Dendreon to close New Jersey plant, cut 600 jobs
(Reuters) - Money-losing biotech Dendreon Corp (DNDN.O) said it would close one of its three manufacturing plants and cut more than 600 full-time and contractor jobs over the next 12 months, with the aim of reducing annual costs by about $150 million a year.
Dendreon had about 1,475 employees as of February 23, 2012, according to a regulatory filing.
The company, whose Provenge treatment for prostate cancer has had disappointing sales since it was launched in April 2010, and which is facing growing competition from easier-to-administer drugs, said the closure of its Morris Plains, New Jersey, factory would greatly reduce its cost of goods sold.
Dendreon expects an initial related restructuring charge of about $4 million and a noncash restructuring charge of about $65 million to be recorded in the third quarter of this year.
It expects full implementation of the restructuring to take about a year and anticipates to continue taking related charges until the plan is complete.
The company expects to begin benefitting from the restructuring plan in the first half of 2013.
Shares of Dendreon fell about 19 percent to $5.00 on the news. They had closed at $6.18 on Monday on the Nasdaq.
Dendreon is betting its Atlanta and Seal Beach manufacturing plants alone will produce $1 billion in annual product revenues, Chief Financial Officer Gregory Schiffman said on a conference call with analysts.
The company, which on Monday reported a worse-than-expected second-quarter loss, said the restructuring should position it to have a positive cash flow once net product revenue reaches about $100 million in a quarter, which is a 20 percent improvement to its prior outlook of about $125 million dollars for the quarter.
"This restructuring sets a new course forward for Dendreon, accelerating our path to profitability and future growth," Chief Executive Officer John Johnson said in a release.
The company said the restructuring is to align Dendreon's support costs with the biotechnology industry norms for similar size and complexity.
In May, Dendreon said it was still contemplating whether to close one of its three manufacturing plants in order to cut costs, but would not make such a decision lightly or hastily as it cost hundreds of millions of dollars to get those plants up and running.
The competitive landscape is growing ever-harsher for Provenge. J&J's (JNJ.N) prostate cancer drug Zytiga became a bigger threat to Provenge last month when researchers reported favorable results in patients who had not previously taken chemotherapy but had failed to benefit from drugs that block testosterone -- the male hormone that fuels development of the disease. Provenge is approved for such patients.
Meanwhile, Medivation Inc's (MDVN.O) own prostate cancer treatment, called enzalutamide, is awaiting U.S. approval for treating men that have already taken chemotherapy and anti-testosterone drugs.
Dendreon said it lost $96.1 million in the second quarter, or 65 cents per share. That compared with a loss of $116 million, or 79 cents per share in the year-earlier period.
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