Attached files
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EX-32 - EX-32 - DENDREON CORP | v56319exv32.htm |
EX-31.1 - EX-31.1 - DENDREON CORP | v56319exv31w1.htm |
EX-31.2 - EX-31.2 - DENDREON CORP | v56319exv31w2.htm |
EXCEL - IDEA: XBRL DOCUMENT - DENDREON CORP | Financial_Report.xls |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2010
or
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
FOR THE TRANSITION PERIOD FROM TO
Commission File Number: 000-30681
DENDREON CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE | 22-3203193 | |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | |
3005 FIRST AVENUE | ||
SEATTLE, WASHINGTON | 98121 | |
(Address of registrants principal executive offices) | (Zip Code) |
(206) 256-4545
(Registrants telephone number, including area code)
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post such files). Yes
þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer þ | Accelerated filer o | Non-accelerated filer o | Smaller reporting company o | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act.): o Yes No þ
The number of shares of the registrants common stock, $.001 par value, outstanding as of July
28, 2010 was 143,981,965.
DENDREON CORPORATION
INDEX
PAGE NO. | ||||||||
3 | ||||||||
3 | ||||||||
3 | ||||||||
4 | ||||||||
5 | ||||||||
6 | ||||||||
17 | ||||||||
26 | ||||||||
26 | ||||||||
27 | ||||||||
27 | ||||||||
27 | ||||||||
44 | ||||||||
45 | ||||||||
46 | ||||||||
EX-31.1 | ||||||||
EX-31.2 | ||||||||
EX-32 | ||||||||
EX-101 INSTANCE DOCUMENT | ||||||||
EX-101 SCHEMA DOCUMENT | ||||||||
EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
EX-101 LABELS LINKBASE DOCUMENT | ||||||||
EX-101 PRESENTATION LINKBASE DOCUMENT |
2
Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. | FINANCIAL STATEMENTS |
DENDREON CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
June 30, | December 31, | |||||||
2010 | 2009 | |||||||
(Unaudited) | ||||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 217,946 | $ | 409,829 | ||||
Short-term investments |
262,183 | 167,116 | ||||||
Trade accounts receivable |
2,790 | | ||||||
Prepaid antigen costs |
29,648 | 18,975 | ||||||
Inventory |
5,347 | 1,882 | ||||||
Prepaid expenses and other current assets |
6,948 | 6,684 | ||||||
Total current assets |
524,862 | 604,486 | ||||||
Property and equipment, net |
192,789 | 98,964 | ||||||
Long-term investments |
12,262 | 29,441 | ||||||
Debt issuance costs and other assets |
2,325 | 2,524 | ||||||
Total assets |
$ | 732,238 | $ | 735,415 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 13,062 | $ | 2,257 | ||||
Accrued liabilities |
25,531 | 19,557 | ||||||
Accrued compensation |
8,288 | 6,855 | ||||||
Warrant liability |
| 132,953 | ||||||
Current portion of capital lease obligations |
1,661 | 722 | ||||||
Current portion of facility lease obligations |
818 | 592 | ||||||
Total current liabilities |
49,360 | 162,936 | ||||||
Long-term accrued liabilities |
2,144 | 1,554 | ||||||
Capital lease obligations, less current portion |
1,110 | 706 | ||||||
Facility lease obligations, less current portion |
20,031 | 14,120 | ||||||
Convertible senior subordinated notes |
52,535 | 52,535 | ||||||
Commitments and contingencies (Note 10) |
||||||||
Stockholders equity: |
||||||||
Preferred stock, $0.001 par value; 10,000,000 shares authorized, no shares issued or outstanding |
| | ||||||
Common stock, $0.001 par value; 250,000,000 shares authorized, 141,776,126 and 131,125,690
shares issued and outstanding at June 30, 2010 and December 31, 2009, respectively |
139 | 131 | ||||||
Additional paid-in capital |
1,658,693 | 1,286,891 | ||||||
Accumulated other comprehensive income (loss) |
26 | (4 | ) | |||||
Accumulated deficit |
(1,051,800 | ) | (783,454 | ) | ||||
Total stockholders equity |
$ | 607,058 | $ | 503,564 | ||||
Total liabilities and stockholders equity |
$ | 732,238 | $ | 735,415 | ||||
See accompanying notes
3
Table of Contents
DENDREON CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Revenue |
$ | 2,810 | $ | 25 | $ | 2,831 | $ | 55 | ||||||||
Cost of revenue |
2,692 | | 2,692 | | ||||||||||||
Gross profit |
118 | 25 | 139 | 55 | ||||||||||||
Operating expenses: |
||||||||||||||||
Research and development |
20,743 | 13,321 | 50,157 | 25,119 | ||||||||||||
Selling, general and administrative |
47,697 | 7,608 | 75,915 | 12,825 | ||||||||||||
Total operating expenses |
68,440 | 20,929 | 126,072 | 37,944 | ||||||||||||
Loss from operations |
(68,322 | ) | (20,904 | ) | (125,933 | ) | (37,889 | ) | ||||||||
Other income (expense): |
||||||||||||||||
Interest income |
300 | 196 | 578 | 529 | ||||||||||||
Interest expense |
(110 | ) | (213 | ) | (424 | ) | (1,324 | ) | ||||||||
Loss from valuation of warrant liability |
(74,484 | ) | (105,796 | ) | (142,567 | ) | (103,417 | ) | ||||||||
Net loss |
$ | (142,616 | ) | $ | (126,717 | ) | $ | (268,346 | ) | $ | (142,101 | ) | ||||
Basic and diluted net loss per share |
$ | (1.04 | ) | $ | (1.20 | ) | $ | (2.00 | ) | $ | (1.41 | ) | ||||
Shares used in computation of basic and diluted net loss per share |
136,636 | 105,880 | 134,061 | 100,851 | ||||||||||||
See accompanying notes
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Table of Contents
DENDREON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Six Months Ended | ||||||||
June 30, | ||||||||
2010 | 2009 | |||||||
Operating Activities: |
||||||||
Net loss |
$ | (268,346 | ) | $ | (142,101 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
Depreciation and amortization expense |
5,171 | 2,170 | ||||||
Non-cash stock-based compensation expense |
16,469 | 6,513 | ||||||
Loss on valuation of warrant liability |
142,567 | 103,417 | ||||||
Amortization of securities discount and premium |
563 | (9 | ) | |||||
Changes in operating assets and liabilities: |
||||||||
Trade accounts receivable |
(2,790 | ) | | |||||
Prepaid antigen costs |
(10,673 | ) | (18,975 | ) | ||||
Inventory |
(3,465 | ) | (441 | ) | ||||
Prepaid expenses and other assets |
(65 | ) | (268 | ) | ||||
Accounts payable |
10,805 | 1,026 | ||||||
Accrued liabilities and compensation |
7,407 | (102 | ) | |||||
Other long-term liabilities |
(41 | ) | (36 | ) | ||||
Net cash used in operating activities |
(102,398 | ) | (48,806 | ) | ||||
Investing Activities: |
||||||||
Maturities and sales of investments |
140,308 | 25,831 | ||||||
Purchases of investments |
(218,951 | ) | | |||||
Purchases of property and equipment |
(89,944 | ) | (6,248 | ) | ||||
Net cash (used in) provided by investing activities |
(168,587 | ) | 19,583 | |||||
Financing Activities: |
||||||||
Proceeds from exercise of warrant |
71,360 | | ||||||
Proceeds from common stock offering, net of financing costs |
| 220,810 | ||||||
Proceeds from release of security deposit associated with debt |
222 | 853 | ||||||
Payments on capital lease obligations |
(651 | ) | | |||||
Payments on long-term debt |
| (1,526 | ) | |||||
Payments on facility lease obligations |
(290 | ) | (104 | ) | ||||
Net proceeds from exercise of stock options and other |
6,470 | 15,117 | ||||||
Issuance of common stock under Employee Stock Purchase Plan |
1,991 | 672 | ||||||
Net cash provided by financing activities |
79,102 | 235,822 | ||||||
Net increase (decrease) in cash and cash equivalents |
(191,883 | ) | 206,599 | |||||
Cash and cash equivalents at beginning of year |
409,829 | 59,523 | ||||||
Cash and cash equivalents at end of period |
$ | 217,946 | $ | 266,122 | ||||
Supplemental Disclosure of Cash Flow Information: |
||||||||
Cash paid during the period for interest |
$ | 1,689 | $ | 1,571 | ||||
Assets acquired under facility and capital leases |
$ | 8,421 | $ | 1,793 | ||||
Increase in asset retirement obligation |
$ | 631 | $ | 6 | ||||
Exercise of warrants |
$ | 275,520 | |
See accompanying notes
5
Table of Contents
DENDREON CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BUSINESS, PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
Business
Dendreon Corporation (Dendreon, the Company, we, us, or our), a Delaware
corporation, is a biotechnology company focused on the discovery, development and commercialization
of novel therapeutics that may significantly improve cancer treatment options for patients. Our
product portfolio includes active cellular immunotherapy and small molecule product candidates to
treat a wide range of cancers. On April 29, 2010, the U.S. Food and Drug Administration (FDA)
licensed PROVENGE® (sipuleucel-T), an autologous cellular immunotherapy for the
treatment of asymptomatic and minimally symptomatic, metastatic, castrate-resistant,
hormone-refractory, prostate cancer. Commercial sale of PROVENGE began in May 2010. Prostate cancer
is the most common non-skin cancer among men in the United States, with over one million men
currently diagnosed with the disease, and the second leading cause of cancer deaths in men in the
United States. We own worldwide rights for PROVENGE.
Principles of Consolidation
Effective in the quarter ended March 31, 2010, Dendreon Holdings, LLC (Dendreon Holdings)
and Dendreon Distribution, LLC (Dendreon Distribution) were established. Dendreon Holdings is a
wholly-owned subsidiary of the Company, and Dendreon Distribution is a wholly-owned subsidiary of
Dendreon Holdings. The consolidated financial statements for the three and six months ended June
30, 2010 include the accounts of Dendreon and its direct and indirect wholly-owned subsidiaries,
Dendreon Holdings and Dendreon Distribution.
The financial statements for the six months ended June 30, 2009 include the accounts of
Dendreon and its wholly-owned subsidiary, Dendreon San Diego LLC (Dendreon San Diego) through
February 2, 2009, the effective date of dissolution of the entity.
All intercompany transactions and balances have been eliminated in consolidation.
Basis of Presentation
The accompanying unaudited financial statements reflect, in the opinion of management, all
adjustments (consisting of only normal recurring adjustments) necessary for a fair presentation of
our financial position, results of operations and cash flows for each period presented in
accordance with U.S. generally accepted accounting principles for interim financial information and
with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, information and
note disclosures normally included in financial statements prepared in accordance with U.S.
generally accepted accounting principles have been condensed or omitted from the accompanying
statements. These interim financial statements should be read in conjunction with the audited
financial statements and related notes thereto, which are included in our Annual Report on Form
10-K for the year ended December 31, 2009 (the 2009 Form 10-K). The accompanying financial
information as of December 31, 2009 has been derived from audited financial statements. Operating
results for the three and six month periods ended June 30, 2010 are not necessarily indicative of
future results that may be expected for the year ending December 31, 2010 or any other future
period.
Net Loss Per Share
Basic net loss per share is calculated by dividing net loss by the weighted average number of
common shares outstanding. Because we report a net loss, diluted net loss per share is the same as
basic net loss per share. We have excluded all outstanding stock options, warrants and unvested
restricted stock, as well as shares issuable in connection with the conversion of the 4.75%
Convertible Senior Subordinated Notes due 2014 (the Notes) and our Common Stock Purchase
Agreement with Azimuth Opportunity Ltd. (the Common Stock Purchase Agreement), from the
calculation of diluted net loss per common share because such securities are antidilutive to the
computation of net loss per share. As of June 30, 2010 and 2009, shares excluded from the
computation of net loss per share were 22,639,752 and 31,029,660, respectively.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
We recognize revenue primarily from the sale of PROVENGE and collaborative research
agreements. Revenue from the sale of PROVENGE is recorded net of product returns and estimated
healthcare provider contractual chargebacks. Revenues from sales of PROVENGE are recognized upon
our confirmed product delivery to and issuance of the product release form to the physician site.
As we executed a drop shipment agreement with a credit worthy third party wholesaler (wholesaler)
to sell PROVENGE, the wholesaler assumes all bad debt risk from the physician, and no allowance for
bad debt is recorded. Due to the 18 hour shelf life of our product, actual returns are credited
against sales in the month they are incurred. Healthcare provider contractual chargebacks are the
result of contractual commitments by us to provide products to healthcare providers at specified
prices or discounts such as pursuant to mandatory federal programs. Chargebacks occur when a
contracted healthcare provider purchases our products through the wholesaler at fixed contract
prices that are lower than the list prices we charge the wholesaler. The wholesaler, in turn,
charges us back for the difference between the price initially paid by the wholesaler and the
contract price paid to the wholesaler by the healthcare providers. These chargebacks will be
recognized in the same period that the related revenue is recognized, resulting in a reduction in
product sales revenue and are recorded as other accrued liabilities. For the six months ended June
30, 2010 we did not have any chargebacks.
We recognize collaborative research revenue from up-front payments, milestone payments, and
personnel-supported research funding. The payments received under these research collaboration
agreements are generally contractually not refundable even if the research effort is not
successful. Performance under our collaborative agreements is measured by scientific progress, as
mutually agreed upon by us and our collaborators.
Inventory
Inventories are determined at the lower of cost or market value with cost determined under the
specific identification method. Inventories consist of raw materials, work in process and finished
goods. We began capitalizing raw material inventory in mid April 2009 in preparation for our
PROVENGE product launch when the product was considered to have a high probability of regulatory
approval and the related costs were expected to be recoverable through the commercialization of the
product. Such costs incurred prior to mid April 2009 had been recorded as research and development
expense in our statement of operations. As a result, inventory balances for the next few quarters
will reflect a lower average per unit cost.
Prepaid Antigen Costs
The Company utilizes third party suppliers to manufacture and package the recombinant antigen
used in the manufacture of PROVENGE. The Company takes title to this material when accepted from
the third party supplier and stores it as raw material inventory for manufacturing and eventual
sale. As of June 30, 2010, there was $29.6 million of capitalized costs associated with the
purchase of the antigen used in the manufacture of PROVENGE, which Diosynth RTP, Inc. (Diosynth)
is obligated to manufacture and is expected to begin to deliver in 2010.
Research and Development Expenses
Research and development expenses include, but are not limited to, payroll and personnel
expenses, lab expenses, clinical trial and related clinical manufacturing costs, facilities and
related overhead costs.
Accounting for Stock-Based Compensation
Stock-based compensation cost is estimated at the grant date based on the awards fair value
and is recognized on the accelerated method as expense over the requisite service period.
Compensation cost for all stock-based awards is measured at fair value as of the grant date. The
fair value of our stock options is calculated using the Black Scholes Merton (BSM) option pricing
model. The BSM model requires various highly judgmental assumptions including volatility,
forfeiture rates and expected option life. If any of the assumptions used in the BSM model change
significantly, stock-based compensation expense for new awards may differ materially in the future
from that recorded in the current period.
We grant restricted stock awards that generally vest over a four year period, however, in 2006
and 2007 we granted restricted stock awards with certain performance conditions to all employees.
We are required to estimate the probability of achieving each
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Table of Contents
acceleration provision. The restricted stock awards granted in 2006 and 2007 with remaining
performance conditions all vested upon marketing approval for PROVENGE by the FDA on April 29, 2010
(the Approval Date).
At June 30, 2010 and December 31, 2009, we had equity-based employee incentive plans, which
are described more fully in Note 9 in the 2009 Form 10-K, and in the Definitive Proxy Statement for
our 2010 Annual Meeting of Stockholders.
Stock compensation expense was as follows:
Six months ended | ||||||||
June 30, | ||||||||
(in millions) | 2010 | 2009 | ||||||
Cost of revenue |
$ | 0.2 | $ | | ||||
Research and development |
5.1 | 3.3 | ||||||
Selling, general and administrative |
11.2 | 3.2 | ||||||
$ | 16.5 | $ | 6.5 | |||||
In each of the six months ended June 30, 2010 and 2009, the tax deductions related to stock
compensation expense were not reported as a financing cash flow, versus an operating cash flow,
because of the availability of net operating losses.
