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Dendreon Corporation (DNDN - Analyst Report) recently announced preliminary results for the fourth quarter of 2012.

Fourth quarter 2012 Preliminary Results

Dendreon expects to generate net product revenues of around $85.5 million, including approximately $3.8 million as favorable adjustments to the company's charge backs reserve for a change in estimate. Excluding this adjustment, Dendreon expects revenues to be around $81.6 million which represents sequential growth of 5%.

Dendreon experienced strong growth in community accounts. Dendreon recorded 25% and 4% overall sequential growth in community urology and community oncology accounts, respectively. Community accounts accounted for 71% of total sales compared to 58% in the year ago period.

The company added 61 net new accounts for Provenge during the quarter, which means the total number of infusing accounts is 802.

We remind investors that the company sold its immunotherapy manufacturing facility (IMF) to Novartis Pharmaceuticals Corporation (NVS - Snapshot Report) for $43 million in cash last month.

In July 2012, Dendreon announced a restructuring plan for 12 months. It was during that time the company decided to close down its Morris Plains unit. The company decided to operate through its Union City, GA and Seal Beach, CA facilities, which have a manufacturing capacity of approximately $1 billion of Provenge and can be doubled with the implementation of automation.

Our Take

We believe Dendreon’s strategic restructuring plan may help the company to swing to profitability. Dendreon’s growth is dependent on its prostate cancer drug Provenge. Hence, the successful commercialization of Provenge is crucial for the financial performance of Dendreon.

While Provenge’s fourth quarter performance is encouraging, we prefer to remain on the sidelines until we see a sustained improvement in performance. We are also concerned about Dendreon’s high dependence on Provenge for long-term growth.

We currently have a Neutral recommendation on Dendreon. The stock carries a Zacks #3 Rank (Hold). However, other stocks in the pharma sector such as Targacept (TRGT - Snapshot Report) and Repligen (RGEN) carry a Zacks #1 Rank (Strong Buy).

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