Sales force defections have hit hard at Dendreon Corp., the Seattle-based biotechnology company with a Seal Beach manufacturing plant.
Dendreon makes Provenge, which is a treatment for advanced prostate cancer.
The company said on a recent earnings call that 18% of its sales staff had left the company in the three months ended June 30. It noted that many of the sales representatives were recruited by other biotechnology companies.
“To be quite frank, is you have other biotech companies preparing to launch, going after your people who are experienced oncology sales force folks,” said Joe DePinto, Dendreon’s executive vice president, commercial operations.
Dendreon Chief Executive John Johnson said that Dendreon began to experience turnover in its sales force starting in last year’s fourth quarter.
“When we examined our results, we found that those territories that experienced turnover were down 30% in quarter-to-quarter sales versus those with a sales rep throughout the quarter,” said Johnson, who became the drug maker’s chief executive in February, succeeding Mitchell Gold.
DePinto also said there was an “unusually high” rate of cancelled sales for Provenge, which trimmed $2 million from sales in the second quarter.
Dendreon posted a net loss of $96.1 million on sales of $80 million in the quarter.
“We’ve known (Dendreon sales representatives) were being poached but we did not expect this to impact sales to this magnitude,” Lee Kalowski, a Credit Suisse analyst, wrote in a note called “You can’t cut your way to prosperity.”
Dendreon could lose even more sales representatives because Bayer AG of Germany and Norway-based Algeta ASA are hiring to support the expected launch of Alpharadin, a competing prostate cancer drug that they’re developing together, Kalowski added in the note.
Dendreon’s had rough sailing for more than a year.
Its shares plummeted 67% in August 2011 after officials said that acceptance of Provenge—which is made from a patient’s own white blood cells and costs about $93,000 a treatment—would be a more gradual process than first believed for several reasons, including uncertainty on reimburse- ment from insurers.
Dendreon shares are down 56% over the past year, to a recent market value of $744.6 million.
Dendreon previously said it would close its manufacturing plant in Morris Plains, N.J., and restructure its administrative department.
A total of 600 jobs are being cut as a result of the New Jersey plant closure and other moves. Dendreon has said it expects to save about $150 million a year with the moves.
• Headquarters: Seattle
• Business: drug maker
• Founded: 1992
• Ticker symbol: DNDN (Nasdaq)
• 2011 revenue: $341.6 million
• Recent earnings: ($96.1 million) for June quarter
• Market value: About $745 million
• Notable: Major manufacturing facility in Seal Beach; lost 18% of sales staff in recent months, with many hired by competitors
Dendreon executives recently discussed with analysts their decision to keep the manufacturing plant in Seal Beach and another in Union City, Ga., an Atlanta suburb.
It looked at customer service levels through its supply chain, and “based upon this analysis, it became evident that the most robust supply chain would be to (use) our Atlanta and Seal Beach facilities,” Greg Schiffman, Dendreon’s chief financial officer, said on the second-quarter earnings call.
Schiffman said the company believes it can produce products worth about $1 billion in annual revenue using only the Seal Beach and Atlanta plants. He added that the company plans to add new forms of automation at the plants over the next couple of years.
Dendreon opened its Seal Beach plant in 2011. It is located in the Pacific Gateway Business Center near the Garden Grove (22) Freeway.
The local plant started operations with several hundred employees—the company has not given a specific number of how many workers are there—but cut about 70 within a few months.
The company touched on other matters during the conference call, including plans to revise its marketing budget.
Dendreon has learned that “our oncology and academic accounts have historically driven a large volume of patients, and we have learned that we need to achieve better balance in terms of our marketing spend and focus across all three of our key market segments,” DePinto said. “To put it differently, we will not focus on one segment at the expense of another.”
The company doesn’t yet have the scale of penetration across types of accounts to help manage the swings in demand, DePinto said, because Provenge and immunotherapy are still considered relatively new treatments.
