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Dendreon Shares Plummet After It Files for Bankruptcy

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Dendreon Corp. plunged almost 81% after the company along with its U.S. subsidiaries filed voluntary petitions under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware on Nov 10, 2014.

Dendreon also announced that it has reached an agreement with certain holders representing approximately 84% of the $620 million of the aggregate principal amount of the company's 2.875% Convertible Senior Notes due 2016. As per the terms of the agreement, Dendreon will undergo a severe financial restructuring, which may take the form of a stand-alone recapitalization, sales of its assets or even a sale of the company. During this process the company’s prostate cancer drug, Provenge, is expected to remain commercially available.

Third Quarter Results

This news was weighing on the company for some time and overshadowed its third-quarter results. Dendreon reported a net loss of 14 cents per share in the third quarter of 2014, narrower than the Zacks Consensus Estimate of a loss of 18 cents and the year-ago loss of 44 cents.

Total revenue in the reported quarter was up 7.5% year over year to $73.1 million. Revenues were below the Zacks Consensus Estimate of $77 million.

Our Take

Dendreon’s decision to file for bankruptcy did not come as a surprise. We note that Dendreon had warned in August that it may not be able to repay or refinance its notes due 2016.

The company’s sole marketed drug, Provenge, was launched in the U.S. in May 2010. The drug which was initially expected to generate blockbuster revenues continued to disappoint.

Other drugs in the prostate cancer market include Medivation, Inc.'s Xtandi and Johnson & Johnson’s (JNJ - Free Report) Zytiga.

Dendreon is a Zacks Rank #2 (Buy) stock. Other well-ranked stocks in the health care sector are Allergan (AGN - Free Report) carrying the same rank as Dendreon.

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