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Dendreon Narrows Loss, Provenge Disappoints Again

Zacks Equity Research

Dendreon Corporation (DNDN) has been struggling with its sole marketed product, Provenge, for quite some time now. Provenge, a therapeutic vaccine, was launched in the U.S. in May 2010, for treating advanced prostate cancer.

Earlier this week, Dendreon reported third-quarter 2013 loss (including stock-based compensation expenses and depreciation) of 38 cents per share, narrower than the Zacks Consensus Estimate of a loss of 42 cents and the year-ago loss of 45 cents per share. The narrower loss was attributable to lower operating costs incurred in the quarter.

Total revenues in the reported quarter declined 12.8% year over year to $68.0 million. The decrease was primarily due to lower product sales. Revenues were also short of the Zacks Consensus Estimate of $77 million.

Quarter in Detail

Dendreon posted yet another disappointing Provenge sales figure this quarter. Dendreon reported net product revenue of $68.0 million, down 12.8% from the comparable quarter of 2012. Provenge sales during the reported quarter were also down 7.2% on a sequential basis.

The decline in Provenge sales was due to increased competition in the prostate cancer market primarily in the form of Zytiga.

In Sep 2013, Provenge was approved in the EU for the treatment of asymptomatic or minimally symptomatic metastatic (non-visceral) castrate resistant prostate cancer in adults. Chemotherapy is not yet clinically indicated for these patients. Meanwhile, Dendreon is evaluating Provenge in several combination studies.

Dendreon’s research & development (R&D) expenses in the reported quarter were $17.6 million, down 5.7%. Selling, general & administrative (SG&A) expenses for the third quarter decreased 17.5% to $56.2 million.

Restructuring Initiative

Apart from releasing the third quarter 2013 financial results, the company threw light on yet another restructuring initiative to reduce costs further. Dendreon expects to reduce more than $125 million in cash operating expenses this year. Dendreon expects to realize net benefits from the restructuring initiatives from the first quarter of next year. The company also intends to slow down its cash burn in the coming quarters.

Dendreon now expects 2013 R&D and SG&A expenses to decline 14% and 23% on a year-over-year basis, respectively.

Our Take

We are disappointed with Provenge sales in the first nine months of the year. We still believe that the successful commercialization of Provenge is crucial for the financial performance of Dendreon. The company also lacks a decent pipeline with none of its candidates likely to hit the market in the near future.

Dendreon carries a Zacks Rank #3 (Hold). Meanwhile, companies such as Actelion Ltd. (ALIOF), AMAG Pharmaceuticals, Inc. (AMAG) and Acorda Therapeutics, Inc. (ACOR) currently look better positioned. While Actelion carries a Zacks Rank #1 (Strong Buy), AMAG and Acorda carry a Zacks Rank #2 (Buy).

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