Dendreon has announced a strategic restructuring plan designed to accelerate the company’s path to profitability and future growth. The company will close its Morris Plains, NJ manufacturing facility, restructure administrative functions and strengthening commercial functions.
The company expects to reduce costs by approximately $150 million annually with these moves, 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, management projects the company will be positioned to be cash flow positive when net product revenue reaches approximately $100 million in a quarter.
The restructuring is aimed to reduce cost of goods sold (COGS) to less than 50% of net product revenue, down from 77% for the quarter ended June 30, 2012. Dendreon expects it may be able to further 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.
“This restructuring sets a new course forward for Dendreon, accelerating our path to profitability and future growth,” said John H. Johnson, Dendreon chief executive officer, president and chairman. “Since we first launched Provenge, we have continued to look for ways to improve the methods of producing and distributing the first autologous cellular immunotherapy for cancer more efficiently. With efficiency gains in plant utilization, we can now reconfigure our manufacturing network to lower costs across our organization, while continuing to deliver the same quality product and high levels of service our customers expect from us. With the planned improvement in operations, we believe the new network will have similar capacity as that of our three plants currently.” Dendreon's other manufacturing facilities are located in Union City, GA and Seal Beach, CA.