Dendreon 'monetizes' NJ plant with $43M sale to Novartis
Dendreon ($DNDN) has turned to real estate for a financial boost. The Seattle-based drugmaker, reeling from disappointing sales of its cancer vaccine Provenge, is selling off its New Jersey manufacturing plant to Novartis ($NVS). And it's looking to sublease a big chunk of headquarters space that's standing empty after big cutbacks at the company.
Essentially, Dendreon figured the plant's highest and best use was putting it up for sale, rather than producing Provenge. Novartis agreed to buy the 173,000-square-foot facility for $43 million, giving Dendreon a cash infusion. The Swiss drugmaker will also take on 100 of the plant's 300 employees. The selloff is part of Dendreon's previously announced restructuring plans, which include 600 layoffs.
Christine Mikail, EVP of corporate development, told FIercePharmaManufacturing that Dendreon had wanted to "monetize" the plant, so it looked for a buyer that could operate it "in the same bailiwick." In the end, "Novartis seemed to fit the bill."
This is not only good value for Dendreon shareholders but it is great to get 100 people jobs," Mikail said. About 300 people were working at the facility, so one in three will get a job offer from Novartis.
Dendreon also is putting four more of the 8 floors at its Seattle headquarters up for lease, The Seattle Times reports. It had already been looking for tenants for one floor's worth of space.
Dendreon can certainly use all the cash it can get. Provenge fell far short of the company's projections for 2011 sales--$350 million to $400 million--by ending the year with $280 million in revenues. Meanwhile, the drug has seen strengthening competition from Johnson & Johnson's ($JNJ) oral treatment, Zytiga. Former Chief Mitchell Gold announced a 600-layoff restructuring plan early this year, but found himself out of the CEO seat soon after. His replacement, John Johnson, is under pressure from investors to do something about Provenge, and quickly.
Johnson pointed to cost-cutting as a positive for shareholders: The company's plans to cut 600 jobs--145 of them at the Seattle headquarters--and close the New Jersey plant were designed to yield $150 million in savings over 12 months. To meet Provenge demand after pulling out of the New Jersey plant, Dendreon planned to ramp up production at plants in Seal Beach, CA, and Union City, GA--which would reduce its cost of goods from the current 77% to less than 50%.
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