The fair value for stock awards was estimated at the date of grant using the BSM option
valuation model with the following weighted average assumptions for awards granted during the three
and six months ended June 30, 2010 and 2009:
Employee Stock Options | Employee Stock Purchase Plan | |||||||||||||||
For the Three Months ended | For the Three Months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Weighted average estimated fair value |
$ | 25.91 | (A | ) | $ | 18.16 | $ | 3.37 | ||||||||
Weighted Average Assumptions: |
||||||||||||||||
Dividend yield (B) |
0.0 | % | (A | ) | 0.0 | % | 0.0 | % | ||||||||
Expected volatility (C) |
79.1 | % | (A | ) | 124.0 | % | 157.5 | % | ||||||||
Risk-free interest rate (D) |
1.4 | % | (A | ) | .33 | % | 0.63 | % | ||||||||
Expected term (E) |
3.9 years | (A | ) | .8 years | 1.3 years |
Employee Stock Options | Employee Stock Purchase Plan | |||||||||||||||
For the Six Months ended | For the Six Months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Weighted average estimated fair value |
$ | 21.62 | (A | ) | $ | 18.16 | $ | 3.37 | ||||||||
Weighted Average Assumptions: |
||||||||||||||||
Dividend yield (B) |
0.0 | % | (A | ) | 0.0 | % | 0.0 | % | ||||||||
Expected volatility (C) |
79.2 | % | (A | ) | 124.0 | % | 157.5 | % | ||||||||
Risk-free interest rate (D) |
1.8 | % | (A | ) | .33 | % | 0.63 | % | ||||||||
Expected term (E) |
4.2 years | (A | ) | .8 years | 1.3 years |
(A) | During the three and six months ended June 30, 2009 we did not grant stock options; therefore the weighted average estimated fair value and the weighted average assumptions were not applicable during this period. | |
(B) | We have not paid dividends in the past and do not plan to pay dividends in the near future. | |
(C) | The expected stock price volatility is based on the weighted average of the historical volatilities of our stock and the volatilities of certain peer companies. | |
(D) | The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with a term equal to the expected life of the award on the date of grant. |
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(E) | The expected term of the options represents the estimated period of time until exercise and is based on historical experience of similar awards, giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior. The expected term of awards under the employee stock purchase plan represents the weighted average purchase periods of each offering. |
The following table summarizes our stock option activity during the six months ended June 30, 2010:
Shares | Weighted-Average | Weighted-Average | ||||||||||||||
Subject to | Exercise Price per | Remaining | Aggregate Intrinsic | |||||||||||||
Options | Share | Contractual Life | Value | |||||||||||||
Outstanding, January 1, 2010 |
3,274,615 | $ | 11.73 | |||||||||||||
Granted |
448,250 | 36.89 | ||||||||||||||
Exercised |
(1,295,514 | ) | 7.64 | |||||||||||||
Forfeited |
(22,150 | ) | 24.50 | |||||||||||||
Outstanding, June 30, 2010 |
2,405,201 | $ | 18.50 | 7.80 | $ | 36,116,888 | ||||||||||
Exercisable, June 30, 2010 |
818,994 | $ | 7.66 | 5.64 | $ | 20,281,679 |
As of June 30, 2010 we had approximately $14.8 million of unrecognized compensation expense
related to our unvested stock options. We expect to recognize this compensation expense over a
weighted average period of approximately 1.4 years.
Restricted Stock Awards
Restricted stock awards generally vest over a four-year period; however, in 2006 we granted
restricted stock awards with performance conditions to executive employees and restricted stock
awards with time-vesting and performance conditions to non-executive employees. On January 12,
2007, vesting for 40 percent of these shares accelerated upon acceptance of our Biologics License
Application by the FDA. The balance vested for non-executive employees upon the earlier of the
dates that the requisite service periods were rendered or the approval of PROVENGE for
commercialization by the FDA on the Approval Date. On June 20, 2007, we granted restricted stock
awards with performance conditions to executive employees and restricted stock awards with
time-vesting and performance conditions to non-executive employees. Awards granted to executive
employees vested 100% upon the Approval Date. Awards granted to non-executive employees vested 50%
in June 2008 and the balance vested upon the Approval Date. Each of these awards required the
relevant executive or non-executive employee to be employed by us on the date of achievement of the
performance condition in order for the shares to vest. Compensation expense was recorded based
upon managements estimate of the completion of the performance conditions. The remaining
performance conditions related to these restricted stock awards were considered completed upon the
Approval Date; all expense related to these performance-based stock awards has accordingly been
recorded.
The following table summarizes our restricted stock award activity during the six months ended
June 30, 2010 and 2009:
2010 | 2009 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Average | Average | |||||||||||||||
Grant | Grant | |||||||||||||||
Stock | Date | Stock | Date | |||||||||||||
Awards | Fair Value | Awards | Fair Value | |||||||||||||
Outstanding at beginning of period |
2,360,138 | $ | 7.71 | 1,462,936 | $ | 6.13 | ||||||||||
Granted |
930,019 | 33.28 | 1,247,247 | 4.72 | ||||||||||||
Vested |
(1,093,748 | ) | 6.52 | (293,529 | ) | 5.52 | ||||||||||
Forfeited or expired |
(65,249 | ) | 13.48 | (87,319 | ) | 5.69 | ||||||||||
Outstanding at end of period |
2,131,160 | $ | 19.30 | 2,329,335 | $ | 5.47 | ||||||||||
As of June 30, 2010 we had approximately $26 million in total unrecognized compensation
expense related to our restricted stock awards that is to be recognized over a weighted average
period of approximately 1.5 years.
Fair Value
We currently measure and report at fair value our cash equivalents and investment securities.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer
a liability, an exit price, in the principal or most advantageous market for the asset or liability
in an orderly transaction between market participants on the measurement date. Valuation techniques
used to
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measure fair value must maximize the use of observable inputs and minimize the use of
unobservable inputs.
Assets and liabilities typically recorded at fair value on a non-recurring basis include
long-lived assets measured at fair value due to an impairment assessment under ASC 360-10,
Property, Plant and Equipment, and asset retirement obligations initially measured under ASC
410-20, Asset Retirement and Environmental Obligations.
Warrant Liability
On April 3, 2008, we issued 8.0 million shares (the Shares) of our common stock, and
warrants to purchase up to 8.0 million shares of common stock (the Warrants) to an institutional
investor (the Investor). The Investor purchased the Shares and Warrants for a negotiated price of
$5.92 per share of common stock purchased. The Warrants were exercisable at any time prior to
October 8, 2015, with an original exercise price of $20.00 per share of common stock and included a
net exercise feature. On May 18, 2010 (the exercise date), we entered into an amendment (the
Amendment) to the warrant agreement. Pursuant to the terms of the Amendment, the exercise price
of the Warrants was amended from $20.00 to $8.92 per share, and the Investor concurrently exercised
the warrant for 8,000,000 shares of common stock, resulting in aggregate cash proceeds to the
Company of $71.4 million.
The Warrants were recorded at fair value at issuance and continued to be adjusted to fair
value until the exercise date. Any change in value between reporting periods was recorded as other
income (expense). The Warrants continued to be reported as a liability until they were exercised,
at which time the Warrants were adjusted to fair value and reclassified from liabilities to
stockholders equity. The fair value of the Warrants was estimated using the BSM option-pricing
model.
The fair value of the Warrants on the exercise date was $275.5 million of which
$74.5 million and $105.8 million was recognized during the three and six months ended June 30, 2010, respectively, and of which
$142.6 million and $103.4 million
was recognized during the three and six months ended June 30, 2009, respectively,
in loss from valuation of warrant liability.
3. RECENT ACCOUNTING PRONOUNCEMENTS
Effective during the quarter ended March 31, 2010, the Financial Accounting Standards Board
(the FASB) issued Accounting Standards Update (ASU) 2010-09, Subsequent Events (ASU
2010-09), amending Accounting Standards Codification (ASC) 855, Subsequent Events, to state
that an entity that is a SEC filer is required to evaluate subsequent events through the date that
the financial statements are issued, but is not required to disclose the date. The amendment was
effective commencing with the quarter ended March 31, 2010. The adoption of ASU 2010-09 did not
have a significant impact on our financial statements.
During the quarter ended March 31, 2010 we adopted ASU 2010-06, Fair Value Measurements and
Disclosures (ASU 2010-06), which updated ASC 820, Fair Value Measurements and Disclosures. ASU
2010-06 requires disclosure as to the amounts and purpose of significant asset transfers between
Level 1 and 2 fair value measurements. ASU 2010-06 also requires separate disclosure of Level 3
fair value measurement activity as it relates to purchases, sales, issuances and settlements. The
disclosure requirements related to Level 1 and 2 fair value measurements were effective commencing
with the quarter ended March 31, 2010. The disclosure requirements related to the Level 3 fair
value measurements are effective commencing with the quarter ending March 31, 2011. The adoption of
ASU 2010-06 did not have a material impact on our financial statements.
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4. FAIR VALUE MEASUREMENTS
We measure and report at fair value our warrant liability, cash equivalents and investment
securities. Fair value is defined as the exchange price that would be received for an asset or paid
to transfer a liability, an exit price, in the principal or most advantageous market for the asset
or liability in an orderly transaction between market participants on the measurement date.
Valuation techniques used to measure fair value maximize the use of observable inputs and minimize
the use of unobservable inputs. The hierarchy of fair value measurements is described below:
Level 1 Observable inputs for identical assets or liabilities such as quoted prices in
active markets;
Level 2 Inputs other than quoted prices in active markets that are either directly or
indirectly observable; and
Level 3 Unobservable inputs in which little or no market data exists, therefore developed
using estimates and assumptions developed by us, which reflect those that a market participant
would use.
The following table summarizes our financial assets and liabilities measured at fair value on
a recurring basis as of June 30, 2010 and December 31, 2009 (in thousands):
Quoted Prices in | Significant | |||||||||||||||
Active Markets | Other | Significant | ||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||
Balance as of | Assets | Inputs | Inputs | |||||||||||||
Description | June 30, 2010 | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Assets: |
||||||||||||||||
Money market |
$ | 167,244 | $ | 167,244 | $ | | $ | | ||||||||
Commercial paper |
31,697 | | 31,697 | | ||||||||||||
Corporate debt securities |
98,760 | | 98,760 | | ||||||||||||
Government-sponsored enterprises |
110,434 | | 110,434 | | ||||||||||||
U.S. Treasury Note |
59,019 | | 59,019 | | ||||||||||||
Total financial assets |
$ | 467,154 | $ | 167,244 | $ | 299,910 | $ | | ||||||||
Liabilities: |
||||||||||||||||
Warrants |
$ | | $ | | $ | | $ | | ||||||||
Total financial liabilities |
$ | | $ | | $ | | $ | | ||||||||
Quoted Prices in | Significant | |||||||||||||||
Active Markets | Other | Significant | ||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||
Balance as of | Assets | Inputs | Inputs | |||||||||||||
Description | December 31, 2009 | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Assets: |
||||||||||||||||
Money market |
$ | 378,663 | $ | 378,663 | $ | | $ | | ||||||||
Commercial paper |
32,543 | | 32,543 | | ||||||||||||
Corporate debt securities |
92,273 | | 92,273 | | ||||||||||||
Government-sponsored enterprises |
33,022 | | 33,022 | | ||||||||||||
U.S. Treasury Note |
64,918 | | 64,918 | | ||||||||||||
Total financial assets |
$ | 601,419 | $ | 378,663 | $ | 222,756 | $ | | ||||||||
Liabilities: |
||||||||||||||||
Warrants |
$ | 132,953 | $ | | $ | | $ | 132,953 | ||||||||
Total financial liabilities |
$ | 132,953 | $ | | $ | | $ | 132,953 | ||||||||
The fair value of the Warrants was determined using the BSM method with volatility derived
from the weighted average current volatility and implied volatilities of traded options.
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The following table is a roll forward of the fair value of the Warrants, as to which fair
value is determined by Level 3 inputs (in thousands):
Three Months | Six Months | Year | ||||||||||
Ended | Ended | Ended | ||||||||||
Description | June 30, 2010 | June 30, 2010 | December 31, 2009 | |||||||||
Beginning balance |
$ | 201,036 | $ | 132,953 | $ | 14,190 | ||||||
Purchases, issuances, and settlements |
| | | |||||||||
Total loss included in net loss (1) |
74,484 | 142,567 | 118,763 | |||||||||
Exercise and conversion into common stock |
(275,520 | ) | (275,520 | ) | | |||||||
Ending balance |
$ | | $ | | $ | 132,953 | ||||||
(1) | The loss for the three and six months ended June 30, 2010 relates to the revaluation of the Warrant liability from March 31, 2010 and December 31, 2009, respectively, through May 18, 2010, the date of exercise. The loss is reflected in our consolidated statements of operations as a component of other expense. |
The fair value of the Notes at June 30, 2010, was approximately $176.5 million, based on the
last trading price in June. Such amounts are determined based on quoted prices in active markets
for similar instruments (a Level 2 input).
The carrying amounts reflected in the consolidated balance sheets for cash, prepaids, other
current assets, accounts payable, accrued expenses and other liabilities approximate fair value due
to their short term nature. In addition, our capital lease and debt obligations approximate fair
value based on current interest rates which contain an element of default risk.
5. INVESTMENTS
Securities available-for-sale at cost or amortized cost and fair market value by contractual
maturity were as follows:
Cost or | Fair | |||||||
Amortized | Market | |||||||
Cost | Value | |||||||
(In thousands) | ||||||||
June 30, 2010 |
||||||||
Due in one year or less |
$ | 262,173 | $ | 262,183 | ||||
Due after one year through two years |
12,246 | 12,262 | ||||||
$ | 274,419 | $ | 274,445 | |||||
December 31, 2009 |
||||||||
Due in one year or less |
$ | 167,131 | $ | 167,116 | ||||
Due after one year through two years |
29,430 | 29,441 | ||||||
$ | 196,561 | $ | 196,557 | |||||
Our gross realized gains or losses on sales of available-for-sale securities were not material
for the three and six months ended June 30, 2010 and 2009.
Securities available-for-sale, short-term and long-term, consisted of the following:
Cost or | Gross | Gross | Fair | |||||||||||||
Amortized | Unrealized | Unrealized | Market | |||||||||||||
Cost | Gains | Losses | Value | |||||||||||||
(In thousands) | ||||||||||||||||
June 30, 2010 |
||||||||||||||||
Demand deposit |
$ | 6,232 | $ | | $ | | $ | 6,232 | ||||||||
Corporate debt securities |
98,848 | 13 | (101 | ) | 98,760 | |||||||||||
Government-sponsored enterprises |
110,368 | 66 | | 110,434 | ||||||||||||
U.S. Treasury Note |
58,971 | 48 | | 59,019 | ||||||||||||
$ | 274,419 | $ | 127 | $ | (101 | ) | $ | 274,445 | ||||||||
December 31, 2009 |
||||||||||||||||
Demand deposit |
$ | 6,344 | $ | | $ | | $ | 6,344 | ||||||||
Corporate debt securities |
92,263 | 19 | (9 | ) | 92,273 | |||||||||||
Government-sponsored enterprises |
33,015 | 15 | (8 | ) | 33,022 | |||||||||||
U.S. Treasury Note |
64,939 | 7 | (28 | ) | 64,918 | |||||||||||
$ | 196,561 | $ | 41 | $ | (45 | ) | $ | 196,557 | ||||||||
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None of our securities has been in a continuous unrealized loss position for more than 12
months at June 30, 2010.
We have classified our entire investment portfolio as available-for-sale. Available-for-sale
securities are carried at fair value, with the unrealized gains and losses reported in
comprehensive income (loss). Amortization of discounts or premiums is included in interest income.
Realized gains and losses and declines in value judged to be other-than-temporary, if any, on
available-for-sale securities are included in other income or expense. The decline in fair value of
certain of our investments is judged by us, on an individual basis, to be temporary. We do not
intend to sell an impaired security, and it is not more likely than not that we will be required to
sell the security before the recovery of its amortized cost basis. See Footnote 4 Fair Value
Measurements for further discussion.
We have $6.2 million and $6.3 million in secured deposits for various letters of credit as of
June 30, 2010 and December 31, 2009, respectively, that are classified as long-term investments.
6. INVENTORY
Inventories stated at the lower of cost or market consisted of the following: |
(in thousands) | June 30, 2010 | December 31, 2009 | ||||||
Raw materials |
$ | 4,909 | $ | 1,882 | ||||
Work in process |
172 | | ||||||
Finished goods |
266 | | ||||||
Total inventories |
$ | 5,347 | $ | 1,882 | ||||
7. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
June 30, | December 31, | |||||||
(in thousands) | 2010 | 2009 | ||||||
Furniture and office equipment |
$ | 3,031 | $ | 1,473 | ||||
Laboratory and manufacturing equipment |
15,349 | 12,313 | ||||||
Computer equipment and software |
27,447 | 22,485 | ||||||
Leasehold improvements |
29,009 | 16,157 | ||||||
Buildings |
4,643 | 1,730 | ||||||
Construction in progress |
149,653 | 76,235 | ||||||
229,132 | 130,393 | |||||||
Less accumulated depreciation and amortization |
(36,343 | ) | (31,429 | ) | ||||
$ | 192,789 | $ | 98,964 | |||||
In August, 2005, we entered into an agreement to lease approximately 158,000 square feet of
commercial manufacturing space in Morris Plains, New Jersey (the New Jersey Facility). The lease
term is seven years, and we have the option to extend the lease for two ten-year periods and one
five-year period, with the same terms and conditions except for rent, which adjusts upon renewal to
market rate. The aggregate rent payable under the initial lease term is $7.2 million. The initial
phase (Phase I) of the build-out of the New Jersey Facility was completed in July 2006. In February
2007, we started to manufacture PROVENGE for clinical use in the New Jersey Facility. In June 2009,
we entered into a construction agreement for the build-out of Phases II and III of the New Jersey
Facility. Phase II of the facility build-out was substantially complete in January 2010, and we
commenced occupation of Phase III of the facility in May 2010.
