Dendreon's Provenge Revenue Trends

After finally getting FDA approval for prostate cancer therapy Provenge in May 2010, Dendreon's management thought their main problem would be setting up enough manufacturing capability to meet patient demand. Instead, and largely due to the FDA's unconscionable approval delay, by the time Provenge was available prostate cancer competing therapies were coming to market, from companies with larger and more experienced sales forces.

So revenue did not ramp as fast as Dendreon expected. Worse, they leveled off this year. Here are the numbers:

Provenge revenues, millions	2011	2012
Q1	$28.1	$82.0
Q2	$49.6	$80.0
Q3	$65.8	$78.0
Q4	$77.0	$81.6

The Q4 2012 Provenge revenue is preliminary, and excludes a $3.8 million favorable adjustment to chargeback reserves which had built up in prior quarters.

Provenge seems to be in a run rate of $320 million per year, which would be a pretty successful drug if its cost of production were more normal and if it was one of many therapies of a corporation. But at $320 million per year it makes Dendreon a money loser.

The Q4 $81.6 million is suggestive of a trend. Provenge therapy is a bit complicated, so a quarter with major holidays like Q4 might be expected to show some seasonal decline. Q4 2012 is improved $4.6 million or 6% over Q4 2011. It is also up sequentially $3.6 million, or 5%.

On the other hand, the peak so far is back in Q1 of 2012. Also, a number of factors might make revenue slop in or out of a particular quarter.

Even as we await the analyst conference and official numbers for Q4, our minds move to Q1 2013. I would put the goal post at $85.0 million for calling a trend. That would give us 4% annual growth and a record quarter. Even 2 up-trending quarters is not enough to go out on a limb on, but it might start to restore confidence in the financial future of Dendreon.

Disclaimer: I am long DNDN and will not trade the stock for 3 days after the publication of this report.

William P. Meyers

See also: www. dendreon.com

My main Dendreon notes page.