Cuts, which do not impact sales and marketing, are expected to save $120 million per year.
Dendreon is laying off 25% of its workforce in an attempt to offset slower-than-expected sales of its first marketed product, Provenge® (sipuleucel-T) for prostate cancer. The total employee-related cost of the restructuring is expected to be approximately $21 million ($5 million noncash) and result in about $120 million in annual savings.
About 500 employees will be cut, mainly in manufacturing and back-office administrative positions, with no impact to sales and marketing where the company expects to make additional select hires, according to Howard Liang, Ph.D., and Jonathan Eckard, Ph.D., biotechnology analysts at Leerink Swann. “We view DNDN’s restructuring plan to be sensible, and the maintenance of and continued investment in sales and marketing efforts to be likely received well by investors,” Drs. Liang and Eckard note.
FDA approved Provenge, an autologous cellular immunotherapy, in April 2010 for the treatment of asymptomatic or minimally symptomatic metastatic castrate-resistant prostate cancer. The drug brought in almost $48.04 million in sales last year and was predicted to achieve $350–400 million in revenues during 2011.
This August, however, Dendreon backed off those estimates, saying only that it expects modest quarter-over-quarter revenue growth for the remainder of this year. The firm as well as analysts are blaming the slow uptake on doctors’ concerns about reimbursement; Provenge is a $93,000 treatment.
“Provenge provides patients with a clinically meaningful survival benefit, a manageable side effect profile, and a short duration of therapy,” points out Mitchell H. Gold, M.D., president and CEO. In the pivotal study on which FDA approval was based, the drug extended median survival beyond two years, demonstrating a median improvement of 4.1 months compared to the control group. Risk of death was reduced by 22.5%.
Dendreon reported August gross revenues of approximately $22 million. The firm is now banking its plan to educate doctors and on the reimbursement paradigm under the Centers for Medicaid and Medicare Services (CMS) recently established National Coverage Decision (NCD) and issuance of a product specific Q-code.
“Dendreon reported August gross Provenge sales of $22 million, and September orders at the beginning of the month are higher than at same point in August,” Drs. Liang and Eckard report. “We view these growth trends in the midst of turmoil and uncertainty within the organization to be encouraging. The addition of 70 more practices infusing Provenge at the end of August (370) versus the end of July (300) also suggests that there is still growing physician demand for access to the therapy, and the key will be to turn them into repeat customers and have more physicians use the drug on a sustainable basis.”
As of August 31, the company had cash, cash equivalents, and short- and long-term investments of approximately $600 million dollars. Given reduced spending levels following the restructuring, Dendreon expects to have sufficient cash to enable the company to achieve a cash flow break even position in the U.S. at an annual run rate of approximately $500 million in revenue.
To fulfill a post marketing requirement, Dendreon will conduct a registry of approximately 1,500 patients to further evaluate a potential safety signal of cerebrovascular events. In four randomized clinical trials of Provenge in prostate cancer patients, cerebrovascular events were observed in 3.5% of patients in the treatment group compared with 2.6% of patients in the control group.