I recall a three-panel cartoon years ago in Playboy (which of course I purchased only for the short stories) in which a religious pilgrim was walking through a dense fog carrying a sign that read "Lord, show me a sign." By the time the fog lifted in the third panel, he saw a sign on the side of the road. It contained the answer to his prayer: "Welcome to New Jersey."
Lately I've been asking for the same thing with regard to Dendreon (NASDAQ:DNDN). The stock's taken a terrible beating over the last year of so, ever since the previous management withdrew guidance, leaving both shareholders and the Street alike "hanging" because of the corporation's failure to follow through on what was one of the top ten oncology launches at the time. What followed was a dismal financial performance, and the stock's price tanked, hovering today just above $4.30 (see the Technical Analysis below). So, among the questions "Dendreonites" keep asking themselves are: With new management in place and a shift of the corporate headquarters to…(wait for it)…New Jersey, will we see a turnaround, and when it begins, what might be the first signs?
Having been through two corporate turnarounds (all in the defense sector), I know these transformations take time - a year or more at the least. And the improvements I observed in the cases with which I'm familiar were incremental as opposed to quantum leaps. But be assured, there were signposts along the way - metrics indicating the plans we had implemented not only were viable, but also, should be more than effective in correcting the problems we had identified. (As an aside, both turnarounds were successful.)
To be sure, Dendreon's wounds were largely "self-inflicted" (though it got more than a little "help" from the FDA and Wall Street, to be sure!). But those that can be laid at the company's feet resulted from a number of issues, not the least of which was: not enough sales and marketing "feet on the street." Here's what Joe DePinto, Dendreon's Executive Vice President, Global Commercial Operations, had to say on the last conference call on July 31, 2012:
"The first factor that affected our results is a high vacancy rate year-to-date in our sales force. We believe that much of this turnover is a result of organizational changes that Dendreon has been through over the past year as well as other biotech companies preparing for launch recruiting experienced oncology sales people.
"As John [Johnson] mentioned we see a direct correlation between focused coverage and sales growth, with approximately 30% greater sales in areas with focused sales coverage versus unstaffed territories. 18% of our physicians had no direct on the ground sales staff at some point in June. Given the unique delivery of PROVENGE office support from our sales staff is extremely important. To effectively drive sales and meet the growing demand of our product, it is imperative to have a strong team in place as we refocus our commercial operations. We brought in new talent and we ramped our sales leadership with a number of senior level hires including at the regional level.
"With the right team in place at the top, we are aggressively recruiting to fill existing vacancies within our sales force with top notch industry experience personnel. Our goal is to have field leadership, engaged in ongoing recruitment and fill all vacancies within 60 days. We have a number of new hires expected to join in July and August and we expect to begin to see an improvement in sales in the first quarter of 2013 as a result of a stronger sales team."
Okay…so if revenues took a hit from the lack of experienced oncology sales people in the field, and the plan to correct this problem is to institute an aggressive recruitment program, one sign the transformation of Dendreon is on track for a turnaround would be the status of this initiative. But is there a way to know how well DePinto and is team are faring in this regard? Fortunately, there is!
An individual using the pseudonym "Warhawk" (who I have confirmed has no relationship to Dendreon Corporation (personal communication, October 20, 2012)) tracks Dendreon staff vacancies and posts changes regularly on the DNDN Investor Village message board. (Here is but one site on the Internet where Dendreon job postings may be found.) An extract of the historical data for the position of Immunology Sales Specialist is informative. First, some highlights for this position description:
General Summary (highlights):
• Effectively communicates appropriate technical, therapeutic, disease state and product information to customers in order to successfully promote the appropriate use of approved products within the territory.
• Utilizes effective selling techniques and marketing strategies to create and expand demand for all promoted brands.
• Develops and coordinates physician advocates for promoted oncology products.
• Arranges and coordinates effective promotional programs.
• Conducts essential field activities including customer in-services and attend tumor boards
• Work as a resource for various oncology organizations, teaching institutions, physicians, oncology nurses, pharmacy directors, therapeutic groups, etc.
In early June, 2012, there were 21 vacancies in this category. By the start of July, that number had dropped by more than a third, to 12. It continued to fall throughout the summer as Dendreon HR aggressively pursued qualified candidates throughout the country. By the end of August, the number had dropped to 9, and by October 19, the number was down to 8, the current number. (Note: These data are thought to be correct, but there is no way of confirming them with Dendreon Corporation.)
As a former sales and marketing executive, I know it takes time to train and mentor a field organization. Regarding the latter, it's also important to note DePinto has taken the additional step of filling out his marketing team by creating 9 higher-level Market Access Positions called Area Business Managers. Created in mid-August, one (in Chicago) was filled immediately. This suggests DePinto used his extensive contacts within the pharmaceutical industry to attract the talent he sought for the job. Here's the description of this position:
General Summary (highlights):
The Area Business Manager is accountable to ensure appropriate identified new and existing patients have access to PROVENGE. The ABM approaches each customer from a total account management perspective, by leveraging resources appropriately; collaborating with business partners (within and outside the company) and accurately articulating the value proposition for the customer.
• Educate practices on appropriate efficiency practices to infuse PROVENGE, updating practices on key private and public payer changes that impact infusion process, focusing on top Accounts in the Oncology and Urology Clinics.
• Leads pull thru, patient identification, and account management with ISSs, and DSMs.
• Drive execution of the PROVENGE Patient Acquisition Program, working with C-suite and senior leadership within targeted accounts.
• Facilitate business reviews with accounts to drive utilization of PROVENGE in identified key focus accounts and optimize contract performance.
• Provide resources to the clinic to remove reimbursement barriers and identify efficient flows in the infusion patient flow.
• Work in concert with the Sales, Marketing, Dendreon ON Call and other internal stakeholders to ensure that corporate product objectives are met.
At last count, all but 2 Area Business Manager positions have been filled. (Note: these data are thought to be correct, but there is no way of confirming them with Dendreon Corporation.)
The Immunology Sales Specialist and Area Business Manager positions, of course, represent only two of several sales and marketing-related positions employed within the company. (Senior sales and marketing positions, for example, are not mentioned here.) But the progress made in filling vacancies for these two key positions suggests the corporation has been successful in restructuring and staffing its critical sales and marketing arm.
Now the questions becomes, did the reorganized, expanded and reenergized sales and marketing team deliver in the 3rd quarter? The answer will be seen in the data released by Dendreon before the market opens on October 30, 2012. This, in turn, leads to the $64,000 question: Will the Street be surprised?
Lord, show me a sign.
The Daily chart, courtesy StockChart.com, shows the stock closing last Friday at $4.33, one of the few biotechs to close in the green on what was a horrific day for the markets in general. The Relative Strength is neutral, as is the MACD. The Street clearly is awaiting the 3Q12 results, which will be provided by the corporation at the end of October.
The Weekly data tell much the same story as above, though here, the Relative Strength is hovering just above an Oversold condition.
Disclosure: I am long DNDN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I am long DNDN and will not alter my position within 72 hours of the time of publication of this article. I am not a registered investment advisor and do not provide specific investment advice. The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. It is up to investors to make the correct decision after necessary research. Investing includes risks, including loss of principal. I am long DNDN and will not alter my position within 72 hours of the time of publication of this article. I am not a registered investment advisor and do not provide specific investment advice. The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. It is up to investors to make the correct decision after necessary research. Investing includes risks, including loss of principal.