Dendreon Corporation (DNDN) suffered a fourth-quarter net loss of 31 cents per share (excluding special items) as against a loss of 17 cents (excluding special items) in the year-ago quarter. The Zacks Consensus Estimate for the reported quarter pointed at a loss of 28 cents per share. The higher loss in the reported quarter was attributable to higher operating expenses, as Dendreon gears up for the launch of its prostate cancer drug Provenge, in addition to lower revenues.
The company incurred a loss of 94 cents (excluding special items) in full year 2009 as against a loss of 79 cents (excluding special items) in 2008. The Zacks Consensus Estimate for 2009 was a loss of $1.64. As of Dec 31, 2009, Dendreon had approximately $606 million in cash, cash equivalents, and short-term and long-term investments as against $111 million a year-ago.
Quarter in Detail
Revenue for the quarter came in at $21,000 as against $28,000 in the comparable quarter of 2008. Dendreon spent approximately $20 million on research and development in the fourth quarter of 2009 which was almost double of $10.8 million spent in the year-ago quarter. General and administrative expenses in the quarter climbed to $16.4 million from $4.8 million in the year-ago period.
The huge leap in operating expenses is largely due to the expenses incurred by the company for the filing of an amended Biologics License Application (BLA) for Provenge (sipuleucel-T) with the U.S. Food and Drug Administration (FDA). The application was filed in Nov 2009.
In December 2009, the company raised approximately $409.5 million in net proceeds by issuing 17.25 million new shares. The company intends to use the net proceeds to accelerate the construction of new facilities in Atlanta, Georgia and Orange County, California and build out the remaining capacity at its facility in Morris Plains, New Jersey.
Furthermore, the money raised from the offering will be utilized to fund investment in information technology infrastructure and product support systems coupled with the hiring of manufacturing, sales and marketing and other related personnel in preparation for marketing Provenge.
The FDA is expected to decide on whether to approve the drug by May 1, 2010. If approved, Provenge would be the first product to receive approval in a new therapeutic class known as active cellular immunotherapies.
In development studies, Provenge boosted survival rates in men with advanced prostate cancer beyond any currently available treatments. Unlike traditional vaccines that prevent diseases, Provenge treats by stimulating the body’s own immune system to attack cancer cells.
We believe that the approval of Provenge is critical for the financial performance of the company because the product has blockbuster potential and its successful commercialization could drive a company of Dendreon’s size to strong profitability.
Our Recommendation
Dendreon currently has a Zacks Rank #2 (Buy), implying that the stock is expected to outperform the broader U.S. equity market over the next one to three months. We are also positive on the company in the long-run. The Outperform recommendation implies that the stock is expected to outshine the overall U.S. equity market over the next six to twelve months.
We believe that the approval of Provenge by the FDA (expected in the first half of this year) will have a positive impact on the stock price. Therefore, we believe that the current price represents a suitable entry point for investors.
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