Conference date: July 30, 2012 @ 1:30 PM Pacific Time
for quarter ending: June 30, 2012 (second quarter, Q2)
Overview: Provenge revenue was down slightly sequentially. Will close the New Jersey facility as part of a restructuring effort.
Basic data (GAAP):
Revenue was $80.0 million, down 2% sequentially from $82.0 million, but up 66% from $48.2 million in the year-earlier quarter.
Net income was negative $96.1 million, improved sequentially from negative $103.9 million and improved from negative $116.0 million year-earlier.
EPS (earnings per share) were negative $0.65, improved sequentially from negative $0.70 and from negative $0.79 year-earlier.
Non-GAAP net income of negative $90.9 million or negative $0.61 per share excludes $5.2 million in severance expenses.
Cash balance ended at $509.7 million. Used $49 million cash in quarter. Convertible senior notes total $547 million.
Added 115 new physician accounts in the quarter, to a total of 687. 151 new infusion sites were added, to total of 874. 65% of business is now in community accounts, 35% in academic. Within the community segement 70% was oncology and 30% urology.
Soft revenues was due to some sales force turnover. Hiring to fill gaps. Infusion cancellations were about twice the normal late in June. There has been a drop off between patient enrollment and infusions. Now fielding a nursing team to increase infusion to enrollment ratio. Also doing a direct-to-patient awareness campaign.
Restructuring will reduce costs by about $150 million per year while eliminating over 600 employees and contractors and closing the Morris Plains, New Jersey manufacturing facility. After restructuring Dendreon should be cash flow positive if quarterly revenues are above $100 million.
Cost of goods sold should drop to less than 50% of revenues after restructuring, then lower as revenues ramp.
In the quarter data from the prior Phase III trials was presented suggesting Provenge "extended median overall survival in all subgroups" according to PSAs. The quartile with the lowest PSA score had a 13 month median survival increase.. In a separate, open-label Phase 2 trial, when Provenge was infused before a radical prostatectomy, there was an immune T-cell response at the rims of tumors. This is cause for further evaluation of Provenge in neoadjuvant (prior to other therapy) settings.
Cost of product revenue was $61.7 million. Research and development expenses were $19.7 million. Selling, general and administrative expense was $80.2 million. Restructuring expense was $1.1 million. Creating a loss from operations of $82.8 million. Interest expense was $13.8 million.
$6 million in rebates and charge backs in quarter.
Using only 2 facilities, now believes can still produce $1 billion in product per year, and possibly hit $2 billion per year eventually using more automation.
Expects $4 million cash and $65 million non-cash restructuring charges in Q3.
SGA expense to be reduced to $240 million per year (or $60 million per quarter) within a year.
EBITDA negative $0.48 per share.
$150 million savings compared to what? It is relative to where we are at today, including SG&A and gross margin improvements.
Areas of high turnover, what did they effect more specifically? We have seen vacancies distributed throughout the nation and hitting both large and small volume accounts. We believe we have a good plan to execute well on our top tier accounts. Improving the sales team will take some time, not not releasing monthly or quarterly guidance until later.
What about impacts from conferences and emerging competition? The turnover really hurts. The yield issue, the cancellations, now has a solution. The critical point is getting a patient to the first infusion. We did not see any relation to prostate cancer competitive therapies.
What did same-account sales look like quarter to quarter? We have a lot of vacancies to fill, and they need to be trained. It is a question of how quickly we can get the new sales people delivering result. The quality of new sales hires has been very high.
How did you choose New Jersey to close? The main criteria were customer service, especially timely delivery of Provenge, and cost of goods.
We see Zytiga as a complementary product. We see physicians using Provenge in conjunction with other therapies; they tell us about it. Patients will have the benefit of multiple options, but sequencing is important. We believe Provenge should be sequenced up front, before Zytiga. We do not believe Zytiga affected our Q2 results.
Sale force loss is not unusual. You have other biotechnology companies headhunting your experienced sales people.
Urology accounts? Provenge is a promotionally sensitive product and we have to have feet on the street. Urology continues to be a big opportunity going forward. We realize a lot of the potential patients originate in urology.
We have the cash we need to get to cash flow break even.
In Europe, we are spending at about $3 million per year. We are strongly looking at partnering Provenge in Europe.
Zytiga plus Provenge sequencing trial should have all the patients enrolled by end of 2012 and some data in 2013.
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