Dendreon Corp. (DNDN), maker of the prostate-cancer drug Provenge, is cutting its workforce 25 percent in a restructuring effort to reduce costs and offset slower-than-anticipated sales of its only product.
The pace of sales for the cancer drug prompted the Seattle- based company last month to withdraw its 2011 revenue estimate of $350 million to $400 million. Dendreon announced yesterday it had fired 500 workers, a move that would save $120 million annually.
Provenge, the first U.S. approved therapy that trains the body’s immune system to attack cancer cells as if they were a virus, is a $93,000 treatment. The cost, and concern by doctors that they may not be reimbursed quickly, led some physicians to avoid prescribing the medicine, Mitch Gold, Dendreon’s president and chief executive officer, said in an interview.
“The launch of any new product is always difficult to predict what it will look like,” Gold said. The company is focusing on educating physicians on available reimbursement. “When we look at our own numbers internally, they haven’t shifted at all, in terms of what we think the peak sales potential is.”
Dendreon yesterday reported August revenue of $22 million, a 16 percent gain from July, and Gold said September sales should continue to rise.
Approval in 2010
About 241,000 new cases of prostate cancer will be diagnosed in the U.S. this year and an estimated 33,720 Americans will die of the disease, according to the National Cancer Institute. Provenge was approved in April 2010 for patients with advanced cases of the disease after the company’s three-year effort to persuade the U.S. Food and Drug Administration to clear the medicine for sale.
Dendreon’s restructuring, which will cost $21 million, will enable the company to achieve a break even position in cash flow, Dendreon said in its statement. The company also announced the departure of chief operating officer Hans Bishop.
Dendreon gained 6 cents to $10.94 at 9:31 a.m. New York time in Nasdaq Stock Market trading. The shares dropped 69 percent this year before today.
The restructuring “could be key to the company achieving future profitability from much reduced revenue expectations,” said Geoffrey Porges, an analyst at Sanford C. Bernstein & Co. in New York, in a note to investors before the details were announced. Porges has an “underperform” rating on the stock.
Dendreon will have 1,500 employees after the cutbacks.
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