WASHINGTON (AP) – Biotech drugmaker Dendreon disclosed in a filing last week that the Securities and Exchange Commission has opened a formal investigation into company conduct, but provided little detail. Dendreon says the investigation may relate to allegations made in investor lawsuits filed earlier this year.
In February, a class action lawsuit alleged that Dendreon management made false or misleading statements about the company’s finances and potential sales for its main product, the injectable prostate cancer drug Provenge. A related complaint alleges insider trading and misuse of company information by several executives. The Seattle company says it “believes the claims lack merit” and intends to defend itself legally.
Dendreon said it has not set aside any money to cover the potential cost of the SEC investigation, which it has says is not yet clear.
Deutsche Bank analyst Robyn Karnauskas downplayed the news, pointing out that the disclosure was first made in an SEC filing.
“The investigation appears to be focused on old management’s practices on Provenge launch and guidance,” Karnauskas wrote in a note to investors. “We expect this investigation to take some time to conclude.”
Dendreon made headlines in April 2010 when it won approval for Provenge, the first cancer drug that uses the body’s own immune system to fight off cancer. Analysts predicted the drug would grow into a $1 billion a year drug, though sales have been slower than expected, at about $320 million per year.
The drug carries a $93,000 price tag and requires a time-consuming manufacturing process in which each patient’s dose must be individually formulated using blood cell samples collected by their doctor.
Last fall, Dendreon laid off 500 employees, and since then analysts have lowered expectations for company sales, citing competition from rival prostate cancer drugs like Johnson & Johnson’s Zytiga.
“We continue to be concerned with the risk-reward of the stock and believe the only upside comes from potential acquisition,” wrote Citi analyst Dr. Yaron Werber, in a research note last week.
Date: May 17, 2012
Source: Associated Press
