Dendreon hopes manufacturing can save the day

Dendreon is again turning to manufacturing, along with slashing more jobs, in its effort to claw its way to profitability. The drugmaker last year sold a plant to save money and raise some cash but will now invest in manufacturing in hopes that production improvements will reduce operation costs.

Dendreon ($DNDN), whose prostate cancer drug Provenge has floundered, says "automation" in its remaining facilities is key to its plan to reduce costs another 20%, saving $125 million. CEO John Johnson acknowledged that the proposed changes must be approved by regulators, saying, "we continue the progress on the regulatory pathway," according to a transcript from Seeking Alpha of Tuesday's call with analysts. The call followed the Seattle-based company's third-quarter earnings release, in which it reported sales down 12.8% but narrowed its loss to $67.2 million from $154.9 million in the same quarter a year ago.

The company did not give much detail about the new processes--only that they would be less manual and more efficient. Johnson said the changes could tamp down the cost of goods sold into the 30% to 39% range from 50% now. They would also require fewer people. And Dendreon will have far fewer people. With the newest round of cuts, the company will have 820 employees, down from a peak in 2011 of more than 2,000.

Johnson refused to talk about the possibility of selling one of Dendreon's two remaining plants to again grab some quick cash, a step it took last year. Dendreon has facilities in the Los Angeles and Atlanta areas. The company put itself up for sale in the last month. Some in the industry think its manufacturing facilities may be as enticing as its portfolio, and so it may not want to consider anything that would make it harder to attract a buyer. In December 2012, it closed on a deal to sell a Provenge manufacturing plant in Morris Plains, NJ, to Novartis ($NVS) for $43 million. Novartis also took on 100 Dendreon employees, a third of the 300 who had worked there before the sale.

- here's the Seeking Alpha transcript
- and the earnings release