Provenge fallout leads Dendreon to end GSK supply pact

The impact of slow sales of Dendreon‘s (NASDAQ:DNDN) prostate cancer treatment Provenge is reaching pharma giant GlaxoSmithKline (NYSE:GSK).

Seattle biotech company Dendreon is terminating a supply contract it signed a year ago that called for GSK to supply antigen intended for the manufacture of Provenge. Dendreon said in securities filings that it gave 60 days notice on Sept. 1 to end the pact with GSK due to “unforeseen delays and implementation difficulties.”

Dendreon executives dropped a bombshell during its release of second-quarter earnings when it revealed that sales of the drug were well below projections. The company abandoned sales forecasts for the high-priced drug and said that part of the reason for the slow uptake of the product was uncertainty among physicians about whether they would be reimbursed for a treatment that costs $93,000 a year. Given the sluggish sales, Dendreon announced cost-cutting measures, including layoffs. Now it appears that supply agreements are also getting the axe.

London-based GSK has its U.S. headquarters in Research Triangle Park, North Carolina. The manufacturing and supply contract with GSK was set to run through the end of 2015. The dollar value of the agreement to GSK was not disclosed in the filings. But upon signing the agreement last year, Dendreon placed an initial antigen order of $8.3 million with delivery slated for August 2011. In the Sept. 6 securities filing, Dendreon said manufacturing had not yet commenced and no production runs or batches had been started as of Sept. 1. All previous product orders under that agreement were cancelled.

Until the contract ends on Oct. 31, Dendreon may continue to pay GSK $2 million per month.