Analyst Conference Summary



Conference date: November 12, 2013 @ 6:00 AM Pacific Time
for quarter ending: September 30, 2013 (third quarter, Q3)

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Forward-looking statements

Overview: Continuing drop in Provenge sales, insufficient expense reduction. If there is good news, it is that Provenge sales did not collapse to the extent predicted by shorts. Pipeline progress: could be some value in the therapy pipeline.

Basic data (GAAP):

Revenue was $68.0 million, down 7% sequentially from $73.3 million, and down 13% from $78.0 million in the year-earlier quarter.

Net income was negative $67.2 million, slightly improved sequentially from negative $68.8 million, and considerably improved from negative $154.9 million year-earlier.

EPS (earnings per share) were negative $0.44 , improved sequentially from negative $0.45, and improved from negative $1.05 year-earlier.




Plans to continue cutting costs of good sold and operating expense; new plan could reduce annual expenses by $125 million [WPM: $31.25 million per quarter, not enough to get in the black.].

John H. Johnson, CEO, claims enrollments accelerated in September and October, with October the best month of the year so far. However, enrollments must convert to treatments (infusions) to generate revenue. Did not make a specific Q4 revenue prediction.

Sales in Q3 were weak because of increased competition and sales force vacancies. 27 net new accounts. 71% of sales were from community clinics. 37% oncology. 34% urology. Xtandi and Zytiga extended their market share in post-chemo segment, impacting Provenge especially in smaller clinic settings. Realigning remaining sales force to focus on the largest accounts. But patient enrollments in October were strong. Now has 94 large accounts.

In the quarter Provenge was granted marketing authorization in the EU, but no definite plan for a partner or a launch date has been announced yet. Label in EU is favorable, including PSA quartile analysis. Hopes for more cost efficient manufacturing in Europe. Working towards qualifying for reimbursement.

Believes direct to consumer (DTC) marketing program is beginning to have an effect. DTC program has met expectations for enrollments and infusions.

Exploring options for dealing with convertible debt; will announce plans in February.

Non-GAAP numbers were net income negative $43.9 million, sequentially from negative $51.1 million. EPS negative $0.29.

Cash and equivalents balance ended at $233.3, down $47 million sequentially from $280.6 million. Debt is $580 million in convertible notes.

Provenge + Xtandi Phase II sequencing trial began enrollment in Q4. Sequencing trials, Phase 2, with Zytiga and ADT are fully enrolled; "data support that Zytiga and Provenge can be given concurrently." There are 19 novel investigator initiated trials underway or planned. Also looking for biomarkers.

Xtandi Phase 3 Prevail trial results showed a 2.2 month median survival benefit, far less than many physicians expected, which should help Provenge [See Medivation Xtandi Prevail press release]. Provenge showed a 4.1 month benefit.

There is preliminary evidence that Xtandi and Zytiga are most effective in later stages, while Provenge has the greatest effect earlier, suggesting Provenge should be used earlier. There are a few reports of patients having dramatic improvements when Provenge is combined with hormonal treatments.

PREDICT study screening for castrate-resistant prostate cancer patients for metastasis is actively enrolling.

DN24-02 immunotherapy for HER2/neu tumor antigen is advancing in the pipeline. Preliminary data showed positive immune response, with 3/4 of bladder cancer patients expressing Her2.

Will be looking for opportunities to augment the pipeline. Study enrollment should complete in 2014.

After the restructuring Dendreon should be down to about 820 employees, down from about 2,000 at peak. Cost reduction should begin to be seen in Q1 results. Reductions will be in all expense categories, particularly SG&A. But continuing investment in strategic initiatives, including Europe.

Total operating expenses were $121.9 million. Consisted of $46.9 million cost of goods sold; $17.6 million research and development; $56.2 million selling, general, and administrative; and a $1.2 million restructuring. Income from operations negative $53.9 million. Interest expense $13.5 million.

Non-cash stock-based compensation expense has been deceasing. Expects new run rate close to $7 million per quarter.


Expense reduction, from what run rate? It is off the Q1 to Q3 2013 cash run rate. There could be further reductions as some strategic expenses are completed, and we would continue to look for other reductions.

What about shutting down one of the 2 U.S. plants? Right now one serves the east coast, one the west, so we are concentrating on automation improvements.

Xtandi Prevail results, given the progression free survival data, would it not be more of a competitive threat? The results are still good news for patients. Overall survival is still the gold standard; we are glad they hit statistical significant. We had heard before the results came out that expectations were for an overall survival benefit of 8 months or greater, which would make it important to sequence before Provenge. We realize the 2.2 months could be extended. None of these products is a cure; doctors need multiple agents for their patients. We feel we are in a better position today than we were a couple of weeks ago. There is also increasing evidence of cross-resistance to hormonal agents. So the enthusiasm about hormonal agents is now sobering up.

Time frame for expense reduction program? It will start immediately, with full benefit in 6 to 9 months.

Sales vacancies? We have a retention program, these professionals are in high demand. Vacant territories do not perform as well as stable territories. We believe our realignment will help to continue the strong October enrollment trend.

Details of extent of October uptick? They are strong across all key market segments. Partly a result from growing the number of large customers, plus the marketing campaign. We also added hospital reps to call on key academic centers.

Red Cross pull-back on collections for apheresis? Our network continues to improve, which cuts down on the distance patients have to go.

COGs (cost of goods sold)? 30% to 39% going forward, no specific time frame. There is a regulatory pathway for introducing automation.

In stable sales territories, enrollments were up 15% (did not give over what timeframe).

Check point inhibitors? The challenge is getting access to check point inhibitors. We are supporting three investigator initiated trials of inhibitors.

Any plans to change the platform, for instance targeting multiple antigens? We have considered that for some time, and will let you know our plans ...

A majority of patients who enroll progress to infusion.

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Copyright 2013 William P. Meyers