Dendreon cuts 500 jobs in Provenge retrenchment

Dendreon ($DNDN) has unveiled its retrenchment plans. Faced with much-slower-than-expected sales of its lead drug, the embattled biopharma is slashing its payroll by 25% to help make up for the revenue shortfall. COO Hans Bishop also is out. But CEO Mitchell Gold maintains that all manner of things shall be well with Provenge, given some time.

Provenge sales are already on an upswing, Gold said during a conference call yesterday after the markets closed. August revenues hit $22 million, up 16% from July. Dendreon hopes to amp it up further by reaching out to more doctors, especially with info about Medicare's new reimbursement policy, which includes special coding to cover Provenge treatment. During yesterday's call, Gold said reimbursements were speeding up already.

Now, some growth is better than none. But it's far from enough to put Dendreon back on a path to $350 million to $400 million in Provenge sales this year. Hence the cost-cutting plans, which will claim 500 jobs at headquarters and in manufacturing. The company wants to depress costs to the point at which it can break even and then ramp back up from there if and when sales allow.

The question on everyone's mind is whether Provenge is lagging projections for the reasons Dendreon suggests: Doctors' reluctance to put big money on the line, given the drug's $93,000 price tag and short treatment span. Payers and doctors have expressed some doubts about Provenge use, leading analysts to question whether demand for the drug will ever be as strong as the company had hoped. Some suggest Zytiga, Johnson & Johnson's ($JNJ) new oral treatment that is aimed at a similar patient population, will eat into Provenge's long-term prospects.

Gold maintained educating doctors will do the trick. "There's no question the patients are there," he said. However, there's no way to know for sure until more sales figures and prescription data arrive.

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