INDIANAPOLIS (AP) — The problems plaguing Dendreon’s only
marketed drug Provenge may be deeper than the company is acknowledging,
industry analysts said Thursday, sending company shares plunging 60 percent before
the market opened.

Late Wednesday, the company cited reimbursement concerns and
withdrew its 2011 revenue forecast.

Brean Murray, Carret & Co. analyst Jonathan Aschoff said
the problem with Provenge is more about a lack of demand and high price than it
is about reimbursement. The analyst said doctors and patients are not too
impressed with its performance.

Aschoff downgraded the company’s shares to “sell”
from “buy” and slashed his target price on the stock to $6 from $60.

The Seattle
drugmaker said it expects only “modest” sales of Provenge over the
second half of 2011 because payers are uncertain about reimbursement for the
costly treatment. It withdrew a forecast of $350 million to $400 million in
sales of Provenge, which trains the body’s immune system to fight cancer.

Provenge sales totaled $49.6 million in the second quarter,
or $51.4 million if discounts to federal and state programs like Medicaid are
excluded, the company said Wednesday. That fell short of Wall Street estimates.

Citi analyst Dr. Lucy Lu was surprised by the announcement
and lowered her price target on the company’s stock to $14 from $36.

“We believe the Street mis-modeled the market potential
of the drug and the primary issue is lack of demand under the current standard
of care for advanced prostate cancer in the U.S.,” Lu wrote.

Provenge was approved in April 2010, and Medicare said in
June that it will cover the treatment, a round of which costs $93,000.

Shares fell $22.13 to $13.71 in electronic trading Thursday.