Seattle-based biotech company Dendreon Corp., which opened a manufacturing plant in Seal Beach two months ago, now is working to reach a break-even point on cash flow as part of an ongoing restructuring.
Chief Financial Officer Gregory Schiffman said the maker of Provenge, a drug made to fight advanced prostate cancer, is in a push to conserve capital and avoid diluting the company’s value through the sale of additional shares.
Dendreon launched its restructuring on the heels of disappointing sales of Provenge. A key part of the plan is 500 job cuts, including positions at the Seal Beach plant.
The move came after Dendreon withdrew its 2011 revenue estimate of $350 million to $400 million and posted a loss of $114.6 million for the second quarter.
The job cuts are expected to bring about $21 million in short-term costs and yield $120 million in annual savings.
Another key to the restructuring is efforts to speed up reimbursements to customers for Provenge, which is made from white blood cells harvested from a patient’s body. It costs about $93,000 per treatment.
Dendreon has developed “a comprehensive plan” to help customers on reimbursements, Chief Executive Mitchell Gold said in a recent conference call with analysts and investors.
Some clients had been saying it took an average of 30 days to see reimbursement for the drug.
Gold said there have been some improvements.
Just recently, “one of our customers notified us that they were paid in eight days,” he said. “This is a significant improvement from what we’d been seeing.”
Dendreon sales representatives are now sharing information with doctors and their office managers about the changes, according to Gold.
“We know it is critical that physicians know of the improved reimbursement landscape,” he said.
The drug maker is making changes to its sales force to better target the community oncologists and neurologists who are expected to account for the majority of Provenge prescriptions. It’s also considering a new push to work with major oncology purchasing groups.
The jobs cuts hit about of 25% of Dendreon’s total work force.
The vast majority of the cuts will come in Seal Beach and manufacturing plants in New Jersey and Atlanta.
Company executives declined to say how many jobs would be trimmed in Seal Beach. The company has never given a specific number of workers at the plant.
Investors have pounded Dendreon since the announcement—its shares were recently down some 67%, to a recent market value of $1.7 billion.
Dendreon opened its Seal Beach plant in the Pacific Gateway Business Park earlier this summer.
“With the shift in our launch trajectory, we were significantly overstaffed at the manufacturing facilities,” Schiffman said.
A combination of launch changes and expected efficiencies created “an immediate staffing issue” in the plants, he said.
Tenet Healthcare
Tenet Healthcare Corp., a Dallas company with three Orange County hospitals, should have accepted a buyout offer from a rival in the wake of a stock slump, according to one analyst.
Tenet is unlikely to achieve its long-term growth projections in light of recent weakness in the economy, and “we believe it’s pretty clear management should have accepted a deal,” Jason Gurda, who covers Tenet for Boston-based Leerink Swann LLC, wrote in a client note.
As of last week, Tenet’s stock was down 35% since May, when it rejected a $4 billion offer by Nashville, Tenn.-based Community Health Systems Inc.
Community also offered to buy Tenet last December.
Tenet officials dismissed Community’s offers, arguing that they “grossly undervalued” the company.
Tenet owns Fountain Valley Regional Hospital and Medical Center, Los Alamitos Medical Center and Placentia-Linda Community Hospital. It was once Orange County’s largest hospital operator but has sold off most of its local holdings in recent years.
PerkinElmer Moves On
Earlier this year, PerkinElmer Inc., a Waltham, Mass.-based maker of diagnostic tests and supplies, lost out in a bid to buy Brea-based Beckman Coulter Inc.
Beckman, which makes medical testing equipment and supplies, eventually went to Washington, D.C., conglomerate Dan-aher Corp. for $6.8 billion.
Earlier this month it announced plans for a more modest deal. PerkinElmer has a deal for Hopkinton, Mass.-based Caliper Life Sciences Inc., a developer and seller of products to the life science, diagnostics and environmental industries, for $600 million.
Bits and Pieces:
ChromaDex Corp. of Irvine said the University of California, Irvine, granted it the exclusive rights to a joint patent application that would allow the study of ChromaDex’s formulation of pterostilbene, a compound that’s found in blueberries, as a potential treatment for treating skin cancers. … Irvine venture capital firm SAIL Capital Partners LLC said one of its portfolio companies, CNS Response Inc., also in Irvine, released a study showing that doctors who received CNS Response’s peer outcome reports for patients reported a reduction in how many medications had to be tried before achieving a successful outcome. The study involved 128 records of patients treated for mental health conditions.
