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Originally published June 9, 2014 at 1:48 PM | Page modified June 9, 2014 at 3:52 PM

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Dendreon CEO steps down as debt issues loom

Dendreon said Monday its leader for the past two years, John H. Johnson, has resigned as board chairman and will step down as president and CEO on Aug. 15.


By Seattle Times business staff

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Dendreon said Monday its leader for the past two years, John H. Johnson, has resigned as board chairman and will step down as president and CEO on Aug. 15.

The Seattle biotechnology company said Johnson is stepping down for personal reasons and will be replaced as chairman by Douglas Watson, its lead independent board member. The search for a new CEO has begun.

Dendreon faces a mountain of convertible debt — roughly $600 million — due in 2016, on top of $27 million due June 15, according to company filings. That debt is a huge burden whoever the CEO is, said analyst David Nierengarten of Wedbush Securities in San Francisco.

“The main issue here is math, and that doesn’t change,” he said in an interview.

Johnson became CEO in February 2012, replacing Mitch Gold, who led the company for nine years as it brought its prostate-cancer immunotherapy Provenge to market through a rocky regulatory process.

Dendreon issued a statement from Watson noting that Johnson had “driven important strategic initiatives to help reposition the company, including launching a new commercial strategy, gaining marketing authorization in the European Union, increasing manufacturing efficiencies, significantly lowering costs and advancing our clinical pipeline.”

He also presided over a sharp downsizing of Dendreon as its therapy failed to meet the lofty revenue forecasts made under Gold. Sales have plateaued in the face of competition from other new prostate-cancer therapies.

The company’s stock price has fallen from as high as $15 in early 2012 to below $2 this spring. Johnson’s resignation was announced after the markets closed Monday; in after-hours trading, Dendreon stock was down 7 cents, or 3.3 percent, to $2.08.

At the stock’s current levels, analysts wonder what kind of deal Dendreon can strike with noteholders.

“They don’t have the cash to repay it, obviously,” said Nierengarten. And with the market capitalization of its stock hovering around $350 million, it would be difficult to sell enough new shares to pay off the 2016 notes.

Options include giving creditors ownership of the company, or restructuring the debt in some other way. Current stockholders are likely to fare poorly under any scenario, said Nierengarten.

Dendreon last month said that “addressing the company’s convertible debt remains a top priority and the company is exploring its options with advisers.”

Nierengarten last summer went so far as to put a target price of zero on the stock, and he stands by that forecast.

“I think the equity here is worthless,” he said, adding, “That’s a statement on the equity, not on the company itself.”

According to Bloomberg, 13 analysts rate Dendreon stock a hold, while 8 have a sell rating and two call it a buy.



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