It's another round of cutbacks for Dendreon. As sales of its prostate cancer treatment Provenge continue to lag, the Seattle-based company says it will cut 600 jobs and shutter a New Jersey manufacturing plant. That's 41% of its current 1,475-employee workforce.
Dendreon's ($DNDN) latest retrenching follows 500 job cuts announced last September, so the company will be less than half its previous size, staff-wise. Dendreon expects to save $150 million annually from the latest moves; to put that in context, Dendreon reported a $96.1 million loss for the quarter, on sales of $80 million.
"These changes are necessary and essential," CEO John H. Johnson said during a conference call with the media. They're also disappointing to Dendreon followers, who had high hopes for Provenge when it finally won FDA approval in April 2010. But despite the fact that Provenge was the first immunotherapy for cancer--which uses a patient's own cells to help fight off the disease--its sales have never really taken off.
The Provenge launch was complicated; Dendreon had to ramp up manufacturing and build a network of patient-intake sites. But the company also ran into some hurdles it didn't expect. At $93,000, Provenge treatment is costly, and reimbursement questions dogged the drug from the beginning. Doctors worried that they'd pay the premium cost up front and wait for months to be paid. The complexity of the treatment process proved to be a deterrent, too. Plus, just as Provenge hit the market, Johnson & Johnson's ($JNJ) oral drug Zytiga won FDA approval, giving the Dendreon drug a formidable, easier-to-use rival.
Johnson aimed for an upbeat note with today's announcement. Zytiga is a complementary drug, not an alternative to Provenge treatment, he maintained. The plant shutdown won't eat into Provenge capacity much, because of improvements in efficiency at other production sites, he said. And he blamed sales-rep turnover for the second-quarter slowdown; in territories that didn't lose a rep, revenues were almost a third higher year-over-year.
Johnson implied that the salesforce turnover is a fixable problem. But Wedbush Securities analyst David Niengarten told Bloomberg that it's also a red flag. "It's telling that they're losing sales personnel," he said.