutsche Bank after a weak quarterly report.

By Benzinga Jul 31, 2012 4:59PM
By Scott Rubin, Benzinga Staff Writer

Shares of biotech firm Dendreon (DNDN) plunged Tuesday after the company released its second-quarter earnings results and announced a massive restructuring plan that will trim 600 jobs.


Dendreon shares closed down 23% to $4.76. The company hit a new 52-week low earlier in the session at $4.75.


The strategic restructuring will cut 600 jobs, or 41% of the workforce, and close Dendreon's Morris Plains, N.J., facility. The restructuring is projected to save about $150 million a year, aiding Dendreon's goal to reduce its cost of goods sold to less than half of revenue. The full implementation of the plan is expected to take around one year.


"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," CEO John Johnson said in a statement.


For the first quarter, Dendreon reported a net loss of $96.14 million, or 65 cents per share, from a loss of $115.99 million, or 79 cents per share, a year earlier.


On an adjusted basis, which is comparable to analyst estimates, the company reported a net loss of $60.21 million, or 41 cents per share, from $85.04 million, or 58 cents per share a year earlier. The consensus analyst estimate called for a loss of 59 cents.


Revenue in the period rose 66% to $79.99 million from $48.16 million a year earlier. Despite the strong growth, revenue missed Wall Street consensus expectations of $85.78 million.


In the wake of the revenue miss, analysts at JPMorgan (JPM) and Deutsche Bank (DB) downgraded the stock. The JPMorgan analysts slashed DNDN to "neutral" from "overweight" and lowered the price target to $8 from $15.


Deutsche Bank analysts lowered their rating on the stock to "hold" from "buy" with a $7 price target. The second quarter "introduces infrastructure risk," they wrote. "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 to $2 from $4. His report called Dendreon "still not a contender -- not now, not later."


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