Six hundred impending pink slips and a 12-month restructuring plan that includes shutting its New Jersey manufacturing plant were just the beginning of the changes that Dendreon introduced during its July 30 earnings call.
“Today we set a new course for Dendreon,” president and CEO John Johnson told investors.
The company said the changes—which include keeping its plants in Atlanta, GA, and Seal Beach, CA, open—will help the company save $150 million per year. It expects to wrap up the New Jersey plant closing by the fourth quarter of 2012, after which the company forecasts its cost of goods will fall by about 50%.
The biotech said that its second-quarter ills included an evaporating sales force—18% of its sales staff left—and what EVP, global commercial operations Joe Pinto called an unusually high rate of cancelled sales for its prostate-cancer drug Provenge. The falloff meant the drug rang in $2 million less during the quarter ended June 30, when compared to sales of the infused drug for the same period last year.
Execs said talent poaching was partly behind the migrating sales reps, and that the impact was indisputable—sales among areas that had good rep coverage were 30% higher than those without.
The sheer impact of the talent poaching took several analysts aback, including Credit Suisse’s Lee Kalowski whose research note was titled “You can’t cut your way to prosperity.” In that note, Kalowski commented, “We’ve known DNDNers were being poached, but we did not expect this to impact sales to this magnitude.” Kalowski added that Dendreon’s sales force could shrink even further as competitors Algeta and Bayer accelerate hiring to support the potentially near-term launch of Phase III prostate cancer drug Alpharadin.
Barclays analyst Ying Huang’s July 31 research note indicated he was taking a cautious approach to interpreting Monday’s changes. “While cost-cutting measures are clearly a step in the right direction, DNDN must also deliver on the revenue side. We are concerned that Provenge sales are likely to remain weak throughout 2H12, given Q2 sales…DNDN faces an uphill battle to gain top-line traction,” he wrote.