Analyst Conference Summary


Conference date: May 7, 2012 @ 1:30 PM Pacific Time
for quarter ending: March 31, 2012 (first quarter, Q1)

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Forward-looking statements

Overview: Note Q4 had a one-time revenue item. Q1/Q4 better indicator is Provenge revenue.

Basic data (GAAP):

Revenue was $82.0 million, down 59% sequentially from $202.1 million, but up 200% from $27.0 million in the year-earlier quarter.

Net income was negative $103.9 million, down sequentially from $38.1 million, but improved from negative $112.8 million year-earlier.

EPS (earnings per share) were negative $0.70, down sequentially from $0.26, but improved from negative $0.78 year-earlier.


Projecting low single digit sequential growth. Modest quarter to quarter growth for the remainder of 2012.


Provenge revenue was $82.0 million, up 6.5% sequentially from $77.0 million. March was the strongest month of the quarter, but does not know if that trend will continue into Q2.

Excluding cash and non-cash severance expense, non-GAAP net income was negative $87.1 million or negative $0.59 per share.

Trying to reduce the cost of producing Provenge while ramping sales. Aiming for cost of goods sold between 20 and 30% of revenue.

Demand growth is both in community oncology and urology centers and are 70% of total, 72% oncology, 28% urology, but urology is growing faster. There are challenges to introducing this fundamental change to therapy.

Added 128 new infusion sites to total of 723 sites. Sites include satellite offices of some practices, so lesser number of accounts. Expanding geographically, which sometimes reduces referrals into academic centers. 84 new accounts infused Provenge in the quarter. Average reimbursement time remains less than 30 days.

Because of acute nature of disease, when new sites come on there can be a bump before leveling off at a slower rate. Also months have different numbers of infusion dates.

Continues finding better ways to educate physicians. Needs to get urologists to screen for treatment earlier.

$5.7 million in rebates and chargebacks. $1 million in charges for GPO administration fees, which reduces gross sales.

Cost of goods sold was 73% of revenue, only slightly improved over 74% in Q4. But spent $2 million on antigen, and will have higher antigen costs in Q2. Will introduce more automation into testing and manufacturing.

SG&A expense $95 million, up sequentially from $76 million due to executive severance charges, but flat y/y.

R&D $17 million, down from $18 million year-earlier, but will increase to $25 million range

Loss from operations was $90.5 million. Net interest expense was $13.5 million.

EBITDA negative $0.35 per share

$559 million cash and equivalents balance. Cash used was $59 million in quarter. There are $514 million in convertible senior subordinated notes due in 2014.

$500 million annual run rate would allow for cash flow break even.

In Europe the Provenge application is under review.


"same store" comparisons? In community urology and oncology we have seen more patients in same large accounts.

Growth guidance, does it include an assumption of missing out during cancer national conferences? Offices do have Provenge champions, and it they are out of the office the patient infusions get pushed out. We do think there will be some impact from conferences this quarter. However, we will also be doing education at the conferences.

At AUA we have a comprehensive plan to position Provenge as the foundation of care. We will have a very interactive booth, with 1-on-1 dinners with clients.

Is March strength just a pattern of seasonality? We don't want to make a prediction based on two data points. Adherence to GPO contracts could have been a driving factor. We don't know if we will see it again in June, so we have tempered our guidance.

Any reason we would see a breakout to a faster growth rate? We have seen some individual accounts break out, with some new accounts becoming among our largest accounts. When that happens in more community accounts we would see a faster growth rate. We see urology as very important, it is the fastest growing segment.

Fixed versus variable costs? Breaking them out is difficult. Labor is essentially fixed, so the only variable is raw materials, and it is 20% of cost of goods sold.

AUA, clinical presentation at? Effect of cross-over on IMPACT results, and on the particularly strong survival benefit shown by African-Americans.

Is the time between a physician tries first patient and second? Yes, we have seen the second patient coming quicker, especially in community oncology accounts, because of reliable and quick reimbursement.

Shutting down plants to save money? Does not think that would work, but are looking at it in the context of improving manufacturing efficiency. Closing down a facility would be very expensive.

What is the feedback from centers that are not using Provenge? They want to make sure they understand the entire science and system. They may start with one or two patients to test the waters. We help them identify appropriate patients once they get started. It is a unique product, not a pill or vial. Logistics of apheresis has been a rate limiting step in some cases.

Before March whatever infusions were booked at the beginning of a month were the total for the month. In March we had new bookings that were infused in the quarter. We don't know if that might continue in future months.

We now have about 60% of the top 80% of oncologist and urologist accounts.

When you see the benefit of using as many therapies as possible, and data showing the benefit of using Provenge in patients with lesser disease, it makes sense to include Provenge for as many patients as possible, followed by other therapies. Thought leaders believe there is a very real benefit to Provenge therapy, but obviously not every physician will agree with that.

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Copyright 2012 William P. Meyers