Analyst Conference Summary


Conference date: November 2, 2012, 6:00 AM Pacific Time
[was originally scheduled for October 30, 2012 @ 6:00 AM Pacific Time]
for quarter ending: September 30, 2012 (third quarter, Q3)

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Forward-looking statements

Overview: Continued downward trend of Provenge revenue.

Basic data (GAAP):

Revenue was $78 million, down 2% sequentially from $80.0 million, but up 27% from $61 million in the year-earlier quarter.

Net income was negative $154.9 million, down sequentially from negative $96.1 million and also down from negative $147.1 million year-earlier.

EPS (earnings per share) were negative $1.04, down sequentially from negative $0.65 and down from negative $1.00 year-earlier.


SG&A will increase to around $75 million in Q4, but cost of goods sold will continue to drop. R&D around $20 million.


Restructuring charge of $81 million, largely to close Morris Plains, New Jersey Provenge manufacturing facility, which will happen by end of year. Believes will be cash flow break even at $100 million revenue per quarter after restructuring is completed. Consolidating commercial operations in Bridgewater, N. J. $67 million of restructuring charge was non-cash.

Non-GAAP net income negative $50 million or negative $0.33 per share.

Cost of goods sold expected to drop to less than 50% of revenue following restructuring.

Cash and equivalents ended at $445.1 million. Used $65 million cash in quarter. Convertible notes due 2014 and 2016 debt is $554 million.

Within the dropping revenue, there was more revenue from community urology accounts, up 14% sequentially, while academic medical center revenue declined. Community oncology account revenue was flat. Added 54 new accounts, for a total of 741. Is working to further educate patients and public about Provenge benefits.

October was a strong first month of the quarter, but there was some impact from Sandy storm requiring rescheduling of patients. Believes there is new momentum for Provenge in community urology accounts and has a new team in oncology accounts. Academic account decrease appears to be due to large trials of new therapies in the segment.

Treated the first European trial subject and expects a regulatory decision in Europe in mid-2013. Also completed enrollment of a trial evaluating sequencing of Provenge with Zytiga, with data expected in 2013. Will also do a sequencing study with Xtandi.

The hope is that more physicians will want to use all the available therapies with earlier use of Provenge.

Cost of product revenue was $51.8 million. Research and development expense $18.6 million. Selling, general and administrative $68.1 million. Restructuring $81.0 million. Total operating expenses $219.5 million. Loss from operations $141.5 million. Interest expense $13.4 million.

$4.4 million rebates and chargebacks in quarter, which reduced revenue, but was sequentially lower.


Decline in academic setting? We did see a decline in Q2 as well. The driver was losing patients to clinical trials. It was just a loss of 43 patients q/q. We expect a headwind. We are not satisfied with the performance. We will continue to work on driving deeper conviction among these physicians.

Assess impact of pre-chemo label Zytiga impact? We have not seen direct impact yet. We believe the sales force turnover in Q2 was the real problem.

Sequencing study? We are going forward whether or not we partner it.

Percentages by type? Community oncology 43%, urology 23%. The rest is hospitals, mixed clinics, and academic.

Urology 14% growth, new vs. same accounts? Most of the growth was driven by existing accounts. Larger accounts have unique needs.

We still have some unfilled sales positions and had some turnover in the quarter.

We had 68 new accounts, net was 54, the difference was due to consolidation, not anyone dropping off. We are not subtracting accounts that have not ordered in the quarter.

We are still having active partnering discussions for Europe, but will not necessarily have a partner.

Zytiga sequencing study data date? It is fully enrolled, we expect to be able to provide some results in the first half of next year.

EU open label study is not a requirement for our submission to the EMA. It is to get experience with European physicians. It could help us answer questions the EMA asks.

The convertible note does not come due to January 2016.

VA contract, volume from? Will not disclose details, but can now go into that segment.

Our main Q4 concern is closed physician offices due to the storm. Even getting patients to offices, or electricity to offices, is difficult. Our own logistics are ready to continue treating patients.

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Copyright 2012 William P. Meyers