Dendreon to slash costs using production automation; CFO

15-May-2012 - Last updated on 16-May-2012 at 09:12 GMT

Related tags Vaccine

Dendreon hopes to cut its cost of goods sold by two-thirds through automation of tasks at its cancer vaccine plants.

The cost of producing the prostate cancer vaccine, Provenge, is dragging on financials at Dendreon and the biotech’s financial team is now targeting manufacturing efficiencies to cut outgoings.

Speaking at Deutsche Bank Securities Healthcare Conference Greg Schiffman, chief financial officer at Dendreon, said: “This year is focused on cost of goods sold reduction both due to volume growth, efficiencies that we expect to gain, but also automation and changes in our process.”

Schiffman is targeting costs of goods sold of 50 per cent by the time product sales hit $125m (€98m) a quarter. In the first quarter net product revenue was $82m, three times the sales one year ago, and cost of goods sold was essentially flat sequentially at 73 per cent.

Increased volumes will drive some of the near-term one-third cut to costs but to move lower still and hit the longer-term target of 20 to 30 per cent Dendreon must improve its manufacturing processes.

“This is not a process that’s been fine-tuned”, Schiffman said. Commercial-scale production of cancer vaccines is still in its infancy and Dendreon is “in a very early stage of a learning curve”. Moving along this curve and improving the processes it has used since clinical trials is the next step for Dendreon.

Automated gains

Schiffman is working on adopting electronic systems and automation at the network of US cancer vaccine production plants Dendreon runs. A system for electronic batch records is expected to go live this year and beyond this the biotech will work to automate aspects of its vaccine production.

“Automating our manufacturing process brings potentially the greatest benefit [because of] the ability to potentially generate far more revenue out of each of our manufacturing sites”, Schiffman said.

By automating aspects of vaccine production, such as the testing process, Schiffman expects to boost output at each facility. Output gains could leave Dendreon with “far more” capacity than it needs, Schiffman said, and if this happened he “would have to look at our manufacturing infrastructure”.

Before reaching this stage Dendreon must validate some of the changes for the US Food and Drug Administration (FDA). Dendreon is already having early discussions with the FDA about the plans and expects these talks to intensify as projects progress.

“The process that we have is a very good process. Some of it has been very repetitive types of activity and I think the FDA to the extent that you can automate some of those activities, I think that they do see that in a very favourable light”, Schiffman said.