In August 2009, we entered into a lease with Knickerbocker Properties, Inc. XLVI for existing
building space totaling approximately 184,000 rentable square feet in Orange County, California
(the Orange County Facility) for use by us as a manufacturing facility following build-out. The
initial lease term is ten and a half years, with two renewal terms of five years each. The lease
includes a one-time purchase option exercisable during the first three years of the lease term. We
took possession of the building in September 2009 and are in the construction phase of the
manufacturing build-out consisting of cell processing stations, quality control laboratories, a
data center, training areas, infrastructure and offices. The aggregate rent payable under the
initial lease term is $13.6 million. As we are responsible for the construction costs, we are
deemed to be the owner of the Orange County Facility for accounting purposes during the
construction period. Upon taking possession of the facility and subsequently beginning
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construction, we capitalized approximately $6.7 million in our construction in progress
account to record the estimated fair value of the building with a related lease obligation at June
30, 2010 of approximately $6.5 million, which was reflected in the accompanying balance sheet as
facility lease obligation.
In July 2009, we entered into a lease with Majestic Realty Co. for building space totaling
approximately 160,000 square feet in Atlanta, Georgia (the Atlanta Facility) for use by us as a
manufacturing facility following build-out. We took possession of the building upon substantial
completion of construction of the building shell in March 2010. The initial lease term is ten and a
half years, with five renewal terms of five years each. The lease includes a one-time purchase
option exercisable during the first year of the lease term. We are in the construction phase of the
manufacturing build-out consisting of cell processing stations, quality control laboratories, a
data center, training areas, infrastructure and offices. The aggregate rent payable for the Atlanta
Facility under the initial lease term is $6.7 million. As we are responsible for the construction
costs, we are deemed to be the owner of the facility for accounting purposes during the
construction period. Upon taking possession of the facility and beginning construction, we
capitalized approximately $6.4 million in our construction in progress account to record the
estimated fair value of the building with a related lease obligation of approximately $6.4 million
at June 30, 2010, which was reflected in the accompanying balance sheet as facility lease
obligation. The related lease payments have been allocated to the building and the land based on
their estimated relative fair values. The portion of the lease related to land is treated as an
operating lease and the balance of the lease payment is applied to the facility lease obligation.
At June 30, 2010, the $149.7 million in construction in progress included $49.2 million
related to the New Jersey Facility expansion, $45.2 million related to the build-out of the Orange
County Facility, $27.1 million related to the build-out of the Atlanta Facility, $21.5 million of
capitalized facility leases and $6.7 million in software and other. Year-to-date through June 30,
2010 we have capitalized $1.5 million of interest.
8. ACCRUED LIABILITIES
Accrued liabilities consisted of the following:
June 30, | December 31, | |||||||
(in thousands) | 2010 | 2009 | ||||||
Clinical trial costs |
$ | 1,464 | $ | 1,243 | ||||
Deferred rent |
1,275 | 1,334 | ||||||
Accrued property and equipment |
11,445 | 9,443 | ||||||
Accrued legal costs |
173 | 318 | ||||||
Other accrued liabilities |
11,174 | 7,219 | ||||||
$ | 25,531 | $ | 19,557 | |||||
9. CONVERTIBLE SENIOR SUBORDINATED NOTES
In June and July 2007, an aggregate of $85.3 million of the Notes were sold in a private
placement to qualified institutional buyers. Proceeds from the offering, after deducting placement
fees and our estimated expenses, were approximately $82.3 million. The Notes were issued at face
principal amount and pay interest semi-annually in arrears on June 15 and December 15 of each year.
Record dates for payment of interest on the Notes are each June 1st and December 1st. In certain
circumstances, additional amounts may become due on the Notes as additional interest. We can elect
that the sole remedy for an event of default for our failure to comply with the reporting
obligations provisions of the indenture under which the Notes were issued (the Indenture), for
the first 180 days after the occurrence of such event of default would be for the holders of the
Notes to receive additional interest on the Notes at an annual rate equal to 1% of the outstanding
principal amount of the Notes. We recorded interest expense, including the amortization of debt
issuance costs related to the Notes, of $1.5 million and $1.4 million during the six months ended
June 30, 2010 and 2009, respectively.
The Notes are convertible into our common stock, initially at the conversion price of $10.28
per share, equal to a conversion rate of approximately 97.2644 shares per $1,000 principal amount
of the Notes, subject to adjustment. There may be an increase in the conversion rate of the Notes
under certain circumstances described in the Indenture; however, the number of shares of common
stock issued will not exceed 114.2857 per $1,000 principal amount of the Notes. A holder that
converts Notes in connection with a fundamental change, as defined in the Indenture, may in some
circumstances be entitled to an increased conversion rate (i.e., a lower per share conversion
price) as a make whole premium. If a fundamental change occurs, holders of the Notes may require us
to repurchase all or a portion of their Notes for cash at a repurchase price equal to 100% of the
principal amount of the Notes to be repurchased, plus any accrued and unpaid interest and other
amounts due thereon. The Indenture contains customary covenants.
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In April 2009, $11.5 million in principal amount of the Notes were converted by holders of the
Notes, resulting in the issuance of approximately 1.1 million shares of common stock. In May 2009,
we exchanged an aggregate of 2,137,411 shares of our common stock for $21.2 million in aggregate
principal face amount of the Notes held by holders of the Notes.
We have identified embedded derivatives associated with the Notes and are accounting for these
embedded derivatives accordingly. These embedded derivatives meet certain criteria and are
therefore not required to be accounted for separately from the Notes.
10. COMMITMENTS AND CONTINGENCIES
We have a supply agreement with Diosynth covering the commercial production of the recombinant
antigen used in connection with PROVENGE. We currently have a commitment with Diosynth to purchase
antigen through the second quarter of 2011 for a total of $78.7 million. As of June 30, 2010, we
have paid a deposit of $29.6 million and expect to receive shipments of the order beginning in
2010. We have a remaining obligation related to this commitment of approximately $49.1 million as
of June 30, 2010. In May 2010, we placed an order with Diosynth for shipment of antigen to commence
delivery in mid 2011. The commitment for this order is $39.2 million of which $9.3 million was
prepaid to Diosynth in May 2010. On May 12, 2010, we entered into a Second Amendment to the supply
agreement to extend the term of the agreement through December 31, 2018, and unless terminated, the
agreement will renew automatically thereafter for additional 5-year terms. The agreement may be
terminated upon written notice by us or Diosynth at least 24 months before the end of the initial
term or a renewal term or by either party in the event of an uncured material breach or default by
the other party.
We have entered into a technology transfer agreement with a second source
supplier for the antigen and are in discussions for a second source supply agreement.
In June 2009, we entered into a construction agreement with The Henderson Corporation of PA,
Inc. (Henderson) to retain Henderson to perform construction related services and to arrange for,
monitor, supervise, administer and contract for the construction of Phase II and Phase III of our
New Jersey Facility. The guaranteed maximum price for the completion of all work under the
construction agreement is approximately $51.1 million, of which $45.7 million has been paid through
June 30, 2010.
In December 2009 and January 2010, we entered into construction agreements with Turner
Construction Company (Turner) to retain Turner to perform construction related services and to
arrange for, monitor, supervise, administer and contract for the construction of the build-out of
the Atlanta Facility and Orange County Facility, for a maximum total cost of $87.7 million of which
$56.6 million has been paid through June 30, 2010. The agreements include incentives for the
completion of work prior to milestone dates and penalties for failing to meet such deadlines.
Beginning on May 24, 2007, four proposed securities class action suits were filed in the
United States District Court for the Western District of Washington, on behalf of purchasers of the
Companys common stock, purporting to state claims for securities law violations stemming from our
disclosures related to PROVENGE and the FDAs actions regarding our BLA for PROVENGE. The
complaints seek compensatory damages, attorneys fees and expenses. On October 4, 2007, the Court
consolidated these actions under the caption McGuire v. Dendreon Corporation, et al., and
designated a lead plaintiff. The lead plaintiff designated the complaint filed June 6, 2007 in
McGuire, et al. v. Dendreon Corporation, et al., as the operative complaint. Between December 2007
and January 2009, Dendreon and the individual defendants filed motions to dismiss the original
complaint, the amended complaint, and the second amended complaint. The Court granted these motions
in part, and denied them in part, allowing plaintiffs leave to amend the complaint each time.
Plaintiffs filed a third amended complaint on June 8, 2009. The third amended complaint includes
claims against Dendreon, our chief executive officer, and a senior vice president, challenging
disclosures related to the FDAs actions regarding our BLA for PROVENGE, and the sale of Dendreon
stock by our chief executive officer. On June 29, 2009, defendants filed an answer to the third
amended complaint. Discovery was completed on June 22, 2010 and defendants motion for partial summary judgment is currently pending.
Trial in this action has been set for October 18, 2010.
On March 31, 2009, a complaint captioned Mountanos v. Dendreon Corporation, et al., was filed
in the United States District Court for the Western District of Washington, naming Dendreon, our
chief executive officer, and a senior vice president as defendants. The complaint in Mountanos
makes similar factual and legal allegations as the second amended complaint filed in the McGuire
action described above, but Mountanos is not a class action and the named plaintiffs allegedly
purchased options rather than the Companys common stock. It seeks compensatory damages, attorneys
fees and expenses. On July 2, 2009, plaintiffs filed an amended complaint, which the defendants
answered on August 3, 2009.
Discovery was completed on June 22, 2010, and defendants motion for partial summary judgment is currently pending.
Trial in this action has been
set for October 18, 2010, to take place concurrently with the trial in McGuire v. Dendreon
Corporation.
Management currently believes that resolving these matters, individually or in aggregate, will
not have a material adverse effect on our financial position, our results of operations, or our
cash flows. However, these matters are subject to inherent uncertainties and the actual cost, as
well as the distraction from the conduct of our business, will depend upon many unknown factors and
managements
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view of these may change in the future. Thus, these matters could result in a material adverse
effect on our business, financial condition and results of operations.
11. EQUITY
Equity Line of Credit
On October 11, 2007, we entered into an equity line of credit arrangement with Azimuth
Opportunity Ltd. (Azimuth) pursuant to the Common Stock Purchase Agreement with Azimuth, which we
amended in October 2008 and February 2009. As amended, the Common Stock Purchase Agreement provides
that, upon the terms and subject to the conditions set forth therein, Azimuth is committed to
purchase up to $130.0 million of our common stock over the approximate 36-month term of the Common
Stock Purchase Agreement. From time to time, and at our sole discretion, we may present Azimuth
with draw down notices to purchase our common stock over 10 consecutive trading days or such other
period mutually agreed upon by us and Azimuth. Each draw down is subject to limitations based on
the price of our common stock and a limit of 2.5% of our market capitalization at the time of such
draw down, provided, however, Azimuth will not be required to purchase more than $55.0 million of
our common stock in any single draw down. In addition, the number of shares of our common stock
purchased by Azimuth under the Common Stock Purchase Agreement cannot equal or exceed 20% of our
issued and outstanding shares of common stock as of the date of the Common Stock Purchase
Agreement. We are able to present Azimuth with up to 24 draw down notices during the term of the
Common Stock Purchase Agreement, with a minimum of five trading days required between each draw
down period.
12. COMPREHENSIVE LOSS
Comprehensive loss includes charges and credits to stockholders equity that are not the
result of transactions with stockholders. Our comprehensive loss consisted of net loss plus changes
in unrealized gain or loss on investments as follows:
Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
(in thousands) | 2010 | 2009 | 2010 | 2009 | ||||||||||||
Net loss |
$ | (142,616 | ) | $ | (126,717 | ) | $ | (268,346 | ) | $ | (142,101 | ) | ||||
Net unrealized gain (loss) on securities |
6 | 60 | 30 | 14 | ||||||||||||
Comprehensive loss |
$ | (142,610 | ) | $ | (126,657 | ) | $ | (268,316 | ) | $ | (142,087 | ) | ||||
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ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
This quarterly report contains forward-looking statements concerning matters that involve
risks and uncertainties. The statements contained in this report that are not purely historical are
forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended (the Exchange Act), and Section 27A of the Securities Act of 1933, as amended.
These forward-looking statements concern matters that involve risks and uncertainties that could
cause actual results to differ materially from those projected in the forward-looking statements.
Words such as believes, expects, likely, may and plans are intended to identify
forward-looking statements, although not all forward-looking statements contain these words.
Although we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness
of the forward-looking statements. We are under no duty to update any of the forward-looking
statements after the date hereof to conform such statements to actual results or to changes in our
expectations.
The following discussion should be read in conjunction with the financial statements and the
notes thereto included in Item 1 of this Quarterly Report on Form 10-Q. In addition, readers are
urged to carefully review and consider the various disclosures made by us regarding the factors
that affect our business, including without limitation the disclosures set forth in our Annual
Report on Form 10-K for the year ended December 31, 2009 (the 2009 Form 10-K), including the risk
factors contained therein and in Item 1A hereof, and audited financial statements and the notes
thereto and disclosures made under the caption, Managements Discussion and Analysis of Financial
Condition and Results of Operations.
OVERVIEW
We are a biotechnology company focused on the discovery, development and commercialization of
novel therapeutics that significantly improve cancer treatment options for patients. Our portfolio
includes active immunotherapy and small molecule product candidates to treat a wide range of
cancers. On April 29, 2010, the U.S. Food and Drug Administration (FDA) licensed
PROVENGE® (sipuleucel-T), an autologous cellular immunotherapy for the treatment of
asymptomatic and minimally symptomatic, metastatic, castrate-resistant, hormone-refractory prostate
cancer. Commercial sale of PROVENGE began in May 2010.
We have incurred significant losses since our inception. As of June 30, 2010, our accumulated
deficit was $1,051.8 million. We have incurred net losses as a result of research and development
expenses, clinical trial expenses, contract manufacturing expenses and general and administrative
expenses in support of our operations and research efforts. We anticipate that near term we will
continue to fund our ongoing research, development and general operations from revenue generated
from the commercial sale of PROVENGE and our available cash as we expand our operations, including
our manufacturing capabilities, develop the infrastructure to support the commercialization of
PROVENGE, continue our clinical trials, apply for regulatory approvals and invest in research and
product development. The majority of our resources continue to be used in support of the
commercialization of PROVENGE. We own worldwide rights for PROVENGE.
Following receipt of positive clinical data from our IMPACT (IMmunotherapy for Prostate
AdenoCarcinoma Treatment) study for PROVENGE in April 2009, we focused on
(i) | the amendment to our Biologics License Application (our BLA), submitted in October 2009, |
(ii) | expanding our manufacturing operations, and |
(iii) | developing our commercial infrastructure. |
Soon after PROVENGE was approved by the FDA, the National Comprehensive Cancer Network
(NCCN) listed PROVENGE in the NCCN Clinical Practice Guidelines in Oncology for Prostate Cancer
and NCCN Drugs & Biologics Compendium as a category 1 treatment recommendation for patients with
castration-recurrent prostate cancer. A category 1 recommendation means that the recommendation
is based on high level evidence (e.g., randomized controlled trials) and there is uniform NCCN
consensus. NCCN is a not-for-profit alliance of 21 of the worlds leading cancer centers.
Approximately 25% of the capacity of the New Jersey Facility has been approved by the FDA for
commercial manufacturing. We began the expansion of the remaining 75% capacity of our manufacturing
facility in Morris Plains, New Jersey (the New Jersey
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Facility) in July 2009 to bring that facility to full capacity. We are in the process of
activities to support FDA inspection of the additional capacity. Subject to license by the FDA, we
expect the additional capacity to be available in the first half of 2011. During July and August
2009, we entered into new facilities leases in Atlanta, Georgia, and Orange County, California, for
an aggregate of approximately 340,000 square feet of space we intend to use for commercial
manufacturing, following construction build-out and validation of these new facilities. We
anticipate the build-out of these facilities will be substantially complete in the second half of
2010, which will be followed by inspection and license by the FDA prior to use for the commercial
manufacture of PROVENGE.
As of June 30, 2010, our commercial team included 70 individuals
employed in sales, marketing,
government affairs and as medical science liaisons. During the second quarter, our field based teams
were primarily focused on training launch infusion sites.
