The Shame and Lessons of a Dendreon Bankruptcy

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Dendreon Corp. (NASDAQ: DNDN) has committed the ultimate sin by filing for bankruptcy protection. This should not be a total surprise as it was in August that we warned that bankruptcy simply may be unavoidable. Dendreon’s financial restructuring may take the form of a stand-alone recapitalization, or it may take the form of a sale of the company outright or a sale of its assets. What the common stockholder needs to understand here is that this could represent a total wipeout of the common stock value.

Dendreon said that it has reached agreements on the terms of a financial restructuring with certain holders of its 2.875% convertible senior notes due 2016, which represent about 84% of the $620 million aggregate principal amount of the 2016 notes. Dendreon and its U.S. subsidiaries have filed voluntary petitions under Chapter 11 of the Bankruptcy Code in the U.S. Bankruptcy Court for the District of Delaware on November 10, 2014. The transactions under the agreements will enable continued delivery of Provenge without disruption or impact to access for providers and appropriate patients.

Dendreon claims that it has significant liquidity to support all of its operations during the restructuring process. This is comprised of about $100 million of cash and cash equivalents on hand as of November 7, 2014. The company claims that it does not anticipate the need to raise any incremental financing in connection with the restructuring process.

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During the restructuring process, Dendreon will continue to operate in the ordinary course of business. The company has also requested court approval of the proposed bidding procedures and a series of customary motions allowing it to honor employee obligations, including wages, salaries and health benefits, without interruption, as well as to continue customer programs and patient assistance programs.

Back in March of this year that we warned of one analyst seeing Dendreon worth only $1.00. Also, we asked if this was the ultimate end game as early as in the first half of 2013.

If you want to know how bad this situation is, how does a 63% drop to $0.34 sound in early Monday trading. Dendreon’s prior 52-week trading range was $0.80 to $3.52. We won’t bother bringing up that Dendreon was trading at about 10-times the current 52-week high in the past. That was then, this is now.

The filing terms were noted as follows:

Under the terms of the restructuring support agreements, the Senior Noteholders will support a plan of reorganization to convert all 2016 Notes to common equity of the reorganized Dendreon. The agreements further provide for Dendreon to conduct a court-supervised sale process, pursuant to Section 363 of the Bankruptcy Code or through a plan of reorganization, for all or substantially all of its assets to a party that would continue producing and providing PROVENGE. Qualified bids under the terms of the proposed bidding procedures will have to meet certain criteria and provide value of not less than $275 million. If more than one qualified bid is received, an auction will be held to determine the successful bidder with the highest or otherwise best bid, following which the Company will seek to consummate that transaction. If no qualified bids are received, Dendreon will proceed to confirmation of the stand-alone plan.
W. Thomas Amick, president and chief executive officer of Dendreon, said,

“Whether the restructuring takes the form of a stand-alone recapitalization or a sale of the Company or its assets, we are confident that this process will allow PROVENGE to remain commercially available to the patients and providers who have come to rely on this revolutionary personalized cancer immunotherapy. We are pleased to have the support of a substantial majority of our Senior Noteholders through this restructuring and sale process. We thank our employees for their continued hard work and dedication and for their commitment to help deliver PROVENGE to patients who are in need of immunotherapy.”

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