Dendreon (DNDN) Announces Strategic Restructuring, Cutting 600 Jobs
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Dendreon Corporation (Nasdaq: DNDN) today announced a strategic restructuring plan designed to accelerate the Company’s path to profitability and future growth. The plan includes re-configuring Dendreon’s manufacturing model with the closure of its Morris Plains, NJ manufacturing facility, restructuring administrative functions and strengthening the Company’s commercial functions.
As a result of the restructuring, the Company expects to reduce costs by approximately $150 million annually, including a reduction in headcount of more than 600 full-time and contractor positions over the next 12 months. Full implementation of the restructuring is expected to take 12 months. Once implemented, the Company believes it will be positioned to be cash flow positive when net product revenue reaches approximately $100 million in a quarter. With this restructuring, Dendreon expects to reduce its cost of goods sold (COGS) to less than 50 percent of net product revenue following the closure of the Morris Plains, NJ facility, down from 77 percent for the quarter ended June 30, 2012. Dendreon expects it may be able to continue to reduce COGS through ongoing operational efficiencies, automation, systems improvements and increased sales over time. The Company will begin to implement the restructuring immediately and expects net benefits associated with these restructuring initiatives to begin to appear in its financial results as early as the first half of 2013.
The plan is designed to optimize resources and accelerate profitability through a three-pronged approach:
As a result of the restructuring, the Company expects to reduce costs by approximately $150 million annually, including a reduction in headcount of more than 600 full-time and contractor positions over the next 12 months. Full implementation of the restructuring is expected to take 12 months. Once implemented, the Company believes it will be positioned to be cash flow positive when net product revenue reaches approximately $100 million in a quarter. With this restructuring, Dendreon expects to reduce its cost of goods sold (COGS) to less than 50 percent of net product revenue following the closure of the Morris Plains, NJ facility, down from 77 percent for the quarter ended June 30, 2012. Dendreon expects it may be able to continue to reduce COGS through ongoing operational efficiencies, automation, systems improvements and increased sales over time. The Company will begin to implement the restructuring immediately and expects net benefits associated with these restructuring initiatives to begin to appear in its financial results as early as the first half of 2013.
The plan is designed to optimize resources and accelerate profitability through a three-pronged approach:
- Restructure Technical Operations. Dendreon will reconfigure its network to operate at a significantly lower cost, while continuing to meet customer demand and expectations for future growth, without any disruptions in service. With efficiency gains in plant utilization recognized over the past six months, Dendreon has determined that the manufacturing of PROVENGE can be handled through the Company’s existing manufacturing facilities located in Union City, GA and Seal Beach, CA. As a result, the Company will close its Morris Plains, NJ facility, which is expected to occur in the fourth quarter of 2012. Dendreon expects to have the ability to manufacture approximately $1 billion of product from the Union City and Seal Beach facilities. Over time, with the implementation of automation, Dendreon believes that its manufacturing capacity could at least double.
- Restructure Administrative Functions. Dendreon will restructure its other administrative functions to align its support costs with the biotechnology industry norm. The Company expects to reduce these costs by more than 35 percent over the next 12 months.
- Strengthen Commercial Operations. Dendreon will continue to strengthen its commercial operations and refocus its investment to support sales growth, improve execution of its sales force and reorganize its market access team for better on-the-ground support at each touch point from sale to physician administration. The Company has already begun to reorganize and has attracted a top quality sales leadership team. The Company is also adopting a unique customer service model with enhanced technology to serve customers more efficiently.
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