* Says employee-related cost of restructuring $21 million
* Reports August Provenge sales of $22 million
* Sees modest quarter-over-quarter sales growth
* Shares up 4.6 percent after cuts announced
(Adds analyst, company comment, share price)
By Bill Berkrot
NEW YORK, Sept 8 Dendreon Corp DNDN.O said on
Thursday it would cut 500 jobs as it seeks to trim expenses in
light of diminished sales expectations for its high-priced
Provenge prostate cancer vaccine.
The total employee-related cost of the restructuring is
expected to be about $21 million, the company said, citing a
need to align staffing "with the shift in the (Provenge) launch
trajectory and meet the company's manufacturing requirements."
Investors appeared to be pleased by the moves, sending
Dendreon shares up more than 4 percent in extended trading.
"Their SG&A (Sales, General and Administrative) cuts are
more than expected and will mean $120 million in SG&A savings,"
said RBC Capital Markets analyst Michael Yee.
Dendreon also announced the departure of Hans Bishop, the
company's chief operating officer, and said it was starting a
search for a replacement.
Dendreon stunned analysts and investors last month when it
withdrew its often repeated Provenge sales forecast. The
surprise move sparked a massive stock sell-off in which the
company lost two-thirds of its market value.[ID:nN1E7721QB]
The company said with reduced expenses it expects to have
sufficient cash to achieve a cash flow break-even position in
the United States at an annual run rate of about $500 million
"While the last month has been difficult for our employees,
these cost reductions are necessary to ensure the long-term
growth of our company," Mitchell Gold, chief executive of the
biotechnology company, said in a statement.
Dendreon reported August Provenge sales of about $22
million -- a 16 percent increase over July sales -- and
continues to expect modest quarter-over-quarter growth.
Given the modest growth expectations, Dendreon said it was
significantly overstaffed in its manufacturing facilities and
said some job cuts would also come from its Seattle
headquarters. The total job cuts account for about 25 percent
of the company's staff.
"To some extent they are stuck between a rock and a hard
place," said Sanford Bernstein analyst Geoffrey Porges.
"Just bringing expenses down by 20 percent doesn't mean
they are going to generate a significant profit and investors
Management said it would refrain from closing any of the
company's three manufacturing plants in its cost cutting
efforts, noting that such a move would be counterproductive to
long-term growth plans.
The company previously blamed slow initial Provenge sales
on manufacturing constraints, promising robust sales once it
had all three of its production facilities up and running.
But last month, Dendreon management had new reasons for the
disappointing sales and withdrew its bullish 2011 Provenge
revenue forecast of $350 million to $400 million, with half
coming in the fourth quarter.
The company blamed the slow sales ramp on a
steeper-than-expected learning curve for physicians on how to
use the new immunotherapy vaccine and doctor uncertainty over
whether the drug, which runs $93,000 for a course of treatment,
would be reimbursed by Medicare and health plans.
Dendreon told analysts and investors it was starting to see
Provenge reimbursement occur within about 30 days and said in
one case reimbursement came in as little as eight days.
It also cited a need to educate urologists on the
appropriate patients for Provenge. "There's no doubt the
patients are there," Gold said on the conference call.
Provenge, which works by stimulating a patient's own immune
system to fight tumors, was approved last year to great fanfare
as the first therapeutic vaccine for cancer after demonstrating
it extended survival in patients with advanced disease.
But analysts have complained about management's lack of
transparency and questioned its credibility after being
blindsided by the pulled sales forecast. [ID:nN1E7870Z4]
"How can they continue to supply their market given the
logistics ... with this reduction in head count?" Porges
Dendreon shares rose 4.6 percent to $11.38 in after-hours
trading after closing at $10.88 on Nasdaq, a decline of 6.3
(Reporting by Bill Berkrot; additional reporting by Deena
Beasley in Los Angeles; editing by Andre Grenon, Gary Hill)