It's no secret that when serial acquirer and cost-cutting enthusiast Valeant ($VRX) takes over a company, layoffs are on the way. And for Dendreon, the bankrupt Seattle biotech whose assets the Canadian company snatched up last month, they've already begun.
Seventy-seven employees will pack their bags, according to a WARN notice seen by the Seattle Times. Washington's state Employment Security Department received word of the job cuts Feb. 23, immediately after Valeant wrapped its $400 million buyout of Dendreon's flailing prostate cancer vaccine, Provenge, along with other prospects.
"Most of these positions were in G&A functions where there was overlap with Valeant's existing businesses, especially in corporate and back office functions," Valeant spokeswoman Laurie Little told the paper in an email.
|Valeant CEO J. Michael Pearson
It's the first opportunity of many that CEO J. Michael Pearson sees for squeezing out costs. As he said on last month's fourth-quarter earnings call, Valeant can wring some money out of Provenge's infrastructure, which was "built for a billion-dollar product." All told, he foresees more than $130 million in spending cuts, including manufacturing savings--and that's before factoring in the benefit of Valeant's Canadian tax domicile.
"We believe that we have the ability to raise the gross margins of this business to more than 65% by the end of 2015 and to reach 80% gross margins in the longer term," he told investors on the call.
The news may have some Salix ($SLXP) employees bracing for the worst. Valeant snagged the North Carolina drugmaker shortly after inking the Dendreon deal. Pearson has said the company's specialty sales reps are safe; he'll need them to help with a couple of key launches, especially if Salix's lead product, Xifaxan, wins an IBS indication this spring.
But with the Quebec-based drugmaker looking to slash more than $500 million in operating costs on the Salix deal, primary care reps may not be so lucky. Valeant hasn't "had the time to fully determine the optimal size of the primary care sales force," Pearson said on the call, but it'll do so between now and when the deal closes--an event Valeant expects next quarter.
- read the Seattle Times story
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