With respect to
reimbursement, to date Medicare Administrative Contractors
(MACs) covering nine
of the fifteen regional MAC territories have established
coverage guidelines for on-label use of PROVENGE. Of the remainder,
five have stated that they will process PROVENGE
claims. One MAC, covering Arkansas, Louisiana and Mississippi, has indicated it will establish a policy of non-coverage, however we continue to work with them to ensure patients have access to PROVENGE in that region. A number of private payers, including large
national plans such as Aetna, Emblem Health, Humana, Kaiser and several large Blue Cross-affiliated plans have confirmed national and local coverage.
The Centers for Medicare and Medicaid Services (CMS) initiated a National Coverage Analysis
(NCA) of PROVENGE on June 30, 2010. NCAs do not impact existing coverage decisions, nor do they
restrict local Medicare contractors from covering PROVENGE. Medicare beneficiaries are still able
to access PROVENGE where it is covered by the local contractor. The NCA does not affect coverage
of PROVENGE by private payers.
On July 28, 2010, we announced the publication of data from the pivotal Phase 3 IMPACT study
for PROVENGE in the July 29, 2010 issue of the New England Journal of Medicine,
showing that PROVENGE demonstrated a statistically significant improvement in overall
survival compared to control in men with asymptomatic or minimally symptomatic
metastatic castration resistant prostate cancer.
Other potential product candidates we have under development include our investigational
active cellular immunotherapy directed against HER2/neu for the treatment of patients with bladder,
breast, ovarian and other solid tumors expressing HER2/neu. Active cellular immunotherapies
directed at CA-9, an antigen highly expressed in renal cell carcinoma, and CEA, an antigen
expressed in colorectal cancer, are in preclinical development. We are also developing an
orally-available small molecule targeting TRPM8 that could be applicable to multiple types of
cancer in advanced cancer patients. We commenced our Phase 1 clinical trial to evaluate TRPM8 in
2009 and the trial is ongoing.
As a matter of regular course, we have obtained and intend to actively seek to obtain, when
appropriate, protection for our current and prospective products, and proprietary technology by
means of U.S. and foreign patents, trademarks, and applications for each of the foregoing. In
addition, we rely upon trade secrets and contractual agreements to protect certain of our
proprietary technology and products. PROVENGE is a novel biologic, and it is difficult to predict
how competition could develop and accordingly which aspects of our related intellectual property
may prove the most significant in the future. We have three issued U.S. patents with claims
relating to immunostimulatory compositions, including PROVENGE, and to methods of treating specific
diseases, including prostate cancer, using the immunostimulatory compositions. One of the issued
U.S. patents relating to the method of treating specific diseases recently underwent reexamination
at the USPTO, and was resolved in our favor, resulting in a decision by the examiner confirming the
patentability of all claims. We also have four issued U.S. patents with claims relating to the
cell separation devices and related media and certain aspects of the manufacturing process used to
produce PROVENGE. The scheduled expiration dates of our U.S. patents related to PROVENGE are in
2014 through 2018. Outside of the U.S., we have in certain territories corresponding issued
patents related to PROVENGE that are scheduled to expire in 2015 through 2019. Patent expiration
dates may be subject to patent term extension depending on certain factors. In addition, following
expiration of a basic product patent or loss of patent protection resulting from a legal challenge
it may be possible to continue to obtain commercial benefits from other characteristics such as
clinical trial data; product manufacturing trade secrets; patents on uses for products; and patents
for special formulations of the product or delivery mechanisms.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We make judgmental decisions and estimates with underlying assumptions when applying
accounting principles to prepare our consolidated financial statements. Certain critical accounting
policies requiring significant judgments, estimates, and assumptions are detailed below. We
consider an accounting estimate to be critical if (1) it requires assumptions to be made that are
uncertain at the time the estimate is made and (2) changes to the estimate or different estimates
that could have reasonably been used would have materially changed our consolidated financial
statements. The development and selection of these critical accounting policies have been reviewed
with the Audit Committee of our Board of Directors.
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We believe the current assumptions and other considerations used to estimate amounts reflected
in our financial statements are appropriate. However, should our actual experience differ from
these assumptions and other considerations used in estimating these amounts, the impact of these
differences could have a material impact on our financial statements.
Revenue Recognition
We recognize revenue primarily from the sale of PROVENGE and collaborative research
agreements. Revenue from the sale of PROVENGE is recorded net of product returns and estimated
healthcare provider contractual chargebacks. Revenues from sales of PROVENGE are recognized upon
our confirmed product delivery to and issuance of the product release form to the physician site.
As we executed a drop shipment agreement with a credit worthy third party wholesaler (wholesaler)
to sell PROVENGE, the wholesaler assumes all bad debt risk from the physician, and no allowance for
bad debt is recorded. Due to the 18 hour shelf life of our product, actual returns are credited
against sales in the month they are incurred. Healthcare provider contractual chargebacks are the
result of contractual commitments by us to provide products to healthcare providers at specified
prices or discounts such as pursuant to mandatory federal programs. Chargebacks occur when a
contracted healthcare provider purchases our products through the wholesaler at fixed contract
prices that are lower than the list prices we charge the wholesaler. The wholesaler, in turn,
charges us back for the difference between the price initially paid by the wholesaler and the
contract price paid to the wholesaler by the healthcare providers. These chargebacks will be
recognized in the same period that the related revenue is recognized, resulting in a reduction in
product sales revenue and are recorded as other accrued liabilities. For the six months ended June
30, 2010 we did not have any chargebacks.
We recognize collaborative research revenue from up-front payments, milestone payments, and
personnel-supported research funding. The payments received under these research collaboration
agreements are generally contractually not refundable even if the research effort is not
successful. Performance under our collaborative agreements is measured by scientific progress, as
mutually agreed upon by us and our collaborators.
Fair Value
We currently measure and report at fair value our warrant liability, cash equivalents and
investment securities. Fair value is defined as the exchange price that would be received for an
asset or paid to transfer a liability, an exit price, in the principal or most advantageous market
for the asset or liability in an orderly transaction between market participants on the measurement
date. Valuation techniques used to measure fair value must maximize the use of observable inputs
and minimize the use of unobservable inputs.
Assets and liabilities typically recorded at fair value on a non-recurring basis include
long-lived assets measured at fair value due to an impairment assessment under ASC 360-10,
Property, Plant and Equipment, and asset retirement obligations initially measured under ASC
410-20, Asset Retirement and Environmental Obligations.
Warrant Liability
On April 3, 2008, we issued 8.0 million shares (the Shares) of our common stock, and
warrants to purchase up to 8.0 million shares of common stock (the Warrants) to an institutional
investor (the Investor). The Warrants were exercisable at any time prior to October 8, 2015, with
an original exercise price of $20.00 per share of common stock and include a net exercise feature.
On May 18, 2010, we entered into an amendment (the Amendment) to the warrant agreement. Pursuant
to the terms of the Amendment, the exercise price of the Warrants were amended from $20.00 to $8.92
per share, and the Investor agreed to concurrently exercise for cash the entire 8,000,000 shares of
common stock, resulting in aggregate cash proceeds of $71.4 million.
The Warrants were recorded at their fair values at issuance and continued to be adjusted to
fair value each subsequent balance sheet date. Any change in value between reporting periods was
recorded as other income (expense) each reporting date. The Warrants continued to be reported as a
liability until they were exercised at which time the Warrants were adjusted to fair value and
reclassified from liabilities to stockholders equity. The fair value of the Warrants was estimated
using the Black-Scholes-Merton (BSM) option-pricing model. As of May 18, 2010 (the Exercise
Date) and December 31, 2009, the fair value of the Warrants was determined to be $275.5 million
and $133.0 million, respectively; accordingly, we recorded approximately $142.6 million in other
loss for the six months ended June 30, 2010 related to the change in the fair value of the
Warrants.
Recent Accounting Pronouncements
Effective during the quarter ended March 31, 2010, the Financial Accounting Standards Board
(the FASB) issued Accounting
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Standards Update (ASU) 2010-09, Subsequent Events (ASU 2010-09), amending Accounting
Standards Codification (ASC) 855, Subsequent Events, to state that an entity that is a SEC
filer is required to evaluate subsequent events through the date that the financial statements are
issued, but is not required to disclose the date. The amendment was effective commencing with the
quarter ended March 31, 2010. The adoption of ASU 2010-09 did not have a significant impact on our
financial statements.
During the quarter ended March 31, 2010 we adopted ASU 2010-06, Fair Value Measurements and
Disclosures (ASU 2010-06), which updated ASC 820, Fair Value Measurements and Disclosures. ASU
2010-06 requires disclosure as to the amounts and purpose of significant asset transfers between
Level 1 and 2 fair value measurements. ASU 2010-06 also requires separate disclosure of Level 3
fair value measurement activity as it relates to purchases, sales, issuances and settlements. The
disclosure requirements related to Level 1 and 2 fair value measurements were effective for the
quarter ended March 31, 2010. The disclosure requirements related to the Level 3 fair value
measurements are effective commencing with the quarter ended March 31, 2011. The adoption of ASU
2010-06 did not have a material impact on our financial statements.
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RESULTS OF OPERATIONS FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009
Revenue
Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Product revenue |
$ | 2,790 | $ | | $ | 2,790 | $ | | ||||||||
Collaborative revenue |
20 | 25 | 41 | 55 | ||||||||||||
Total revenue |
$ | 2,810 | $ | 25 | $ | 2,831 | $ | 55 | ||||||||
Product revenue of $2.79 million during the three and six months ended June 30, 2010 resulted
from FDA approval of PROVENGE for commercial sale on April 29, 2010. The second quarter of 2010
reflects approximately two months of product sales activity. We recognize product revenues from the
sale of PROVENGE upon our confirmed product delivery to the prescribing site and issuance of the
product release form to the physician site.
Collaborative revenue includes the recognition of deferred revenue related to a license
agreement amounting to $20,000 and $25,000 for the three months ended June 30, 2010 and 2009,
respectively, and $41,000 and $55,000 for the six months ended June 30, 2010 and 2009,
respectively.
Cost of Revenue
Cost of revenue was $2.7 million for the three and six months ended June 30, 2010. The cost of
revenue includes the costs of manufacturing and distributing PROVENGE and excess manufacturing
overhead due to under utilization of our Morris Plains, NJ manufacturing facility (the New Jersey
Facility) plant capacity. Although commercial manufacture of PROVENGE began in May 2010 after FDA
approval, substantial production of PROVENGE for commercial sale did not commence until June 2010. During
April and May 2010, the New Jersey Facility primarily manufactured PROVENGE for clinical patients
who were enrolled in existing clinical trials prior to FDA approval. The costs related to clinical
manufacture are classified as research and development expense.
Gross margins on new product introductions generally increase over the life of the product as
utilization of capacity increases and manufacturing efforts on product cost reduction are
successful. As we expand our product distribution we anticipate cost of revenue as a percentage of
product revenue to decline.
We did incur substantial costs associated with the portion of the New Jersey Facility that was
not operational during the year. These costs were classified as selling, general and
administrative expense. We expect that these expenses will continue to increase as we add
additional headcount in anticipation of being licensed by the FDA to produce PROVENGE for commercial sale in
the expanded capacity of our New Jersey Facility, as well as hiring for our Orange County,
California and Atlanta, Georgia facilities.
We began capitalizing raw material inventory in mid April 2009 in preparation for our PROVENGE
product launch when the product was considered to have a high probability of regulatory approval
and the related costs were expected to be recoverable through the commercialization of the product.
Such costs incurred prior to mid April 2009 had been recorded as research and development expense
in our statement of operations. As a result, cost of revenues may reflect a lower average per unit
cost offset by higher per unit manufacturing overhead due to under utilization of plant capacity
for the next few quarters.
Research and Development Expenses
Research and development expenses increased to $20.7 million for the three months ended June
30, 2010, from $13.3 million for the three months ended June 30, 2009. Research and development
expenses increased to $50.2 million for the six months ended June 30, 2010, from $25.1 million for
the six months ended June 30, 2009. This increase is the result of increased employee related
expenses, including stock compensation, clinical trial costs in connection with sipuleucel-T
trials as well as expenses incurred in securing second source suppliers and expanding product pipeline
development. We did manufacture, primarily during April and May 2010, PROVENGE for clinical patients
who were enrolled in existing clinical trials prior to the approval date.
Financial data related to our research and development activities is categorized as either
costs associated with clinical programs or discovery research. Our research and development
expenses for the three and six months ended June 30, 2010 and 2009 were as follows (in millions):
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Three months ended | Six months ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Clinical programs: |
||||||||||||||||
Direct costs |
$ | 1.5 | $ | 1.1 | $ | 4.1 | $ | 2.5 | ||||||||
Indirect costs |
16.9 | 11.6 | 42.0 | 21.6 | ||||||||||||
Total clinical programs |
18.4 | 12.7 | 46.1 | 24.1 | ||||||||||||
Discovery research |
2.3 | 0.6 | 4.1 | 1.0 | ||||||||||||
Total research and development expense |
$ | 20.7 | $ | 13.3 | $ | 50.2 | $ | 25.1 | ||||||||
Direct research and development costs associated with our clinical programs include clinical
trial site costs, clinical manufacturing costs, costs incurred for consultants and other outside
services, such as data management and statistical analysis support, and materials and supplies used
in support of clinical programs. Indirect costs of our clinical program include wages, payroll
taxes and other employee-related expenses, rent, stock-based compensation, utilities and other
facilities-related maintenance. The costs in each category may change in the future and new
categories may be added. Costs attributable to our discovery research programs represent our
efforts to develop and expand our product pipeline.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased to $47.7 million for the three months
ended June 30, 2010, compared to $7.6 million for the three months ended June 30, 2009. Selling,
general and administrative expenses increased to $75.9 million for the six months ended June 30,
2010, compared to $12.8 million for the six months ended June 30, 2009. Selling, general and
administrative expenses primarily consisted of salaries and wages, stock-based compensation,
consulting fees, sales and marketing fees and administrative costs to support our operations. In
addition, as mentioned above, selling, general and administrative costs include the expenses
associated with the portion of our New Jersey Facility which was not commercially operational
during the quarter and related costs of personnel in training. The significant increase in the
three and six months ended June 30, 2010 compared to 2009 was primarily attributable to increased
payroll from increased headcount and commercial product launch preparation activities including
non-operational manufacturing capacity.
We incurred substantial costs associated with the portion of the New Jersey Facility which was
not operational during the year. We have also begun incurring pre-operational costs at the
Atlanta and Orange County manufacturing facilities (Atlanta Facility and Orange County
Facility) both of which are in the process of being built-out. These costs include the facility
related expenditures, additional headcount to support the build out as well as prepare for
commercial production of PROVENGE in anticipation of licensure of the facilities for manufacture of
PROVENGE by the FDA. The costs related to these activities for the three months ended March 31 and
June 30, 2010 was approximately $8.3 million and $17.7 million, respectively,
and represent ongoing expenses of the manufacturing facilities that will be
classified as cost of revenue when the related commercial operations commence as well as one-time
start up costs required to support the launch of PROVENGE and new facility start-up. We expect
that these types of expenditures will continue to increase over the
next few quarters.
Interest Income
Interest income increased to $300,000 for the three months ended June 30, 2010 from $196,000
for the three months ended June 30, 2009. Interest income increased to $578,000 for the six months
ended June 30, 2010, from $529,000 for the six months ended June 30, 2009. The increases in the
three and six months ended June 30, 2010 compared to 2009 was primarily due to increased holdings
of cash and investments.
Interest Expense
Interest expense decreased to $110,000 for the three months ended June 30, 2010, compared to
$213,000 for the three months ended June 30, 2009. Interest expense decreased to $424,000 for the
six months ended June 30, 2010, compared to $1.3 million for the six months ended June 30, 2009.
The decreases in the three and six months ended June 30, 2010 compared to 2009 was primarily due to
a lower outstanding debt balance associated with the conversion in April 2009 and the exchange in
May 2009 of $32.7 million in aggregate principal amount of the 4.75% Convertible Senior
Subordinated Notes due 2014 (the Notes) to equity offset by an increase in capitalized interest
expense to $1.5 million.
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Warrant Liability
Non-operating loss associated with the increase in warrant liability for the three and six
months ended June 30, 2010 was $74.5 million and $142.6 million, respectively, as compared to
non-operating loss of $105.8 million and $103.4 million for the three and six months ended June 30,
2009, respectively. The fair value was calculated using the BSM option-pricing model and was remeasured at either
the end of the reporting period or date of exercise, whichever was applicable. The warrant
agreement was amended and immediately exercised in May 2010 and therefore the fair value of the
Warrants will have no further impact on our results of operations in the future.
LIQUIDITY AND CAPITAL RESOURCES
Cash Uses and Proceeds
As of June 30, 2010, we had approximately $492.4 million in cash, cash equivalents and
short-term and long-term investments. To date, we have financed our operations primarily through
proceeds from the sale of equity, debt and convertible securities, cash receipts from collaborative
agreements and interest income earned.
