Dendreon Concentrates Job Cuts in Manufacturing, but Seattle Feels the Axe Too
Employees at Seattle-based Dendreon (NASDAQ: DNDN) have been on pins and needles for five weeks since they heard layoffs were in the works, and when the bad news came today, few parts of the company were spared.
Today’s layoffs of 500 employees, about one-fourth of the workforce, were spread among all functions within the company, except for those who generate demand for its prostate cancer drug (i.e., the sales and marketing team). About 80 percent of the job cuts are being concentrated at its manufacturing plants—in New Jersey, Atlanta, and Los Angeles—with the rest coming at its Seattle headquarters. Dendreon made the cost cuts after it said there was no way it could live up to its forecast of $350 million to $400 million in sales for 2011.
“It’s incredibly difficult,” CEO Mitch Gold said in an interview today. “It’s always hard to let good people go.”
He added that the manufacturing group performed exceptionally well in keeping supplies of sipuleucel-T (Provenge) flowing to doctors and patients, even during Hurricane Irene. All three factories were approved by the FDA on schedule.
Dendreon, as reported here earlier today, said it ended August with about $600 million in cash left on the books. By making these cuts, which are supposed to save about $120 million a year, Dendreon said it should be in position to reach break-even once it ramps up Provenge sales to $500 million a year. The company didn’t say how long that might take. But so far, here’s what’s known for sure: The drug has generated almost exactly $100 million in sales this year through August 31, with $22 million of that coming in the month of August.
Shares of Dendreon climbed 47 cents, or about 4.3 percent, to $11.35 in after-hours trading after the cuts were announced.
As part of the job cuts, Dendreon provided investors with other updates on how its commercial rollout is going. Here are some of the highlights from today’s conference call, and from a follow-up interview I did later with Gold:
—The company has reorganized its sales and marketing team to put more emphasis on “community” oncology and urology medical practices, as opposed to the big-time academic medical centers that are more familiar with the product. Through additional market research, Dendreon has identified 1,000 target accounts, which it says are responsible for 80 percent of the prescriptions written for prostate cancer drugs, Gold said. The sales team has now come up with tailored marketing messages for both cancer physicians (oncologists) and urologists who aren’t as familiar with prescribing infusion-based medicines like sipuleucel-T (Provenge.)
—Chief operating officer Hans Bishop is leaving the company, effective Sept. 30. Dendreon isn’t saying whether he was terminated or resigned. But Gold did say that Dendreon is now looking for a new COO, and in the meantime, the senior vice president in charge of commercialization, Rob Rosen, will report directly to the CEO. Gold didn’t say much in the follow-up interview about the circumstances around Bishop’s departure, other than, “I’m really respectful of Hans. He accomplished a lot in his two years at Dendreon. I wish him the very best.”
—Some signs are emerging, Gold says, that the reimbursement climate is improving. Dendreon sales reps are now communicating to physicians how the FDA-approved prescribing information for Provenge is now much more in sync with the reimbursement protocol that was approved by Medicare in June. On average, physicians are now getting reimbursed for the $93,000 product in about 30 days, Gold said. Still, many physicians won’t believe it until they see it, Gold said, so it will take time before docs get really comfortable, he says.
—When asked if there was one thing he wishes he could do over about the Provenge launch, Gold said he wished he hadn’t given Wall Street the sales forecast of $350 million to $400 million for 2011. “If there’s anything we’d change, it would be not giving guidance so early on, when we needed to better understand the launch dynamics,” Gold says. But since Dendreon put out that bullish sales forecast, investors were deeply disappointed when the company fell so far short. Gold stressed that despite the shortfall, the drug still has all the potential that got investors excited over the past couple years. He pointed out that the average analyst estimate is that Dendreon will reach about $219 million in sales this year, Gold said. If that happens, Provenge will still end up being one of the top five cancer drug introductions of all-time, Gold said.