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Dendreon Narrows 1Q Loss

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Dendreon Corporation reported first-quarter 2013 loss (including stock-based compensation expenses) of 37 cents per share, narrower than the Zacks Consensus Estimate of a loss of 47 cents and the year-ago loss of 56 cents per share. The narrower loss was attributable to the lower operating costs incurred in the first quarter of 2013.

Quarter in Details

Total revenues in the reported quarter declined 17.6% year over year to $67.6 million. The decrease was primarily due to lower product sales. Revenues were well short of the Zacks Consensus Estimate of $81 million.

Dendreon’s sole marketed product Provenge (sipuleucel-T), a therapeutic vaccine for treating advanced prostate cancer, was launched in the US in May 2010.

Dendreon reported net product revenues of $67.6 million, down 17.6% from the comparable quarter of 2012. The sharp decline in Provenge sales was primarily due to the entrance of Zytiga (abiraterone acetate) in the prostate cancer market. We note that in Dec 2012, Zytiga’s label was expanded for the treatment of metastatic castration-resistant prostate cancer (mCRPC).

Moreover, sales were impacted by the compendium listing for Xtandi. Dendreon mentioned in its conference call that the company is slowly recovering from its disappointing first quarter results. The company expects its second quarter 2013 revenues to be in the mid-$70 million range.

Dendreon’s research & development (R&D) expenses in the reported quarter were $18.4 million, up 6.4%. Selling, general & administrative (SG&A) expenses for the first quarter decreased 34.5% to $62.4 million.

Restructuring Initiative

We note that in July last year the company initiated a restructuring plan. The company expects to reap the results of these initiatives from the first half of 2013 and anticipates full benefits to be realized in the third quarter of 2013.

The company expects to reduce its cost of goods sold to below 50% of total revenues in the third quarter of this year. The company also expects a significant decrease in total expenses as the restructuring benefits come into effect.

Our Take

We believe that the successful commercialization of Provenge is crucial for the financial performance of Dendreon. We remain concerned about Dendreon’s high dependence on Provenge for long-term growth.

Dendreon carries a Zacks Rank #4 (Sell). Meanwhile, other biotech companies such as WuXi PharmaTech Inc. , Athersys Inc. (ATHX - Free Report) and Elan Corporation currently look better positioned. While WuXi Pharma and Athersys carry a Zacks Rank #1 (Strong Buy), Elan carries a Zacks Rank #2 (Buy).

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