Net cash used in operating activities for the six months ended June 30, 2010 and 2009 was
$102.4 million and $48.8 million, respectively. Expenditures related to operating activities in all
periods were a result of research and development expenses, clinical trial costs, contract
manufacturing costs and selling, general and administrative expenses in support of our operations.
The increase in net cash used in operating activities in 2010 resulted from expenses associated
with the commercial launch of PROVENGE in 2010, including increased inventory, increase in selling,
general and administrative expense primarily as a result of ramp up in personnel from 212 as of
June 30, 2009 to 796 as of June 30, 2010 and pre-launch expenditures.
Net cash (used in) provided by investing activities for the six months ended June 30, 2010 and
2009, was ($168.6) million and $19.6 million, respectively. Expenditures related to investing
activities for the six months ended June 30, 2010, consisted primarily of purchases of investments
of $219.0 million and purchases of property and equipment, primarily related to facilities related
expenditures, of $90.0 million, offset by maturities and sales of investments of $140.3 million.
We believe that our current cash on hand as of June 30, 2010, is sufficient to meet our
anticipated expenditures for at least the next 12 months as we execute on our commercialization
plan for PROVENGE. We expect revenue from PROVENGE product sales could be a significant source of
cash. However, we may need to raise additional funds to meet potential additional long-term
liquidity needs for uses including:
| the development of marketing, manufacturing, information technology and other infrastructure and activities related to the commercialization of PROVENGE, |
| working capital needs, |
| increased personnel needs, |
| continuing and expanding our internal research and development programs, and |
| potentially engaging in clinical trials outside of the U.S., commercial infrastructure development and other investment in order to support the commercialization of PROVENGE in territories outside the United States. |
Office Leases
In March 2009, we entered into the second amendment to our office lease agreement with Selig
Holdings Company, LLC. The amendment extends the term on our headquarters to December 31, 2011. In
April 2010, we leased an additional 11,500 square feet in the headquarters building with a term
commencing in May 2010 and ending December 31, 2011.
We lease our principal research, development and administrative facilities in Seattle,
Washington that consist of approximately 71,000 square feet, under an operating lease through
December 31, 2011, with the option to extend the term for an additional five years. The annual base
rent for the extended lease term is approximately $2.7 million, which is to be increased annually
between three to six percent, approximating the Seattle area consumer price index.
In July 2009 we entered into a sublease agreement with Hearst Newspapers, LLC (the sublandlord
to Legacy Partners II, the
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landlord) for office space in Seattle, Washington, comprising approximately 37,000 square
feet. The term of the sublease is through April 2011.
Manufacturing Facilities Leases and Construction Agreements
We anticipate facilities related expenses, including equipment expenditures, to increase
significantly during 2010 as we execute on our plan for commercial launch of PROVENGE.
On August 18, 2005, we entered into an agreement to lease approximately 158,000 square feet of
commercial manufacturing space in Morris Plains, New Jersey (the New Jersey Facility). The lease
term is seven years, and we have the option to extend the lease for two ten-year periods and one
five-year period, with the same terms and conditions except for rent, which adjusts upon renewal to
market rate. The initial phase (Phase I) of the build-out of the New Jersey Facility was completed
in July 2006. In February 2007, we started to manufacture PROVENGE for clinical use in the New
Jersey Facility. In June 2009, we entered into a construction agreement for the build-out of Phases
II and III of the New Jersey Facility, described below. Phase II of the facility build-out was
substantially completed in January 2010, and we commenced occupation of Phase III of the facility
in May 2010. The lease required us to provide the landlord with a letter of credit in the initial
amount of $3.1 million as a security deposit. We provided Wells Fargo, the bank that issued the
letter of credit on our behalf, a security deposit of $3.1 million to guarantee the letter of
credit. The deposit was later reduced to $1.9 million. The $1.9 million security deposit was
recorded as long-term investment on our consolidated balance sheet as of June 30, 2010.
In June 2009, we entered into a construction agreement with The Henderson Corporation of PA,
Inc. (Henderson) to retain Henderson to perform construction related services and to arrange for,
monitor, supervise, administer and contract for the construction of Phase II and Phase III of our
New Jersey Facility. Phase II of construction, which consists of additional quality control
laboratories, data center, training areas, infrastructure and offices, was completed in January
2010. We commenced occupation of Phase III, which consists of additional manufacturing clean room
work stations, production support areas, warehouse, infrastructure and offices in May 2010. The
guaranteed maximum price for the completion of all work under the agreement is approximately $51.1
million of which $45.7 million has been paid through June 30, 2010.
As part of an agreement with the Township of Hanover relating to the permitting of the
expansion of our New Jersey Facility, we have $1.9 million in long-term investments being held as a
security deposit to ensure completion of certain improvements at the property.
In July 2009, we entered into a lease with Majestic Realty Co. for a building to be
constructed in Atlanta, Georgia, consisting of approximately 160,000 square feet (the Atlanta
Facility). The facility is intended for use by us as a manufacturing facility following build-out.
The initial lease term, which commenced in March 2010 upon substantial completion of the facility,
is for ten and a half years, with two renewal terms of five years each. The lease includes a
one-time purchase option exercisable prior to March 2011, and a ten-year expansion option for up to
an additional 47,000 square feet. We have commenced the manufacturing build-out at the facility
consisting of cell processing stations, quality control laboratories, a data center, training
areas, infrastructure and offices. The aggregate rent payable for the building shell under the
initial lease term is $6.7 million.
In August 2009, we entered into a lease with Knickerbocker Properties, Inc. XLVI for existing
building space totaling approximately 184,000 square feet in Orange County, California (the Orange
County Facility) for use by us as a manufacturing facility following build-out. The initial lease
term is for ten and a half years, with two renewal terms of five years each. The lease includes a
one-time purchase option exercisable during the first three years of the lease term. We took
possession of the building in September 2009 and are in the construction phase of the manufacturing
build-out consisting of cell processing stations, quality control laboratories, a data center,
training areas, infrastructure and offices. The aggregate rent payable for the existing warehouse
property under the initial lease term is $13.6 million.
The Georgia and California leases required us to provide the landlords with letters of credit
in the total amount of $2.4 million as security deposits. The Georgia letter of credit totaling
$222,000 was returned to us in May 2010. The California letter of credit was $2.2 million as of
June 30, 2010 and is secured by a deposit of $2.2 million. This deposit was recorded as a long-term
investment on our consolidated balance sheet as of June 30, 2010.
During the third quarter 2009, we engaged LifeTek Solutions, Inc., to provide consulting
design and commissioning services for the build-out of the Atlanta Facility and the Orange County
Facility as well as Phase II and Phase III of the New Jersey Facility, for a maximum total cost of
approximately $6.0 million.
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In December 2009 and January 2010, we entered into construction agreements with Turner
Construction Company (Turner) to retain Turner to perform construction related services and to
arrange for, monitor, supervise, administer and contract for the construction of the build-outs of
the Atlanta Facility and Orange County Facility, for a maximum total cost of $87.7 million of which
$56.6 million has been paid through June 30, 2010. The agreements include incentives for the
completion of work prior to milestone dates and penalties for failing to meet such deadlines.
Production and Supply Expenses
In May 2009, we placed an order for $39.5 million with Diosynth under our agreement dated
December 22, 2005, as amended, which covers the commercial production of the recombinant antigen
used in connection with PROVENGE. We expect to receive shipment of the order commencing in 2010. As
of June 30, 2010, our remaining obligation related to this commitment is to pay Diosynth $19.2
million upon the delivery of antigen. In May 2010, we placed an order with Diosynth for shipment of
antigen to commence delivery in mid 2011. The commitment for this order is $39.2 million of which
approximately $9.3 million was prepaid to Diosynth in the second quarter of 2010. On May 12, 2010,
we entered into a Second Amendment to the agreement with Diosynth to extend the term of the
agreement through December 31, 2018, and unless terminated, the agreement will renew automatically
thereafter for additional 5-year terms. The agreement may be terminated upon written notice by us
or Diosynth at least 24 months before the end of the initial term or a renewal term or by either
party in the event of an uncured material breach or default by the other party. We have entered into a technology transfer
agreement with a second source supplier for the antigen and are in discussions for a second source supply agreement.
Financings from the Sale of Securities and Issuance of Convertible Notes
Equity Offering Proceeds
In December 2009, we received net proceeds of $409.5 million, after deducting underwriting
commissions and estimated offering expenses, from the issuance of 17,250,000 shares of common stock
at the public offering price of $24.75 per share.
In May 2009, we received net proceeds of $220.8 million, after deducting underwriting
commissions and estimated offering expenses, from the issuance of 11,979,166 shares of common stock
at the public offering price of $19.20 per share.
In April 2008, we received net proceeds of $46.0 million from the issuance of the Shares and
the Warrants to the Investor. The Investor purchased the Shares and Warrants for a negotiated price
of $5.92 per share of common stock purchased. The Warrants were exercisable at any time prior to
October 8, 2015, with an exercise price of $20.00 per share of common stock and include a net
exercise feature. The Warrants contain a fundamental change provision, as defined in the
Warrants, which may in certain circumstances allow the Warrants to be redeemed for cash in an
amount equal to the BSM Value, as defined in the Warrants. The Warrants were recorded as a
liability and then marked to market each period through earnings in other income (expense). On May
18, 2010 (the exercise date), we entered into an amendment (the Amendment) to the Warrant
agreement. Pursuant to the terms of the Amendment, the exercise price of the Warrants was amended
from $20.00 to $8.92 per share, and the Investor concurrently exercised the warrant for 8,000,000
shares of common stock, resulting in aggregate cash proceeds to the Company of $71.4 million. The
fair value of the Warrants at the exercise date and December 31, 2009 was approximately $275.5
million and $133.0 million, respectively. As a result of this increase, we recorded $74.5 million
and $142.6 million in non-operating loss for the three and six months ended June 30, 2010,
respectively.
On October 11, 2007, we entered into an equity line of credit arrangement with Azimuth
Opportunity Ltd. (Azimuth) pursuant to a Common Stock Purchase Agreement with Azimuth (the
Common Stock Purchase Agreement), which we amended in October 2008 and February 2009. The Common
Stock Purchase Agreement provides that, upon the terms and subject to the conditions set forth
therein, Azimuth is committed to purchase up to $130.0 million of our common stock over the
approximate 36-month term of the Common Stock Purchase Agreement. From time to time, and at our
sole discretion, we may present Azimuth with draw down notices to purchase our common stock over 10
consecutive trading days or such other period mutually agreed upon by us and Azimuth. Each draw
down is subject to limitations based on the price of our common stock, with a minimum price of
$4.00 per share before Azimuth is committed to purchase any shares, and a limit of 2.5% of our
market capitalization at the time of such draw down, provided, however, Azimuth will not be
required to purchase more than $55.0 million of our common stock in any single draw down. We are
able to present Azimuth with up to 24 draw down notices during the term of the Common Stock
Purchase Agreement, with a minimum of five trading days required between each draw down period.
Pursuant to a single draw down notice, on October 10, 2008, we sold 3,610,760 shares of our common
stock to Azimuth and received net proceeds of approximately $19.8 million.
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Convertible Notes
In June and July 2007, an aggregate of $85.3 million of the Notes were sold in a private
placement to qualified institutional buyers. Proceeds from the offering, after deducting placement
fees and our estimated expenses, were approximately $82.3 million. The Notes were issued at face
principal amount and pay interest semi-annually in arrears on June 15 and December 15 of each year.
Record dates for payment of interest on the Notes are each June 1st and December 1st. In certain
circumstances, additional amounts may become due on the Notes as additional interest. We can elect
that the sole remedy for an event of default for our failure to comply with the reporting
obligations provisions of the indenture under which the Notes were issued (the Indenture), for
the first 180 days after the occurrence of such event of default would be for the holders of the
Notes to receive additional interest on the Notes at an annual rate equal to 1% of the outstanding
principal amount of the Notes. We recorded interest expense, including the amortization of debt
issuance costs related to the Notes, of $1.5 million and $1.4 million for the six months ended June
30, 2010 and 2009, respectively.
The Notes are convertible into our common stock, initially at the conversion price of $10.28
per share, equal to a conversion rate of approximately 97.2644 shares per $1,000 principal amount
of the Notes, subject to adjustment. There may be an increase in the conversion rate of the Notes
under certain circumstances described in the Indenture; however, the number of shares of common
stock issued will not exceed 114.2857 per $1,000 principal amount of the Notes. A holder that
converts Notes in connection with a fundamental change, as defined in the Indenture may in some
circumstances be entitled to an increased conversion rate (i.e., a lower per share conversion
price) as a make whole premium. If a fundamental change occurs, holders of the Notes may require us
to repurchase all or a portion of their Notes for cash at a repurchase price equal to 100% of the
principal amount of the Notes to be repurchased, plus any accrued and unpaid interest and other
amounts due thereon. The Indenture contains customary covenants.
In April 2009, $11.5 million in principal amount of the Notes were converted by holders of the
Notes, resulting in the issuance of approximately 1.1 million shares of common stock. In May 2009,
we exchanged an aggregate of 2,137,411 shares of our common stock for $21.2 million in aggregate
principal face amount of the Notes held by holders of the Notes.
As of June 30, 2010, $52.5 million in aggregate principal amount of the Notes was outstanding.
The fair value of the Notes at June 30, 2010 and December 31, 2009 was approximately $176.5 million
and $141.8 million, respectively, based on the last trading prices in March and December,
respectively. Such amounts are determined based on quoted prices in active markets for similar
instruments.
ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
Our investment portfolio is maintained in accordance with our investment policy, which
specifies credit quality standards, limits our credit exposure to any single issuer and defines
allowable investments. Pursuant to our policy, auction rate or asset-backed securities without a
guarantee by the U.S. government are not permitted to be purchased. The fair value of our cash
equivalents and marketable securities is subject to change as a result of changes in market
interest rates and investment risk related to the issuers credit worthiness.
As of June 30, 2010 and December 31, 2009, we had short-term investments of $262.2 million and
$167.1 million, respectively, and long-term investments of $12.3 million and $29.4 million,
respectively. Our short-term and long-term investments are subject to interest rate risk and will
decline in value if market interest rates increase. The estimated fair value of our short-term and
long-term investments at June 30, 2010, assuming a 100 basis point increase in market interest
rates, would decrease by approximately $1.1 million, which would not materially impact our results
of operations, cash flows or financial position. While changes in interest rates may affect the
fair value of our investment portfolio, any gains or losses will not be recognized in our statement
of operations until the investment is sold or if the reduction in fair value was determined to be
an other than temporary impairment.
We proactively monitor and manage our portfolio. If necessary, we believe we are able to
liquidate our investments within the next year without significant loss. We currently believe these
securities are not significantly impaired, primarily due to the government and major corporate
guarantees of the underlying securities; however, it could take until the final maturity of the
underlying notes to realize our investments recorded values. Based on our expected operating cash
flows, and our other sources of cash, we do not anticipate the potential lack of liquidity on these
investments will affect our ability to execute our current business plan.
ITEM 4. | CONTROLS AND PROCEDURES |
(a) Disclosure controls and procedures.
Our chief executive officer and our chief financial officer, based on their evaluation of our
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange
Act) as of the end of the period covered by this Quarterly Report on Form 10-Q, have concluded that
our disclosure controls and procedures are effective for ensuring that information required to be
disclosed
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by us in the reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in the SECs rules and forms.
(b) Changes in internal control over financial reporting.
During the quarter ended June 30, 2010, we have added additional controls over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) related to revenue
recognition and inventory costing that materially affected or are reasonably likely to materially
affect our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. | LEGAL PROCEEDINGS |
Beginning on May 24, 2007, four proposed securities class action suits were filed in the
United States District Court for the Western District of Washington, on behalf of purchasers of the
Companys common stock, purporting to state claims for securities law violations stemming from our
disclosures related to PROVENGE and the FDAs actions regarding our BLA for PROVENGE. The
complaints seek compensatory damages, attorneys fees and expenses. On October 4, 2007, the Court
consolidated these actions under the caption McGuire v. Dendreon Corporation, et al., and
designated a lead plaintiff. The lead plaintiff designated the complaint filed June 6, 2007 in
McGuire, et al. v. Dendreon Corporation, et al., as the operative complaint. Between December 2007
and January 2009, Dendreon and the individual defendants filed motions to dismiss the original
complaint, the amended complaint, and the second amended complaint. The Court granted these motions
in part, and denied them in part, allowing plaintiffs leave to amend the complaint each time.
Plaintiffs filed a third amended complaint on June 8, 2009. The third amended complaint includes
claims against Dendreon, our chief executive officer, and a senior vice president, challenging
disclosures related to the FDAs actions regarding our BLA for PROVENGE, and the sale of Dendreon
stock by our chief executive officer. On June 29, 2009, defendants filed an answer to the third
amended complaint.
