Motivation Behind Dendreon’s $47 Million Capital Raise (DNDN)

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After looking through the filing and press release regarding Dendreon Corporation (NASDAQ: DNDN), there are some interesting data points that could be a game changer for current and future investors.

The company raised roughly $47 million in gross proceeds in a private sale of securities to an institutional investor.  The original filing showed $29.36 million as the filing amount, but the existing shelf registration is much larger.  Lazard Capital Markets acted as the sole placement agent for this offering.

This offering put the per share purchase price at $5.92 for some 8 million shares and warrants to repurchase up to 8 million additional shares.  This purchase price was well above yesterday’s $5.06 close.  The purchasers are also going to get a warrant to purchase shares at a $20.00 strike price for a period of 7-years after the closing of the sale of shares.  We would note that could allow the warrants to actually become available for sale down the road as they will become exercisable on or after October 8, 2008.  In theory, you could even see public warrants trade as a result if it refiles for that.

The USE OF NET PROCEEDS from this sale were listed as follows:

  • to fund commercialization activities for ProvengeĀ® (sipuleucel-T), including the investment in specialized technology systems;
  • to fund clinical trials for PROVENGE and other product candidates;
  • to fund other research and preclinical development activities for active immunotherapies and small molecule products;
  • to satisfy third party obligations;
  • and for other general corporate purposes, including working capital.

This also addresses potential acquisitions, although with the size we wouldn’t expect anything major outside of new molecules or compounds being acquired that demonstrate new potential drugs for the company down the road.  It lists these as "complementary technologies or products, although we currently have no agreements or commitments in this regard."  So this could mean anything from microscopes to new lines.

Most importantly, this gives the company an additional bit of breathing room as it still has a long road in front of it.  We have covered Dendreon in our open email distribution list regarding the stock options and ongoing corporate developments.

Shares of Dendreon are trading up about 3% at $5.23 today and the 52-week trading range is $4.15 to $25.25.  The ultimate motivation behind an investment of this size for a controversial biotech can be many.  It appears that it has gotten at least one true believer to provide funding.

Jon C. Ogg
April 3, 2008

Jon Ogg produces the Special Situation Investing Newsletter; he does not own securities in the companies he covers.