Dendreon Corp.’s (DNDN) second quarter 2010 loss of 49 cents per share (excluding charges for warrant revaluation) was narrower than the Zacks Consensus Estimate of a net loss of 50 cents per share but wider than the year-ago loss of 20 cents per share.
On a reported basis (including special items), the company lost $1.04 per share in the second quarter as against $1.20 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.
Total revenue in the reported quarter climbed to $2.8 million from $25,000 in the second quarter of 2009. The jump was attributable to the approval of Provenge by the US Food and Drug Administration (FDA) in April 2010 for the treatment of advanced prostate cancer in men. The potential blockbuster drug was launched immediately in 50 sites across the US.
We note that Dendreon derived its revenues entirely from collaborative agreements prior to the approval of Provenge. However, revenue in the quarter massively fell short of the Zacks Consensus Estimate of $5 million.
Revenues from sales of Provenge, climbed from $340,000 in May to $2.45 million in June and $5.2 million in July. The company stated that it has received in excess of 500 prescriptions for Provenge since its launch. Furthermore, it is on track to provide the therapy to approximately 2,000 patients in the first year of its approval.
Dendreon is working towards expanding its facilities for the effective marketing of Provenge. The company raised approximately $630 million in 2009 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, which is expected to be operational in mid-2011. Dendreon’s total operating expenses for the quarter jumped 227% year-over-year to $68.4 million.
Our Take and Recommendation
We believe that the approval of Provenge, the first product in the new therapeutic class known as active cellular immunotherapies, is critical for the financial performance of the company and its successful commercialization should drive Dendreon to profitability. Unlike traditional vaccines that prevent diseases, Provenge works by stimulating the body’s own immune system to attack cancer cells.
However, we remain concerned about the company’s dependence on Provenge and the lack of a robust pipeline. Taking this into consideration, we believe Dendreon has little to fall back on incase Provenge is not commercialized successfully. Consequently, we believe that the risk/reward profile is quite balanced at Dendreon. This forms the basis of our short-term Zacks#3 Rank (Hold) rating and the long-term Neutral stance on the stock.