Discovery was completed on June 22, 2010, and defendants motion for partial summary judgment is currently pending.
Trial in this action has been set for October 18, 2010.
On March 31, 2009, a complaint captioned Mountanos v. Dendreon Corporation, et al., was filed
in the United States District Court for the Western District of Washington, naming Dendreon, our
chief executive officer, and a senior vice president as defendants. The complaint in Mountanos
makes similar factual and legal allegations as the second amended complaint filed in the McGuire
action described above, but Mountanos is not a class action and the named plaintiffs allegedly
purchased options rather than the Companys common stock. It seeks compensatory damages, attorneys
fees and expenses. On July 2, 2009, plaintiffs filed an amended complaint, which the defendants
answered on August 3, 2009.
Discovery was completed on June 22, 2010, and defendants motion for partial summary judgment is currently pending.
Trial in this action has been set for October 18, 2010, to take place concurrently with the trial in McGuire v. Dendreon
Corporation,
Management currently believes that resolving these matters, individually or in aggregate, will
not have a material adverse effect on our financial position, our results of operations, or our
cash flows. However, these matters are subject to inherent uncertainties and the actual cost, as
well as the distraction from the conduct of our business, will depend upon many unknown factors and
managements view of these may change in the future. Thus, these matters could result in a material
adverse effect on our business, financial condition and results of operations.
ITEM 1A. | RISK FACTORS |
The risks described below may not be the only ones relating to our company. The risk factors
provided below include any material changes to and supersedes the description of the risk factors
associated with our business previously disclosed in Item 1A of our Annual Report on Form 10-K for
the year ended December 31, 2009. Additional risks that we currently believe are immaterial may
also impair our business operations. Our business, financial condition, and future prospects and
the trading price of our common stock could be harmed as a result of any of these risks. Investors
should also refer to the other information contained or incorporated by reference in this Quarterly
Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2009,
including our consolidated financial statements and related notes, and our other filings from time
to time with the Securities and Exchange Commission, or SEC.
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Risks Relating to Our Product Commercialization Pursuits
PROVENGE is our only FDA-approved product. If we fail to achieve commercial success from PROVENGE,
our business will suffer and our stock price would likely decline.
On April 29, 2010, the FDA licensed our autologous
cellular immunotherapy, PROVENGE®, for the treatment of men with
asymptomatic and minimally symptomatic, metastatic, castrate-resistant, hormone-refractory prostate
cancer. PROVENGE generated substantially all of our revenue for the quarter ended
June 30, 2010, which we rely on together with cash on hand to fund our operations. Prior to the
launch of PROVENGE in May 2010, we had never sold or marketed our own pharmaceutical product. Unless we can
successfully commercialize another product candidate or acquire the right to market other
approved products, we will continue to rely on PROVENGE for the near future to generate
substantially all of our revenue and fund our operations. Our ability to maintain or increase our
revenues for PROVENGE will depend on, and may be limited by, a number of factors, including the
following:
| acceptance of and ongoing satisfaction with PROVENGE as a first-in-class medicine in the United States and potentially foreign markets by the medical community, patients receiving therapy and third party payers; | ||
| our ability to maintain and expand market share, both in the United States and in the rest of the world, in the midst of numerous competing products for late stage prostate cancer which are currently in late stage clinical development; | ||
| successfully expanding and sustaining our manufacturing capacity to meet demand; | ||
| whether physicians are willing to adopt PROVENGE as part of the treatment paradigm for men with metastatic castrate resistant prostate cancer; | ||
| whether data from clinical trials for additional indications are positive and whether such data, if positive, will be sufficient to achieve approval from the FDA and its foreign counterparts to market and sell PROVENGE in such additional indications; | ||
| adequate coverage or reimbursement for PROVENGE by Medicare and third-party payors, including private health coverage insurers and health maintenance organizations; and | ||
| the ability of patients to afford any required co-payments for PROVENGE. |
If for any reason we became unable to continue selling or manufacturing PROVENGE, our business
would be seriously harmed and could fail.
If PROVENGE were to become the subject of problems related to its efficacy, safety, or otherwise,
our revenues from PROVENGE
could decrease.
PROVENGE, in addition to any other of our drug candidates that may be approved by the FDA,
will be subject to continual review by the FDA, and we cannot assure you that newly discovered or
developed safety issues will not arise. With the use of any newly marketed drug by a wider patient
population, serious adverse events may occur from time to time that initially do not appear to
relate to the drug itself. Any safety issues could cause us to suspend or cease marketing
of our approved products, cause us to modify how we market our approved products, subject us to
substantial liabilities, and adversely affect our revenues and financial condition. In the event
of a withdrawal of PROVENGE from the market, our revenues would decline significantly.
Adoption of PROVENGE for the treatment of patients with advanced prostate
cancer may be slow or limited for a variety of reasons including competing therapies, perceived
difficulties in the treatment process and access to reimbursement. If PROVENGE is not successful in
broad acceptance as a treatment option for advanced prostate cancer, our business would be harmed.
The rate of adoption of PROVENGE for advanced prostate cancer and the ultimate market size
will be dependent on several factors including educating treating physicians on the patient
treatment process with PROVENGE and immunotherapies generally. As a first in class therapy,
PROVENGE utilizes a unique treatment approach which can have associated challenges in the treating
physician learning curve. A significant portion of the prospective patient base for treatment with
PROVENGE may be under the care of urologists who are less experienced with infusion treatments.
Acceptance by urologists of PROVENGE as a treatment option may be measurably slower
than adoption by oncologists of PROVENGE as a therapy and may require more educational effort
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by us. In addition, the tight manufacturing and infusion timelines required for treatment with
PROVENGE will require treating physicians to adjust practice mechanics which may result in delay in
market adoption of PROVENGE as a preferred therapy.
PROVENGE is presently only approved in the U.S. for the treatment of metastatic asymptomatic
or minimally symptomatic castrate resistant prostate cancer. Earlier diagnosis of metastatic prostate cancer will be increasingly
important, and screening, diagnostic and treatment practices can vary significantly by geographic
region. Further, PROVENGE is only approved for marketing in the U.S., and in order to achieve
global success for PROVENGE as a treatment we will need to pursue approvals by non-U.S. regulatory
authorities which may result in significant investment in obtaining required data and manufacturing
capability. Submissions for approval by non-U.S. regulatory authorities may not result in
marketing approval by these authorities in this indication. In addition, certain countries require
pricing to be established before reimbursement for this indication may be obtained. We may not
receive or maintain pricing approvals at favorable levels or at all, which could harm our ability
to broadly market PROVENGE. Prostate cancer is common in many regions where the healthcare systems
are limited and reimbursement for PROVENGE may be limited or unavailable, which will likely limit
or slow adoption in these regions. If we are unable to successfully achieve the full market
potential of PROVENGE due to diagnosis practices or regulatory hurdles, our future prospects would
be harmed and our stock price could decline. Data from our completed clinical trials of PROVENGE in
the U.S. may not be sufficient to support approval for commercialization by regulatory agencies
governing the sale of drugs outside the US. This could require us to spend substantial sums to
develop sufficient clinical data for licensure by authorities outside the U.S.
Products we may potentially commercialize and market may be subject to promotional limitations.
We may not be able to obtain the labeling claims necessary or desirable for the promotion of
our products. The FDA has the authority to impose significant restrictions on an approved product
through the product label and allowed advertising, promotional and distribution activities. The FDA
also may approve a product for fewer indications than are requested or may condition approval on
the performance of post-approval clinical studies. We may also be required to undertake
post-marketing clinical trials. There may be monetary penalties if post-approval requirements are
not fulfilled. If the results of such post-marketing studies are not satisfactory, the FDA may
withdraw marketing authorization or may condition continued marketing on commitments from us that
may be expensive and/or time consuming to fulfill. Even if we receive FDA and other regulatory
approvals, if we or others identify adverse side effects after any of our products are on the
market, or if manufacturing problems occur, regulatory approval may be withdrawn and reformulation
of our products, additional clinical trials, changes in labeling of our products and additional
marketing applications may be required, any of which potential concerns could harm our business and
cause our stock price to decline.
Risks Relating to Manufacturing Activities
We are rapidly expanding our operations to support commercial launch of PROVENGE, and we may
encounter unexpected costs or difficulties.
We have and expect to continue to significantly increase our investment in commercial
infrastructure. We will need to expand and effectively manage our operations and facilities and
continue to grow our infrastructure to commercialize PROVENGE and pursue development of our other
product candidates. We must effectively manage our supply chain, third-party vendors and
distribution network, all of which requires strict planning in order to meet production timelines
for PROVENGE. We continue to add manufacturing, quality control, quality assurance, marketing and
sales personnel, and personnel in all other areas of our operations, including executive-level
personnel, to support commercialization, which strains our existing managerial, operational,
financial and other resources. The costs of expansion of our facilities and investment in related
equipment has been and will continue to be a very significant expenditure for us during 2010 and
2011. In pursuing rapid expansion, we must continue to monitor quality and effective controls, or
we risk possible delays in approval of the facilities by the FDA for commercial manufacturing.
Any delay in
readiness of the expansion of our New Jersey facility and construction of our facilities in Orange
County, California and Atlanta could result in the loss of revenue from potential sales of
PROVENGE, and adversely impact market acceptance for PROVENGE. Prior to April 2010, our company
had no experience in commercial-scale manufacturing, the management of large-scale information
technology systems, or the management of a large-scale distribution network. We also had no
experience in sales, marketing or distribution of products in commercial quantities. If we fail
to manage the growth in our systems and personnel appropriately and successfully in order to
achieve our commercialization plans for PROVENGE our revenues could suffer and our business could
be harmed.
In addition to increased production efforts, we may make manufacturing changes to the
components or to the manufacturing process for PROVENGE. These changes could result in delays or
interruption of commercial sales, any of which could materially harm our business. We will be
required to demonstrate product comparability for each manufacturing site. The FDA may require
additional testing beyond what we propose, which could result in delays and unanticipated costs
which could cause our revenues to suffer and results to be harmed.
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We may initially be unable to successfully manufacture PROVENGE in quantities sufficient to fulfill
patient demand.
To date, our product candidates have been manufactured in small quantities for preclinical and
clinical trials. In order to support commercial demand for PROVENGE, we will need to manufacture
the product in significantly larger quantities. We may experience constraints in our ability to
initially manufacture PROVENGE in sufficient quantities to satisfy market demand. The existing
capacity
at our New Jersey Facility is built-out to one quarter of capacity, which we presently believe
will be insufficient to satisfy the anticipated market demand for PROVENGE. Until additional
capacity from the expansion of our New Jersey Facility and new manufacturing facilities in Atlanta,
Georgia and Orange County, California is available commencing in the first half of 2011, we may
experience a significant supply shortage of PROVENGE.
We and our contract manufacturers are subject to significant regulation with respect to
manufacturing of our products.
All of those involved in the preparation of a therapeutic drug for clinical trials or
commercial sale, including our existing supply contract manufacturers and clinical trial
investigators, are subject to extensive regulation by the FDA. Components of a finished therapeutic
product approved for commercial sale or used in late-stage clinical trials must be manufactured in
accordance with Current Good Manufacturing Practices, a series of complex regulations. These
regulations govern manufacturing processes and procedures and the implementation and operation of
quality systems to control and assure the quality of investigational products and products approved
for sale. Our facilities and quality systems and the facilities and quality systems of some or all
of our third party contractors must pass inspection for compliance with the applicable regulations
as a condition of FDA approval of our products. In addition, the FDA may, at any time, audit or
inspect a manufacturing facility involved with the preparation of PROVENGE or our other potential
products or the associated quality systems for compliance with the regulations applicable to the
activities being conducted. The FDA also may, at any time following approval of a product for sale,
audit our manufacturing facilities or those of our third party contractors. If any such inspection
or audit identifies a failure to comply with applicable regulations or if a violation of our
product specifications or applicable regulation occurs independent of such an inspection or audit,
we or the FDA may require remedial measures that may be costly and/or time consuming for us or a
third party to implement and that may include the temporary or permanent suspension of a clinical
trial or commercial sales or the temporary or permanent closure of a facility. Any such remedial
measures imposed upon us or third parties with whom we contract could materially harm our business.
Manufacturing difficulties, disruptions or delays could limit supply of our products and limit
our product sales.
Manufacturing biologic human therapeutic products is difficult, complex and highly regulated.
We currently manufacture PROVENGE and plan to manufacture our product candidates. Our ability to
adequately and timely manufacture and supply our products is dependent on the uninterrupted and
efficient operation of our facilities and those of our third-party contract manufacturers, which
may be impacted by:
| availability or contamination of raw materials and components used in the manufacturing process, particularly those for which we have no other source or supplier; |
| capacity of our facilities and those of our contract manufacturers; | ||
| facility contamination by microorganisms or viruses; | ||
| compliance with regulatory requirements; | ||
| changes in forecasts of future demand for product components; | ||
| timing and actual number of production runs for product components; | ||
| updating of manufacturing specifications; and | ||
| product quality success rates and yields. |
If the efficient manufacture and supply of our products is interrupted, we may experience
delayed shipments or supply constraints. If we are at any time unable to provide an uninterrupted
supply of our products to patients, we may lose patients and physicians may elect to prescribe
competing therapeutics instead of our products, which could materially and adversely affect our
product sales and results of operations.
Our manufacturing processes and those of our third-party contract manufacturers must undergo a
potentially lengthy FDA or other regulatory approval process and are subject to continued review by
the FDA and other regulatory authorities. It is a multi-year process to build and license a new
manufacturing facility and it can take significant time to qualify and license a new contract
manufacturer. In order to maintain supply, mitigate risks and to satisfy anticipated demand for
PROVENGE, we must successfully implement manufacturing projects on schedule.
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We may need to build additional manufacturing facilities in order to develop additional
products, which would require significant investment. Given the complexities of the manufacturing
process for PROVENGE and of our cellular immunotherapies platform, this could require large capital
expenditures to pursue these initiatives before we are able to determine feasibility.
If regulatory authorities determine that we or our third-party contract manufacturers or
certain of our third-party service providers have violated regulations or if they restrict, suspend
or revoke our prior approvals, they could prohibit us from manufacturing our products or conducting
clinical trials or selling our marketed products until we or the affected third-party contract
manufacturers or third-party service providers comply, or indefinitely. Because our third-party
contract manufacturers and certain of our third-party service providers are subject to FDA and
foreign regulatory authorities, alternative qualified third-party contract manufacturers and
third-party service providers may not be available on a timely basis or at all. If we or our
third-party contract manufacturers or third-party service providers cease or interrupt production
or if our third-party contract manufacturers and third-party service providers fail to supply
materials, products or services to us, we may experience delayed shipments, and supply constraints
for our products.
Risks Relating to Our Clinical Trial and Product Development Initiatives
Our clinical and pre-clinical candidates in the pipeline for other potential cancer immunotherapies
and small molecule products may never reach the commercial market for a number of reasons.
In order to sustain our business, we focus substantial resources on the search for new
pharmaceutical products. These activities include engaging in discovery research and product
development, conducting preclinical and clinical studies, and seeking regulatory approval in the
United States for product candidates and abroad for PROVENGE and other products we may market in
the future. Our long term success depends on the discovery and development of new drugs that we can
commercialize. Our cancer immunotherapy and small molecule program pipeline candidates are still at
a relatively early stage in the development process. There can be no assurance that these product
candidates or any other potential therapies we may pursue will become a marketed drug. In
addition, we may find that certain products cannot be manufactured on a commercial scale and,
therefore, they may not be economical to produce, or may be precluded from commercialization by
proprietary rights of third parties.
A significant portion of the research that we are conducting involves new and unproven
technologies. Research programs to identify disease targets and product candidates require
substantial technical, financial and human resources, whether or not we ultimately identify any
candidates. Our research programs may initially show promise in identifying potential product
candidates, yet fail to yield candidates for clinical development for a number of reasons,
including difficulties in formulation which cannot be overcome, timing and competitive concerns.
An IND must become effective before human clinical trials may commence. The IND application is
automatically effective 30 days after receipt by the FDA unless, before that time, the FDA raises
concerns or questions about the products safety profile or the design of the trials as described
in the application. In the latter case, any outstanding concerns must be resolved with the FDA
before clinical trials can proceed. Thus, the submission of an IND may not result in FDA
authorization to commence clinical trials in any given case. After authorization is received, the
FDA retains the authority to place the IND, and clinical trials under that IND, on clinical hold.
If
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we are unable to commence clinical trials or clinical trials are delayed indefinitely, we
would be unable to develop additional product candidates and our business could be materially
harmed.
If testing of a particular product candidate does not yield successful results, then we will be
unable to commercialize that product.
