Troubled Dendreon is again cutting its payroll, planning to shed about 200 employees in an effort to water down its cash burn rate and finally turn a profit. But, with a disappointing prostate cancer drug and a dim outlook for the future, the Seattle drugmaker may need more than lighter books to reverse its fortunes or find an acquirer.
The company ($DNDN) is looking to save about $125 million in cash per year, a 20% reduction in its run rate. Once its cuts are complete, Dendreon will employ about 820 people around the world, the company said, down from the 1,050-person workforce it had as of February and far below its peak of more than 2,000 staffers, back when Provenge was expected to become a multibillion-dollar blockbuster.
Now, thanks to reimbursement troubles and stiff competition, Dendreon's drug has flatlined, with sales falling 13% to $68 million last quarter, and analysts are less than optimistic about its future.
But all's not necessarily lost, and the latest cuts will make Dendreon "a leaner, more nimble" company on the path to profitability, CEO John Johnson said in a statement. "We are confident that with the successful execution of our plan, we can create value for shareholders, physicians and patients," he said.
And, perhaps more importantly, the cuts could spur potential suitors. Late last month, Bloomberg reported that Dendreon is sniffing around for buyout offers, looking for a deep-pocketed acquirer who sees promise in Provenge and isn't afraid to contend with Johnson & Johnson's ($JNJ) fast-growing Zytiga and Medivation ($MDVN) and Astellas' impressive Xtandi.
That, of course, is easier said than done, and Provenge's disappointing performance isn't Dendreon's only obstacle. The company has $546 million of convertible bonds coming due in 2016, and even if the company can meaningfully slow its cash burn, it's hard to imagine Provenge sales stepping up to close the gap.
Analysts, in short, aren't expecting a bidding war.
- read Dendreon's results