Dendreon Shows Poor Provenge Sales, Implosion Risk Rising

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Dendreon Corp. (NASDAQ: DNDN) just cannot catch a break. Despite having what was supposed to be one of the best late-stage prostate treatments in Provenge, sales just are not coming in as expected. Dendreon’s earnings report left a lot to be desired. Earnings in the first quarter came in at a loss of $72.0 million. That translates to -$0.48 in earnings per share. About the only good news is that Dendreon’s loss was narrower than the $103.9 million, or $0.70 per share, loss in the same quarter a year ago.

Our take is worse than income being lower than expectations. Dendreon said that net product revenues fell to $67.6 million, compared to $82.0 million for the same quarter a year ago. Dendreon is supposed to be seeing sales decline marginally now and then rise through time, but this is down a sharp 17.6% year over year. Here are the total revenues in each of the past four quarterly reports, in order of most recent first: $85.493 million, $77.971 million, $79.992 million and $82.074 million. Compare $67.6 million to these and you will see that sales were the worst over the entire quarterly cycle course of 2012.

Thomson Reuters was calling for -$0.48 per share in earnings and sales of $80.15 million. Some analysts were calling for sales up in the $85 million and $86 million range. The long and short of the matter is that it is just far too soon for Dendreon’s sales cycle to already be petering out.

Dendreon claims to have added 33 net new accounts in the first quarter. This brings the total number of accounts that have infused to 835. Dendreon is claiming that it can reduce its cost of goods sold to less than 50% of net product revenue in the third quarter 2013 at its current forecast levels.

You might expect that the reaction is bad, and that is an understatement. Dendreon’s stock price is down more than 15% to $3.99, against a 52-week range of $3.69 to $9.34. Note that the market cap here is down to $711 million. With the company losing so much money, it will be very hard to get excited that it had $337.3 million in cash, cash equivalents and short-term and long-term investments at the end of the quarter. Keep in mind that this balance compared to $429.8 million as of December 31, 2012, and that translates to a quarterly cash burn rate of about $92.5 million.

Our take here is simple, even if the end game is uncertain. Dendreon’s cash burn rate puts it at financial implosion in less than a year. The company claims that its cost of goods sold will be much lower, but if it cannot generate a substantial amount higher in Provenge sales, then the company is going have to try to save itself by selling itself. Unfortunately for shareholders, this might be a takeunder, unless Provenge proves to be potent against other forms of cancer than just late-stage prostate cancer.

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