The pre-clinical testing and clinical trials of any product candidates that we develop must
comply with regulations by numerous federal, state and local government authorities in the United
States, principally the FDA, and by similar agencies in other countries. Clinical trials are
subject to continuing oversight by governmental regulatory authorities and institutional review
boards and must meet the requirements of these authorities in the United States, including those
for informed consent and good clinical practices. We may not be able to comply with these
requirements, which could disqualify completed or ongoing clinical trials. We may experience
numerous unforeseen events during, or as a result of, the testing process that could delay or
prevent commercialization of our product candidates, including the following:
| safety and efficacy results from human clinical trials may show the product candidate to be less effective or safe than desired or earlier results may not be replicated in later clinical trials; |
| the results of preclinical studies may be inconclusive or they may not be indicative of results that will be obtained in human clinical trials; |
| after reviewing relevant information, including preclinical testing or human clinical trial results, we may abandon or substantially restructure programs that we might previously have believed to be promising; |
| we or the FDA or similar regulatory authorities in other countries may suspend or terminate clinical trials if the participating patients are being exposed to unacceptable health risks or for other reasons; and |
| the effects of our product candidates may not be the desired effects or may include undesirable side effects or other characteristics that interrupt, delay or cause us or the FDA to halt clinical trials or cause the FDA or foreign regulatory authorities to deny approval of the product candidate for any or all target indications. |
Each phase of testing is highly regulated, and during each phase there is risk that we will
encounter serious obstacles or will not achieve our goals, and accordingly we may abandon a product
in which we have invested substantial amounts of time and money. In addition, we must provide the
FDA and similar foreign regulatory authorities with pre-clinical and clinical data that demonstrate
that our product candidates are safe and effective for each target indication before they can be
approved for commercial distribution. We cannot state with certainty when or whether any of our
products now under development will be approved or launched; or whether any products, once
launched, will be commercially successful.
The FDA or an Advisory Committee may determine our clinical trials data regarding safety or
efficacy are insufficient for regulatory approval.
We discuss with and obtain guidance from regulatory authorities on certain aspects of our
clinical development activities. These discussions are not binding obligations on the part of
regulatory authorities. Under certain circumstances, regulatory authorities may revise or retract
previous guidance during the course of our clinical activities or after the completion of our
clinical trials. The FDA may also disqualify a clinical trial in whole or in part from
consideration in support of approval of a potential product for commercial sale or otherwise deny
approval of that product. Even if we obtain successful clinical safety and efficacy data, we may be
required to conduct additional, expensive trials to obtain regulatory approval. Prior to regulatory
approval, the FDA may elect to obtain advice from outside experts regarding scientific issues
and/or marketing applications under FDA review. These outside experts are convened through the
FDAs Advisory Committee process. An Advisory Committee will report to the FDA and make
recommendations. Views of the Advisory Committee may differ from those of the FDA, and may impact
our ability to commercial a product candidate.
If we encounter difficulties enrolling patients in our clinical trials, our trials could be delayed
or otherwise adversely affected.
Clinical trials for our product candidates may require that we identify and enroll a large
number of patients with the disease under investigation. We may not be able to enroll a sufficient
number of patients, or those with required or desired characteristics to achieve diversity in a
study, to complete our clinical trials in a timely manner.
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Patient enrollment is affected by factors including:
| design of the trial protocol; |
| the size of the patient population; |
| eligibility criteria for the study in question; |
| perceived risks and benefits of the product candidate under study; |
| availability of competing therapies and clinical trials; |
| efforts to facilitate timely enrollment in clinical trials; |
| patient referral practices of physicians; |
| the ability to monitor patients adequately during and after treatment; and |
| proximity and availability of clinical trial sites for prospective patients. |
If we have difficulty enrolling a sufficient number or diversity of patients to conduct our
clinical trials as planned, we may need to delay or terminate ongoing or planned clinical trials,
either of which would have a negative effect on our business.
Risks Relating to our Financial Position and Operations
We have a history of operating losses. We expect to continue to incur losses for the near future,
and we may never become profitable.
As of June 30, 2010, our accumulated deficit was $1,051.8 million. We have incurred net losses as
a result of research and development expenses, clinical trial expenses, contract manufacturing
expenses and general and administrative expenses in support of our operations and research efforts.
We anticipate that near term we will continue to fund our ongoing research, development and general
operations from available cash, and revenue generated from commercial sales of PROVENGE as we
expand our operations including our manufacturing capabilities, continue our clinical trials, apply
for regulatory approvals outside the U.S. and invest in research and product development. The majority of our
resources continue to be used in support of the commercialization of PROVENGE. Even if we are able to successfully realize our
commercialization goals for PROVENGE, because of the numerous risks and uncertainties associated
with commercialization of a biologic, we are unable to predict when we will become profitable, if
at all. Even if we do produce revenues and achieve profitability, we may not be able to maintain or
increase profitability.
We may require additional funding, and our future access to capital is uncertain.
It is expensive to develop and commercialize cancer immunotherapy and small molecule product
candidates. We plan to continue to simultaneously conduct clinical trials and preclinical research
for a number of product candidates while pursuing commercial acceptance and our marketing goals for
PROVENGE. Our product development efforts may not lead to commercial products, either because our
product candidates fail to be found safe or effective in clinical trials or because we lack the
necessary financial or other resources or relationships to pursue our programs through
commercialization. Even if commercialized, a product may not achieve revenues that exceed the costs
of producing and selling it. Our capital and future cash flow may not be sufficient to support the
expenses of our operations and we may need to raise additional capital depending on a number of
factors, including the following:
| the rate of progress and cost of our research and development and clinical trial activities; |
| to establish manufacturing and distribution capability for a product other than PROVENGE; and |
| to remain competitive in the event of the introduction into the marketplace of competing products and other adverse market developments. |
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We may not be able to obtain additional financing on favorable terms or at all. If we are
unable to raise additional funds, we may have to delay, reduce or eliminate some of our clinical
trials and our development programs. If we raise additional funds by issuing equity or
equity-linked securities, further dilution to our existing stockholders will result. In addition,
the expectation of future dilution as a result of our offering of securities convertible into
equity securities may cause our stock price to decline.
Difficulties we may encounter managing our growth may divert resources and limit our ability to
successfully expand our operations.
We have been and continue to be engaged in a period of rapid and substantial growth, which
places a strain on our commercial, clinical, administrative and operational infrastructure. We will
need to continue to manage multiple locations and additional relationships with various
collaborative partners, suppliers and other third parties. Our ability to manage our operations and
growth effectively requires us to continue to hire necessary personnel and to continue to improve
our reporting systems and procedures as well as our operational, financial and management controls.
We may not be able to effectively manage a rapid pace of growth and timely implement improvements
to our management information and control systems. Any failure by us to appropriately monitor and
manage our business growth could cause one or more of our initiatives to fail to meet its goals,
thus harming our business and near term prospects.
Our indebtedness could adversely affect our financial condition.
In June and July 2007, we sold an aggregate of $85.3 million in convertible senior
subordinated notes (the Notes), which bear interest annually at the rate of 4.75 percent. As of
June 30, 2010, an aggregate of $52.5 million in aggregate principal amount of the Notes remained
outstanding. Our indebtedness and annual debt service requirements may adversely impact our
business, operations and financial condition in the future. For example, it could:
| increase our vulnerability to general adverse economic and industry conditions; |
| limit our ability to raise additional funds by borrowing or engaging in equity sales in order to fund future working capital, capital expenditures, research and development and other general corporate requirements; |
| require us to dedicate a substantial portion of our cash to service payments on our debt; or |
| limit our flexibility to react to changes in our business and the industry in which we operate or to pursue certain strategic opportunities that may present themselves. |
Our stockholders may be diluted by the conversion of our outstanding convertible notes.
The holders of the Notes may choose at any time to convert their Notes into common stock prior
to maturity in June 2014. The Notes are convertible into our common stock, initially at the
conversion price of $10.28 per share, equal to a conversion rate of approximately 97.2644 shares
per $1,000 principal amount of the Notes. The number of shares of common stock issuable upon
conversion of the Notes, and therefore the dilution of existing common stockholders, could increase
under certain circumstances described in the indenture under which the Notes were issued. The
conversion of the Notes results in issuance of additional shares of common stock, diluting existing
common stockholders.
We may elect to issue additional shares of our common stock or other securities that may be
convertible into our common stock, which could result in further dilution to our existing
stockholders.
Future sales of our common stock will depend primarily on the market price of our common
stock, the terms we may receive upon the sale of debt or convertible securities, the interest in
our company by institutional investors and our cash needs. In addition, we may register additional
equity, debt or other convertible securities with the SEC for sale in the future. Each of our
issuances of common stock or securities convertible into common stock to investors under a
registration statement or otherwise will proportionately decrease our existing stockholders
percentage ownership of our total outstanding equity interests and may reduce our stock price.
Our business, financial condition and future prospects could suffer as a result of carrying out
strategic alternatives in the future.
We may decide it is in our best interests to engage in a strategic transaction that could
dilute our existing stockholders or cause us to incur contingent liabilities, commitments, or
significant expense. In the course of pursuing strategic alternatives, we may evaluate potential
acquisitions or investments in related businesses, products or technologies. Future acquisitions or
investments could subject us to a number of risks, including, but not limited to:
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| the assumption of additional indebtedness or contingent liabilities; | ||
| risks and uncertainties associated with the other party to such a transaction, including but not limited to the prospects of that party and their existing products or product candidates and regulatory approvals; | ||
| the loss of key personnel and business relationships; | ||
| difficulties associated with assimilating and integrating new personnel, intellectual property and operations of an acquired company; | ||
| our inability to generate revenue from acquired technology and/or products sufficient to meet our objectives in undertaking the acquisition or even to offset the associated acquisition and maintenance costs; and | ||
| the distraction of our management from our existing product programs and initiatives in pursuing such a strategic merger or acquisition. |
In connection with an acquisition, we must estimate the value of the transaction by making
certain assumptions that may prove to be incorrect, which could cause us to fail to realize the
anticipated benefits of a transaction. We may incur as part of a transaction substantial charges
for closure costs associated with the elimination of duplicate operations and facilities and
acquired in-process research and development charges. In either case, the incurrence of these
charges could adversely affect our results of operations for particular quarterly or annual
periods. Any strategic transaction we may pursue may not result in the benefits we initially
believe, and/or result in costs that end up outweighing the benefits, and may adversely impact our
financial condition and business prospects.
Risks Related to Regulation of our Industry
PROVENGE and our other products in development cannot be sold if we do not maintain or gain
required regulatory approvals.
Our business is subject to extensive regulation by numerous state and federal governmental
authorities in the United States, including the FDA, and potentially by foreign regulatory
authorities. We are required in the United States and in foreign countries to obtain approval from
regulatory authorities before we can manufacture, market and sell our products. Once approved, the
FDA and other U.S. and foreign regulatory agencies have substantial authority to require additional
testing, change product labeling or mandate withdrawal of our products. The marketing of our
approved products will be subject to extensive regulatory requirements administered by the FDA and
other regulatory bodies, including adverse event reporting requirements and the FDAs general
prohibition against promoting products for unapproved uses. The manufacturing facilities for our
approved products are also subject to continual review and periodic inspection and approval of
manufacturing modifications. The FDA stringently applies regulatory standards for manufacturing.
Manufacturing facilities that manufacture drug products for the United States market, whether they
are located inside or outside the United States, are subject to biennial inspections by the FDA and
must comply with the FDAs current good manufacturing practice, or cGMP, regulations.
The FDA can delay, limit or withhold approval of a product candidate for many reasons,
including the following:
| a product candidate may not demonstrate sufficient safety in human trials or efficacy in treatment; |
| the FDA may determine that certain aspects of the clinical testing, manufacture, or quality control are not in compliance with the regulations; |
| the FDA may interpret data from preclinical testing and clinical trials in different ways than we interpret the data or may require additional and/or different categories of data than what we obtained in our clinical trials; |
| the FDA may require additional information about the efficacy, safety, purity, stability, identity or functionality of a product candidate; |
| the FDA may not approve our manufacturing processes or facilities or the processes or facilities of our contract manufacturers; and |
| the FDA may change its approval policies or adopt new regulations that impact our business. |
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Our failure to obtain approval, significant delays in the approval process, or our failure to
maintain approval in any jurisdiction will prevent us from selling a product in that jurisdiction
and receiving product sales revenues. Any product and its manufacturer will continue to be subject
to strict regulations after approval, including but not limited to, manufacturing, quality control,
labeling, packaging, adverse event reporting, storage, advertising, promotion and record-keeping
requirements. Any problems with an approved product, including the later exhibition of adverse
effects or any violation of regulations could result in restrictions on the product, including its
withdrawal from the market, which could materially harm our business. The process of obtaining
approvals in foreign countries is subject to delay and failure for many of the same reasons.
Regulatory agencies could also add new regulations or change existing regulations at any time,
which could affect our ability to obtain or maintain approval of our products. The 2007 creation of
the Food and Drug Administration Amendments Act of 2007 (FDAAA) significantly added to the FDAs
authority, allowing the FDA to (i) require sponsors of marketed products to conduct post-approval
clinical studies; (ii) mandate labeling changes to products and (iii) require sponsors to implement
a REMS (Risk Evaluation and Mitigation Strategy) for a product. Failure to comply with FDAAA requirements could result in significant civil
monetary penalties, reputational harm and increased product liability risk. The process of
obtaining required FDA and other regulatory approvals, including foreign approvals, is expensive,
often takes many years and can vary substantially based upon the type, complexity and novelty of
the products involved. PROVENGE and our investigational cellular immunotherapies are novel;
therefore, regulatory agencies may lack experience with them, which may lengthen the regulatory
review process, increase our development costs and delay or prevent commercialization of PROVENGE
outside of the U.S. and with respect to our active immunotherapy products under development. We
are unable to predict when and whether any changes to regulatory policy affecting our business
could occur, and such changes could have a material adverse impact on our business. If regulatory
authorities determine that we have not complied with regulations in the research and development of
a product candidate, a new indication for an existing product or information to support a current
indication, they may not approve the product candidate or new indication or maintain approval of
the current indication in its current form or at all, and we would not be able to market and sell
it. If we were unable to market and sell our products or product candidates, our business and
results of operations would be materially and adversely affected.
Failure to comply with foreign regulatory requirements governing human clinical trials and
marketing approval for product candidates could prevent us from selling our products in foreign
markets, which may adversely affect our operating results and financial condition.
The requirements governing the conduct of clinical trials, manufacturing, testing, product
approvals, pricing and reimbursement outside the United States vary greatly from country to
country. In addition, the time required to obtain approvals outside the United States may differ
significantly from that required to obtain FDA approval. We may not obtain foreign regulatory
approvals on the timeframe we may desire, if at all. Approval by the FDA does not ensure approval
by regulatory authorities in other countries, and foreign regulatory authorities could require
additional testing. Failure to comply with these regulatory requirements or obtain required
approvals could impair our ability to develop foreign markets for our products and may have a
material adverse effect on our business and future prospects.
Our product sales depend on adequate coverage and reimbursement from third-party payers.
Our sale of PROVENGE is dependent on the availability and extent of coverage and reimbursement
from third-party payers, including government healthcare programs and private insurance plans. We
rely in large part on the reimbursement coverage by federal and state sponsored government programs
such as Medicare and Medicaid in the United States. In the event we seek approvals to market
PROVENGE in non-U.S. territories, we will need to work with the government-sponsored healthcare
systems in Europe and other foreign countries that are the primary payers of healthcare costs in
those regions. Governments and private payers may regulate prices, reimbursement levels and/or
access to PROVENGE and any other products we may market to control costs or to affect levels of use
of our products. We cannot predict the availability or level of coverage and reimbursement for our
approved products or product candidates and a reduction in coverage and/or reimbursement for our
products could have a material adverse effect on our product sales and results of operations.
The availability and amount of reimbursement for our product candidates and the manner in which
government and private payers may reimburse for our potential products is uncertain.
In many of the markets where we may do business in the future, the prices of pharmaceutical
products are subject to direct price controls pursuant to applicable law or regulation and to drug
reimbursement programs with varying price control mechanisms. We expect that many of the patients
who seek treatment with PROVENGE or any other of our products that are approved for marketing will
be eligible for Medicare benefits. Other patients may be covered by private health plans. The
Medicare program is administered
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by the Centers for Medicare & Medicaid Services (CMS), and coverage and reimbursement for
products and services under Medicare are determined pursuant to regulations promulgated by CMS and
pursuant to CMSs subregulatory coverage and reimbursement determinations. It is difficult to
predict how CMS may apply those regulations and subregulatory determinations to newly approved
products, especially novel products such as ours, and those regulations and interpretive
determinations are subject to change. Moreover, the methodology under which CMS makes coverage and
reimbursement determinations is subject to change, particularly because of budgetary pressures
facing the Medicare program. On June 30, 2010, the Centers for Medicare & Medicaid Services (CMS)
initiated a national coverage analysis (NCA) for the treatment of metastatic prostate cancer with
PROVENGE. The NCA process could result in a national coverage decision (NCD) allowing local
medicare contractors to cover PROVENGE for eligible patients only provided certain conditions are
first met, an NCD could in theory prohibit coverage of PROVENGE, or a decision could be made by CMS
not to issue an NCD and therefore to continue to allow Medicares contractors to cover PROVENGE at
their discretion but with no certain guidance. CMS expects to issue a proposed decision no later
than March 30, 2011, and the final decision should be released no later than June 30, 2011, however
CMS could issue a proposed or final decision sooner. Until CMS issues a NCD or otherwise concludes
its review of PROVENGE, some local medicare providers may be hesitant to confirm reimbursement
coverage for PROVENGE. In addition, during the pendency of the NCA, CMS may engage in discussions
with local medicare contractors or make statements that could be interpreted against coverage of
PROVENGE, which could create uncertainty among contractors and have a chilling effect on coverage
determinations. If we are unable to obtain or retain adequate levels of reimbursement from
Medicare or from private health plans, our ability to sell PROVENGE and our other potential
products will be adversely affected. Medicare regulations and interpretive determinations also may
determine who may be reimbursed for certain services. This may adversely affect our ability to
market or sell PROVENGE or our other potential products, if approved.
