Analyst Conference Summary


Conference date: May 9, 2013 @ 6:00 AM Pacific Time
for quarter ending: March 31, 2013 (first quarter, Q1)

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Forward-looking statements

Overview: Disastrous drop in Provenge sales. Only good news is an alleged increase of enrollments that began mid-quarter and continued into April. Sees growth for remainder of year.

Basic data (GAAP):

Revenue was $67.6 million, down 21% sequentially from $85.5 million, and down 18% from $82.1 million in the year-earlier quarter.

Net income was negative $72.0 million, down sequentially from negative $38.7 million, but improved from negative $103.9 million year-earlier.

EPS (earnings per share) were negative $0.48, down sequentially from negative $0.26, but up from negative $0.70 year-earlier.


Mid $70 million range for revenues in Q2. Believes Q4 may see y/y sales increase.


Remains focused on improving Provenge sales. Currently seeing an improvement in enrollments that started mid-way through the quarter. Getting direct patient responses from the direct-to-consumer marketing campaign. Positioning to administer Provenge earlier. Believes key opinion leader support has increased and they are advocating for Provenge to be used first in the label sequence.

April was the strongest month for patient sales this year.

Provenge sales were below plan, facing headwinds as per previous warnings. The largest impact was due to Zytiga and Xtandi competition in smaller accounts where patients previously received chemotherapy. Also hurt by donut hole and benefit re-verification process.

33 new physician accounts added in the quarter, bringing the total to 835. Sales force turnover was greater than normal.

Larger accounts grew 15% sequentially despite the competition. Yield, the number of enrollments that lead to improvements, improved late in the quarter. The first direct to consumer TV ad appeared March 7, so it would not have had an impact on revenue in the quarter. Still budgeted for $5 million per quarter. Patients are contacting the call center and visiting the web site.

Believes cost of goods sold can be reduced to below 50% of revenue by Q3. Believes other cost savings from restructuring will be in place by Q3.

Continues to gather and report data on Provenge for metastatic castrate resistant prostate cancer, including data that may support earlier use of the therapy. Sequencing studies of Provenge with ADT or Zytiga have completed enrollment. A study with Xtandi is likely to begin in the fourth quarter of 2013. Dendreon is supporting 19 investigator-initiated trials.

European Union regulatory decision on Provenge is expected in the second half of 2013. This will follow oral presentation to the advanced therapy committee and possibly as well to the regular CHMP board.

Cash and equivalents balance ended at $337.3 million, down sequentially from $429.8 million. Debt was $566.8 million.

Cash usage is expected to be down dramatically during the rest of the year. Several items caused high cash usage in the quarter including restructuring, buildup of antigen inventory, and the semi-annual interest payment.

Non-GAAP net loss was $53.8 million, worse than the $51.0 million loss year-earlier.

Total operating expenses were $126.2 million. Consisted of $43.4 million cost of goods sold; $18.4 million research and development; $62.4 million selling, general, and administrative; and $2.0 million restructuring. Income from operations negative $58.6 million. Interest expense $13.6 million.


Any color on y/y growth guidance? No specifics except we expect product sales to bounce back in the fourth quarter.

When will you see an impact from marketing campaign? It takes some time to get a patient from seeing a commercial to actual infusions. So the significant bump will be in September quarter. Getting anecdotal evidence that patients are starting through this pipeline. Patients must be appropriate on label and in window. At AUA a year made a lot of difference in terms of support for earlier Provenge administration.

Importance of various factors impacting Q1 sales? Major factor was competition from Zytiga and Xtandi, with smaller practices preferring oral routes. But some of those accounts restarted infusing and enrolling in April. Second factor was access, including benefit re-verification, the donut hole and foundation support issues.

Makeup of accounts by size? 72% of sales are from community setting. We call a million dollar run rate a large account. These accounts are in community oncology, community urology & academic centers.

We believe the first quarter will be the lowest revenue quarter of the year.

The investigation of biomarkers is exciting. If they can be identified it would help.

Argues that cost of goods sold was down as a percentage of revenue in the quarter once you take out one-time factors. Still projecting COGS at around 50% in Q3. It is revenue sensitive because of fixed costs.

26% of business is from community urology clinics. We see the importance of treating patients earlier in this market. From our standpoint it is the optimal setting for Provenge use. 32% of enrollments in Q1 were in this segment, so it is an important growing segment.

We expect to lower SG&A in the second half of the year, and these will help reduce cash burn. Nor would we expect Q1 2014 to have a similar cash drop.

$0.85 of every new revenue dollar now flows through to the bottom line.

Market penetration is hard to determine. There are about 28,000 to 30,000 patients per year who die. We believe Provenge is under penetrated; there is a huge potential in this market. Physicians are still learning because it is a new paradigm, they are used to hormone and chemotherapy treatments.

Physicians are very interested in the Xtandi and Provenge sequencing study, we won't have a problem enrolling patients, but the outcome is hard to predict due to the several factors involved.

Run out of cash? We still believe there is growth for Provenge ahead so we can grow the top line. We believe we were not messaging appropriately to physicians in the past. There was also a gap in consumer education. We are excited about that, it is early, but it looks pretty good. The biomarker work could be game-changing, as could combination with other therapies. Will not share contingency plans for scenario where revenues do not grow.

Are you saying 2013 will have higher revenues than 2012, and does that mean an over-$90 million per quarter run rate the last 2 quarters? Yes.

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Copyright 2013 William P. Meyers