Bankrupt biopharmaceutical business Dendreon Corp. is asking a Delaware bankruptcy judge to approve Valeant Pharmaceuticals International Inc. (NYSE: VRX, TSX: VRX) as the lead bidder for the debtor's prostate cancer treatment, Provenge, and other assets.
Seattle-based Denderon focuses on developing cancer-treatment products. Provenge was approved by the U.S. Food & Drug Administration in April 2010 to treat advanced-stage prostate cancer.
Under the terms of the deal, Valeant would buy the rights to Provenge and other Dendreon assets for $296 million. If the court approves the offer, it is still subject to higher and better bids.
Valeant, headquartered in Quebec, is a specialty pharmaceutical company with a history of dealmaking. The company makes dermatology, eye health, neurology and branded generic pharmaceutical products. Past acquisitions include Solta Medical Inc., Bausch & Lomb and Obagi Medical Products Inc. in 2013.
The bid deadline for other interested parties is Feb. 10. If other offers come in, an auction would be held Feb. 12.
Dendreon filed for bankruptcy On Nov. 10 to facilitate a deal with its noteholders. Before the filing, 84 percent of Dendreon's 2016 noteholders agreed to a deal under which Dendreon would either execute a stand-alone recapitalization or a sale of the company or assets. New York hedge fund Deerfield Management Co. LP owns 36 percent of the notes.
The debtor filed a motion to sell that same day (Nov. 10), which the bankruptcy court approved on Dec. 17. Dendreon filed the motion to approve Valeant as the stalking-horse bidder, or lead bidder, for the sale on Jan. 29.
Dendreon says that expectations for Provenge were high after it received FDA approval, but eventually it became apparent that commercializing the product and growing revenue would take longer than originally anticipated, according to court documents. Dendreon laid off a quarter of its 1,500-person workforce in 2011, and went through a strategic restructuring in 2012 with the goal of reducing costs by $150 million.
In 2013, Dendreon started looking for sale options and potential exchange deals to handle its debt load, and hired J.P. Morgan Securities LLC and Merrill Lynch Pierce Fenner & Smith Inc. to help. The company laid off 600 employees as part of the restructuring, and 150 more in November 2013.
Ultimately, that sale process didn't yield any bids. Dendreon hired Lazard Frères & Co. LLC as investment banker in February 2014 to evaluate strategic alternatives, including a sale, restructuring or financing deal. Dendreon says in court papers it hired Lazard specifically to handle the 2016 notes, with through a refinancing, an extension of the maturity date or a conversion of the notes into debt or equity.
On its petition, Dendreon listed assets between $100 million and $500 million, and liabilities between $500 million and $1 billion.
AlixPartners is Dendreon's financial adviser, while Lazard acts as investment bank and Skadden Arps Slate Meagher & Flom LLP provides legal advice. Weil Gotshal & Manges LLP is Valeant's legal adviser.
For more on buyer interest in cancer treatments, see New Cancer Drugs Spark Deal Possibilities.