Dendreon Corporation’s (DNDN) fourth quarter 2010 loss of 61 cents per share (excluding loss on debt conversion) was wider than the Zacks Consensus Estimate of a loss of 48 cents per share and the year-ago loss of 31 cents per share (excluding gain for warrant revaluation).
On a reported basis (including special items), the company lost 64 cents per share in the fourth quarter as against a loss of 28 cents in the year-ago quarter. The wider loss was attributable to higher operating expenses as the company is working on expanding its facilities to market Provenge.
For full year 2010, Dendreon reported loss per share of $2.11 (excluding loss on debt conversion and warrant revaluation), wider than a loss of 94 cents per share in 2009 but narrower than the Zacks Consensus Estimate of a loss of $3.01. Full year 2010 revenues of $48.1 million were well above the prior-year figure of $101,000.
Quarterly Details
Total revenue in the reported quarter climbed to $25.0 million (entirely from Provenge indicated for the treatment of advanced prostate cancer) from $21,000 in the comparable quarter of 2009. The jump was attributable to the successful launch of Provenge. The potential blockbuster drug performed well in its second full quarter after launch in May 2010.
Unlike traditional vaccines that prevent diseases, Provenge treats by stimulating the body’s own immune system to attack cancer cells. Provenge is the first product in the new therapeutic class known as active cellular immunotherapies (ACI).
Dendreon’s total operating expenses for the quarter swelled 169.0% to $97.9 million due to increased manufacturing and commercialization activities for Provenge in the US.
2011 Guidance
Provenge revenue guidance, for 2011, was reiterated at $350–$400 million with approximately half of the sales expected in the final quarter of the year.
Dendreon also expects to incur an adjusted net loss of $230–$270 million including $90 million in start-up costs associated with the US manufacturing facilities. The company expects to spend approximately $60 million in the EU and $80–$120 million (excluding the $90 million start-up costs) for Provenge commercialization activities.
US Commercialization Efforts
Dendreon is working towards expanding its manufacturing facilities for Provenge in the US. The company’s New Jersey facility, which is currently operating at 25% capacity (12 workstations), is expected to be fully operational (48 workstations) by March 2011. The company is also building capacity at two facilities in Atlanta, Georgia and Los Angeles (LA), with each having 36 workstations. Dendreon is seeking approval for its Atlanta facility and has filed a post-approval supplement for FDA approval of the LA facility. These facility expansions would drive a ten-fold increase in capacity in 2011. The company has earmarked $90 million to bring these facilities online.
In the drive for commercialization, the Provenge sales force is being bolstered to 100 representatives who will target 500 centers (where patients can be treated with Provenge) by the end of 2011, well above the current 50 centers. The company will also increase its marketing efforts to maximize the available capacity. Dendreon now has all 15 US Medicare contractors providing reimbursement for Provenge.
EU Strategy
The company plans to file a Marketing Authorization Application (MAA) for Provenge in the European Union in late 2011/early 2012. Dendreon expects to build its own manufacturing facility in Frankfurt, Germany given its central location and proximity to key places where the majority of the addressable patient population reside.
Other Updates
Dendreon announced plans to start phase II studies of Neuvenge (DN24-02), the company’s second ACI candidate that targets Her2+ in invasive bladder cancer soon. The company filed an Investigational New Drug Application (IND) in December 2010. The study will enroll 180 patients with the primary endpoint being overall survival.
Our Recommendation
We currently have a Neutral rating on Dendreon. We believe Provenge has blockbuster potential and its successful commercialization should push Dendreon towards profitability. We are also encouraged by the upbeat commercial and regulatory update. On a more cautious note, we remain concerned about the company’s dependence on Provenge and the lack of a robust pipeline. Dendreon has little to fall back on if Provenge’s performance belies its potential. We therefore prefer to be Neutral on the company.
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