By Vinay Singh
Dendreon (DNDN) says it expects to cut 600 jobs as it continues to struggle with weak sales of its prostate-cancer therapy, Provenge.
The newest layoffs, amounting to over 40% of the company’s remaining workforce, follow the dismissal of 500 employees in September 2011. Dendreon also says it will close a manufacturing plant in Morris Plains, N.J. By restructuring, the company hopes to reduce its cost of goods to less than 50% of its revenue over the next 12 months.
Dendreon has been on a roller coaster ride since 2010 when its prostate cancer vaccine Provenge was approved by the U.S. Food and Drug Administration. Provenge is considered the first in a new class of therapies meant to train an individual’s immune system to attack cancer cells as if they were viruses.
The company unexpectedly encountered major hurdles in attempting to launch Provenge, including its high price tag, $93,000 for a normal course of treatment, doubts about its efficacy, and complex reimbursement issues that caused doctors to shy away from prescribing the treatment. And just as Dendreon finally brought the drug to market, the FDA approved rival prostate cancer drug Zytiga, developed by Johnson & Johnson (JNJ). Sales of Provenge in 2011 were only $213 million, far short of the $400 million Dendreon had projected.
Amid Dendreon’s restructuring plans, the company also announced its 2012 second-quarter earnings, which, despite being up 66% from the comparable quarter a year ago, missed analysts' estimates. The combination of the news sent Dendreon shares to a 52-week low of $4.37 a share. The company has lost 88% of its market value since April 2010, when it first gained regulatory approval for Provenge.
Despite the bad news, Dendreon’s CEO John Johnson believes that the restructuring will set a new course for Dendreon and Provenge. In an earnings call, Johnson blamed turnover among sales representatives as one of the reasons for the weaker-than-estimated sales of Provenge, and also reiterated his confidence in the long-term prospects of Provenge.