Analyst Conference Summary

Conference date: November 2, 2011 @ 1:30 PM Pacific Time
for quarter ending: September 30, 2011 (third quarter, Q3)

Forward-looking statements

Overview: Provenge sales are ramping, but Dendreon is a long way from profitability.

Basic data (GAAP):

Revenue was $64.3 million, up 30% sequentially from $49.6 million, and over 3 times the $20.2 million recorded year-earlier.

Net income was negative $147.1 million, down sequentially from negative $114.6 million, and also down from negative $79.3 million year-earlier.

EPS (earnings per share) were negative $1.00, down sequentially from negative $0.79 and also down from negative $0.56 year-earlier.

Guidance:

Expects on moderate growth in Provenge revenues in the next several quarters.

Highlights:

There was a $4.3 million reserve for rebates and chargebacks associated with federal health programs. Gross Provenge revenue was $65.8 million.

Still believes they have enough cash to get to cash flow break even. Will submit Provenge application to European medical authorities in early 2012.

Non-GAAP net loss was $81.3 million; Non-GAAP EPS negative $0.56, compared to negative $0.47 year-earlier.

There was about $3 million in royalty revenue in the quarter.

Cash and equivalents at the end of the quarter were $568 million. $106 million cash was used in the quarter.

More than 680 sites were in the Provenge program at the end of the quarter, and 425 of those sites had actually infused Provenge. Knowledge that Medicare and Medicaid would cover Provenge, and a Q-code had been issued, grew from 25% in July to 70% in September. Average time to payment shrank to about 30 days.

$26.4 million revenues in October, but it looks like November and December will be weaker due to the holidays. So Q4 will be about flat versus Q3.

So far it appears that once physicians become comfortable with prescribing Provenge, they continue to recommend it to patients.

Working on making the process simpler for doctors, patients, and other healthcare workers.

Atlanta facility was approved by FDA in August. There should be no more start-up facility costs in future quarters. Labor costs should be stable going forward until Dendreon grows into the current capacity of the workforce.

Neu-ACT, DN24-02, immunotherapy for HER2 positive bladder cancer Phase II trial was initiated. 180 patients are to be enrolled.

Cost of revenue was $55.0 million, leaving gross profit of $9.3 million. Operating expenses of $143.8 million included: $20.4 million for research and development; $84.9 selling, general and administrative; $38.5 million for restructuring. Loss from operations was $134.5 million. Interest loss $12.6 million (from convertible debt).

Q&A:

October sales, down from August? Look artificially lower because of a weather event on the last day of the month on the east coast, pushing out some revenue to November.

Could you grow in November or December? We see modest growth in Q4 compared to Q3, despite the holidays.

Victrelis royalties just dumping into net sales? Royalties are associated with full sales, and included some that really was in Q2. Royalties will continue to be included in total revenue reported.

Q3 growth components? As we add new accounts, it takes 3 or 4 patients to become comfortable. Our older sites are prescribing consistently. So growth from both old and new sites, but we believe there is more room to grow units at the established sites.

Q-code? We expect vast majority of doctors to use the new q-code.

Cost of goods sold, could they be lowered? We intentionally kept all three facilities up and running because we expect Provenge sales to ramp. Shutting a facility down and then restarting would be very expensive and includes another FDA review. Revenue growth projections are now in line with what we assumed when we did the restructuring.

Academic, community, urology differences? Academic accounts are consistent while we are building community accounts. Urology has gone from 7% of business originally to about 20% in Q3.

Q2 to Q3 cost of goods sold increase? The most important was $25 million in startup expenses that moved into COGs once Atlanta was approved. The reduction in force only took place in the last month of the quarter. COGs should level off in Q4 and stay flat in 2012 even if we ramp Provenge sales.

Zytiga competition, other competitors in the space? Speaking to physicians, the benefits of sequencing Provenge prior to other therapies are obvious to them. We are seeing a small percentage movement of Zytiga into our label. Zytiga requires parallel steroid administration, so we think that will be administered later on. Other agents that are coming down the pipe, those will integrate much more easily with Provenge.

Growth in Q3 was a bit more than "modest" over Q2, we do not expect to see that kind of growth rate in Q4.

Urology segment? We are focused on the larger urology groups.

Our goal for the year was to have 500 accounts infusing Provenge, and we are on track to exceed that. In 2012 we want to add sites but mainly increase patients flowing through the accounts.

Going forward we will be limiting inventory growth and expect cash burn to drop as we progress towards $500 million in revenue.

Can you get a benefit from manufacturing scale? This year there were a lot of startup costs that were excluded from COGs and included in SG&A. We know facilities have tremendous capability compared to the units of Provenge now being shipped. Cost should be flat next year, excepting a ramp in raw material costs.

Lack of local apheresis centers? We don't see apheresis centers as a bottleneck.

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