The stock price of Dendreon was down by 68% to $0.30 per share as the Seattle based biotechnological company filed for bankruptcy protection under Chapter 11. Dendreon is now aiming to resurrect its financial structure to continue future operations in a smooth way and increase the growth of the company.
The protection was filed after discussions were held among senior leaders and board of directors who agree to the terms on resurrecting structure that could mean a total re-organization or a sale of its popular cancer drug operation.
Dendreon is seeking this protection with a plan, which involves a possibility of a takeover with the complete sale of the company or takeover by the lenders as the company currently faces a major shortage of cash. In the U.S. Bankruptcy court, the biotech company showed that it has debts worth $664 million while its assets are currently valued at $364 million, which means its current ratio currently stands at 0.59:1 showing how weak the financial structure of the company is currently.
Dendreon’s current financial resurrecting may be in the form of direct selling of the company to a new buyer or the sale of some of its assets. It may also take the position of stand-alone recapitalization. This decision can result in the total annihilation of the value of the shares of the company and bring heavy losses to the shareholders. Dendron on the other hand claims that it has reached financial restructuring agreement with certain holders of its convertible notes, which are due back to them in 2016. It has said that the company has reached an agreement with 84% of the investors of the $620 million that are due back. It also claims that its restructuring will in no way effect the production of the Provenge and the continued supply of the drug will be provided to the doctors and patients.
The company’s first priority will be a buyer who will continue to operate the production of the drug regarding which the company has carried out so much research. In a scenario where the bid does not meet the price that the directors of Dendreon believe that the company is currently worth, the lenders will become the owners of the newly turned private company as the liable notes will be converted to make them the new owners of Dendreon.
The Financial troubles of Dendreon started from Provenge, the first drug of the company that was approved by the Food and Drug Administration. Analysts were of the view that this drug will generate millions in cash and the growth of the company will take place due to its projected demand in the market. It didn’t generate the predicted revenue; however it also bulked up its debt as the company spent billions in its production. The sales for 2012 stood at $325 million and $ 283 million in 2013 showing how much the value of the company and drug fell as time passed away. Now Dendreon is in a crisis no company likes to face.