Replies to post #124467 on Biotech Values

[BTH]

I think Dendreon management most likely did a horrific job in "forecasting" forward-guidance of what Provenge would really bring in. Why not underestimate? ....unless, the big number was their underestimate.

[iwfal]

Please show me an instance where a biotech company has voluntarily laid off manufacturing staff to resolve a short-term issue that had nothing to do with the demand for the company’s products. I don’t think it’s ever happened.

Genzyme comes immediately to mind as a company that did layoffs largely because of a known-to-be-mostly-transient problem. And they were in a MUCH better financial position than Dendreon (they were cash flow positive even with their issues and had a huge cash war chest).

I am sure I could find others as well - but it is hard to find biotech companies where it is unambiguous that the company knows in advance that the problem is largely transient.

PS Although the above post is responsive to you challenge I actually disagree with your trying to limit this to biotech. Biotech isn't special wrt doing layoffs when faced with transient issues - e.g. most other kinds of companies also require special training for RIF'd employees.

[DewDiligence]

DNDN article in Friday’s WSJ:

http://online.wsj.com/article/SB10001424053111903366504576488044215714126.html

Analysts questioned whether the company's explanation told the whole story. They pointed out that a company expecting a short-term problem likely wouldn't take the drastic step of cutting jobs [especially jobs in manufacturing]—often the move of a company adjusting to the new realities of its business model.

"Management's reason is addressable reimbursement issues whereas there are many reasons to believe this is at least in part also a permanent demand issue," Goldman Sachs analyst Sapna Srivastava said, in a note to clients.

[DewDiligence]

DNDN (9.91) is -83% from its 2010 high. This must be close to a record drop in such a short period for a biotech company that did not encounter a clinical or regulatory setback during the period in question.