In the European Union, governments influence the price of pharmaceutical products through
their pricing and reimbursement rules and control of national health care systems that fund a large
part of the cost of such products to consumers. The approach taken varies from member state to
member state. Some jurisdictions operate positive and/or negative list systems under which products
may only be marketed once a reimbursement price has been agreed. Other member states allow
companies to fix their own prices for medicines, but monitor and control company profits. The
downward pressure on health care costs in general, particularly prescription drugs, has become very
intense. As a result, increasingly high barriers are being erected to the entry of new products, as
exemplified by the role of the National Institute for Health and Clinical Excellence in the United
Kingdom which evaluates the data supporting new medicines and passes reimbursement recommendations
to the government. All of these factors
could adversely impact our ability to successfully commercialize product candidates in these
jurisdictions.
The pharmaceutical industry is subject to significant regulation and oversight in the United
States to prevent inducement and fraud pursuant to antikickback laws and false claims statutes.
The Federal Health Care Program Antikickback statute prohibits, among other things, knowingly
and willfully offering, paying, soliciting, or receiving remuneration to induce or in return for
purchasing, leasing, ordering, or arranging for the purchase, lease, or order of any health care
item or service reimbursable under Medicare, Medicaid, or other federally financed healthcare
programs. This statute has been interpreted to apply to arrangements between pharmaceutical
manufacturers on one hand and prescribers, purchasers, and formulary managers on the other.
Although there are a number of statutory exemptions and regulatory safe harbors protecting certain
common activities from prosecution, the exemptions and safe harbors are drawn narrowly, and
practices that involve remuneration intended to induce prescribing, purchases, or recommendations
may be subject to scrutiny if they do not qualify for an exemption or safe harbor. Our practices
may not in all cases meet all of the criteria for safe harbor protection from antikickback
liability.
Federal false claims laws prohibit any person from knowingly presenting, or causing to be
presented, a false claim for payment to the federal government, or knowingly making, or causing to
be made, a false statement to get a false claim paid. Pharmaceutical and other health care
companies have in the past been prosecuted under these laws for allegedly creating bundled services
reflecting artificially high costs for products. Other companies have been prosecuted for causing
false claims to be submitted because of the companys marketing of the product for unapproved, and
thus non-reimbursable, uses. The majority of states also have statutes or regulations similar to
the federal antikickback law and false claims laws, which apply to items and services reimbursed
under Medicaid and other state programs, or, in several states, apply regardless of the payor.
Sanctions under these federal and state laws may include civil monetary penalties, exclusion of a
manufacturers products from reimbursement under government programs, criminal fines and
imprisonment.
Because of the breadth of these laws and the narrowness of the safe harbors, it is possible
that some of our business activities could be subject to challenge under one or more of these laws,
which could have a material adverse effect on our business, financial condition and results of
operations.
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We use hazardous materials in our business and must comply with environmental laws and regulations,
which can be expensive.
Our operations produce hazardous waste products, including chemicals and radioactive and
biological materials. We are subject to a variety of federal, state and local laws and regulations
relating to the use, handling, storage and disposal of these materials. Although we believe that
our safety procedures for handling and disposing of these materials complies with the standards
prescribed by state and federal laws and regulations, the risk of accidental contamination or
injury from these materials cannot be eliminated. We generally contract with third parties for the
disposal of such substances and store our low level radioactive waste at our facilities until the
materials are no longer considered radioactive. We may be required to incur further costs to comply
with current or future environmental and safety laws and regulations. In addition, in the event of
accidental contamination or injury from these materials, we could be held liable for any damages
that result and any such liability could exceed our resources.
Risks from Competitive Factors
Our competitors may develop and market products that are less expensive, more effective, safer or
reach the market sooner, which may diminish or eliminate the commercial success of any products we
may commercialize.
Competition in the cancer therapeutics field is intense and is accentuated by the rapid pace
of advancements in product development. We anticipate that we will face increased competition in
the future as new companies enter our markets. Some competitors are pursuing a product development
strategy competitive with ours. In addition, we compete with other clinical-stage companies and
institutions for clinical trial participants, which could reduce our ability to recruit
participants for our clinical trials. Delay in recruiting clinical trial participants could
adversely affect our ability to bring a product to market prior to our competitors. Further,
research and discoveries by others may result in breakthroughs that render potential products
obsolete before they generate revenue.
There are products currently under development by other companies and organizations that could
compete with PROVENGE, and potentially other products that we are developing. Products such as
androgen metabolism or androgen receptor antagonists, endothelin A receptor antagonists, antisense
compounds, angiogenesis inhibitors and gene therapies for cancer are also under development by a
number of companies and could potentially compete with PROVENGE and product candidates we may
develop. Chemotherapeutic, taxane-based therapy has been available since 2004 for the
therapeutic treatment of metastatic, androgen-independent prostate cancer. In addition, many
universities and private and public research institutes may become active in cancer research, which
may be in direct competition with us.
Some of our competitors in the cancer therapeutics field have substantially greater research
and development capabilities and manufacturing, marketing, financial and managerial resources than
we do. In addition, our competitors may obtain patent protection or FDA approval and commercialize
products more rapidly than we do, which may impact future sales of our products. We expect that
competition among products approved for sale will be based, among other things, on product
efficacy, price, safety, reliability, availability, patent protection, and sales, marketing and
distribution capabilities. Our profitability and financial position will suffer if our products
receive regulatory approval, but cannot compete effectively in the marketplace.
We could face competition for PROVENGE or other approved products from biosimilar products
which could impact our profitability.
We may face competition in Europe from biosimilar products, and we expect we may face
competition from biosimilars in the future in the U.S. as well. Lawmakers in the United States have
recently enacted healthcare reform legislation which included an abbreviated regulatory pathway for
the approval of biosimilars. The EU has already created such a regulatory pathway. To the extent
that governments adopt more permissive approval frameworks and competitors are able to obtain
broader marketing approval for biosimilars, our products will become subject to increased
competition. Expiration or successful challenge of applicable patent rights could trigger such
competition, and we could face more litigation regarding the validity and/or scope of our patents.
In the EU, the European Commission has granted marketing authorizations for several
biosimilars pursuant to a set of general and product class-specific guidelines for biosimilar
approvals issued over the past few years. We cannot predict to what extent the entry of biosimilar
products or other competing products could impact our future potential sale of PROVENGE in the EU.
Our inability to compete effectively in non-U.S. territories would reduce global sales potential,
which could have a material adverse effect on our results of operations.
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On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care
Act which authorized the FDA to approve biosimilar products. The new law established a period of 12
years of data exclusivity for reference products in order to preserve incentives for future
innovation and outlined statutory criteria for science-based biosimilar approval standards that
take into account patient safety considerations. Under this framework, data exclusivity protects
the data in the innovators regulatory application by prohibiting, for a period of 12 years, others
from gaining FDA approval based in part on reliance or reference to the innovators data in their
application to the FDA. The next phase of the process will be implementation of the biosimilars
regulatory approval pathway by the FDA. The new law does not change the duration of patents granted
on biologic products. While the FDA now has the authority to approve biosimilar products, the FDA
has not announced whether they will first publish guidance or rules for biosimilar applicants
before approving biosimilar products. With the likely introduction of a pathway for the approval of
biosimilars in the United States, we may in the future face greater competition from biosimilar
products and downward pressure on our product prices, sales and revenues, subject to our ability to
enforce our patents. Further, biosimilar manufacturers with approved products in Europe may seek to
quickly obtain U.S. approval now that the regulatory pathway for biosimilars has been enacted.
Failure to retain key personnel could impede our ability to develop our products and to obtain new
collaborations or other sources of funding.
We depend, to a significant extent, on the efforts of our key employees, including senior
management and senior scientific, clinical, regulatory, operational and other personnel. The
development of new therapeutic products requires expertise from a number of different disciplines,
some of which are not widely available.
We depend upon our scientific staff to discover new product candidates and to develop and
conduct preclinical studies of those new potential products. Our clinical and regulatory staff is
responsible for the design and execution of clinical trials in accordance with FDA requirements and
for the advancement of our product candidates toward FDA approval and submission of data supporting
approval. The quality and reputation of our scientific, clinical and regulatory staff, especially
the senior staff, and their success in performing their responsibilities, may directly influence
the success of our product development programs. As we pursue successful commercialization of
PROVENGE, our sales and marketing, and operations executive management staff takes on increasing
significance and influence upon our organizational success. In addition, our Chief Executive
Officer and other executive officers are involved in a broad range of critical activities,
including providing strategic and operational guidance. The loss of these individuals, or our
inability to retain or recruit other key management and scientific, clinical, regulatory, medical,
operational and other personnel, may delay or prevent us from achieving our business objectives. We face intense competition
for personnel from other companies, universities, public and private research institutions,
government entities and other organizations.
Risks Relating to Collaboration Arrangements and Reliance on Third Parties
We must rely at present on relationships with third-party suppliers to supply necessary components
used in our products, which relationships are not easy to replace.
We rely upon contract manufacturers for components used in the manufacture and distribution of
PROVENGE. Problems with any of our or our suppliers facilities or processes could result in
failure to produce or a delay in production of adequate supplies of the antigen or other components
we use in the manufacture of PROVENGE. This could delay or reduce commercial sales and materially
harm our business. Any prolonged interruption in the operations of our suppliers facilities could
result in cancellation of orders, loss of components in the process of being manufactured or a
shortfall in availability of a necessary component. A number of factors could cause
interruptions, including the inability of a supplier to provide raw materials, equipment
malfunctions or failures, damage to a facility due to natural disasters, changes in FDA regulatory
requirements or standards that require modifications to manufacturing processes, or action by us to
implement process changes or other similar factors. Because manufacturing processes are highly
complex and are subject to a lengthy FDA approval process, alternative qualified supply may not be
available on a timely basis or at all. Difficulties or delays in our
suppliers manufacturing and
supply of components could delay our clinical trials, increase our costs, damage our reputation
and, for PROVENGE, cause us to lose revenue or market share if we are unable to timely meet market
demands.
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We are dependent on our leukapheresis network for raw materials required for the manufacture of
PROVENGE.
The manufacture of each patient-specific dose of PROVENGE first requires we obtain immune cells
from the relevant patient, which is done through a leukapheresis process at a cell collection
center with which we have contracted. We have entered into agreements with independent cell
collection and blood centers, including the American Red Cross, to perform this process for us.
However there are a limited number of centers with the requisite skill, training, staffing and
equipment to perform the leukapheresis procedure for PROVENGE patients and we cannot be certain
that as our manufacturing capacity expands the leukapheresis network presently available to us will
be sufficient to service demand at full capacity. We anticipate that we will need to expand the
leukapheresis network available to us prospectively through additional partnerships or other
endeavors. There can be no assurances that we will be able to secure sufficient leukapheresis
capacity to manufacture PROVENGE when and as desired. If we are unable to expand our access to
these services as necessary, our revenues will suffer and our business could be harmed.
We rely on single source vendors for some key components for PROVENGE and our active immunotherapy
product candidates, which could impair our ability to manufacture and supply our products.
We currently depend on single source vendors for components used in PROVENGE and other active
immunotherapy candidates. We have entered into a long-term contract with Diosynth for production of
the antigen used in the preparation of PROVENGE, which relationship is not readily replaceable. If
we are unable to obtain sufficient quantity of the antigen from Diosynth when and as needed, it is
uncertain whether sufficient alternative sources could be developed on a timely basis. Any
production shortfall on the part of Diosynth, or another supplier should a second source be
established, that impairs the supply of the antigen to us would have a material adverse effect on
our business, financial condition and results of operations. In addition, we rely on single-source
unaffiliated third-party suppliers for certain other raw materials, medical devices and components
necessary for the formulation, fill and finish of our products. Certain of these raw materials,
medical devices and components are the proprietary products of these unaffiliated third-party
suppliers and are specifically cited in the drug application with regulatory agencies so that they
must be obtained from that specific sole source and could not be obtained from another supplier
unless and until the regulatory agency approved such supplier. An inability to continue to source
product from any of these suppliers, which could be due to regulatory actions or requirements
affecting the supplier, adverse financial or other strategic developments experienced by a
supplier, labor disputes or shortages, unexpected demands or quality issues, could adversely affect
our ability to satisfy demand for PROVENGE or other products, which could adversely affect our
product sales and operating results materially or our ability to conduct clinical trials, either of
which could significantly harm our business.
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If we fail to enter into any needed collaboration agreements for our product candidates, we may be
unable to commercialize them effectively or at all.
To successfully commercialize PROVENGE, we need substantial financial resources and we will
need to continue to develop our expertise and physical resources and systems, including the
in-process expansion of our manufacturing facilities, distribution and information technology
resources and sales and marketing expertise. We may elect to find a commercialization partner for
PROVENGE outside the United States. Such collaborations are complex and any potential discussions
may not result in a definitive agreement for many reasons. For example, whether we reach a
definitive agreement for a collaboration would depend, among other things, upon our assessment of
the collaborators resources and expertise, the terms and conditions of the proposed collaboration,
and the proposed collaborators evaluation of a number of factors. Those factors may include the
design or results of PROVENGE clinical trials, the potential market for PROVENGE, the costs and
complexities of manufacturing and delivering PROVENGE to patients, the potential of competing
products, the existence of uncertainty with respect to our ownership of technology, which can exist
if there is a challenge to such ownership without regard to the merits of the challenge and
industry and market conditions generally. If we were to determine that a collaboration for PROVENGE
is necessary and were unable to enter into such a collaboration on acceptable terms, we might elect
to delay or scale back the commercialization of PROVENGE outside the U.S. in order to preserve our
financial resources or to allow us adequate time to develop the required physical resources and
systems and expertise ourselves.
If we enter into a collaboration agreement we consider acceptable, the collaboration may not
proceed as quickly, smoothly or successfully as we plan. The risks in a collaboration agreement for
PROVENGE include the following:
| the collaborator may not apply the expected financial resources or required expertise in developing the physical resources and systems necessary to successfully commercialize PROVENGE; |
| the collaborator may not invest in the development of a sales and marketing force and the related infrastructure at levels that ensure that sales of PROVENGE reach their full potential; |
| disputes may arise between us and a collaborator that delay the commercialization of PROVENGE or adversely affect its sales or profitability; or |
| the collaborator may independently develop, or develop with third parties, products that could compete with PROVENGE. |
With respect to a collaboration for PROVENGE or any of our product candidates, we are
dependent on the success of our collaborators in performing their respective responsibilities and
the continued cooperation of our collaborators. Our collaborators may not cooperate with us to
perform their obligations under our agreements with them. We cannot control the amount and timing
of our collaborators resources that will be devoted to activities related to our collaborative
agreements with them. Our collaborators may choose to pursue existing or alternative technologies
in preference to those being developed in collaboration with us. Disputes may arise between us and
our collaborators that delay the development and commercialization of our product candidates. In
addition, a collaborator for PROVENGE may have the right to terminate the collaboration at its
discretion. Any termination may require us to seek a new collaborator, which we may not be able to
do on a timely basis, if at all, or require us to delay or scale back the commercialization
efforts. The occurrence of any of these events could adversely affect the commercialization of
PROVENGE or other product candidates we may commercialize and materially harm our business and
stock price by slowing the pace of growth of such sales, by reducing the profitability of the
product or by adversely affecting the reputation of the product in the market.
Risks in Protecting our Intellectual Property
If we are unable to protect our proprietary rights or to defend against infringement claims, we may
not be able to compete effectively or operate profitably.
We invent and develop technologies that are the basis for or incorporated in our potential
products. We protect our technology through United States and foreign patent filings, trademarks
and trade secrets. We have issued patents, and applications for United States and foreign patents
in various stages of prosecution. We expect that we will continue to file and prosecute patent
applications and that our success depends in part on our ability to establish and defend our
proprietary rights in the technologies that are the subject of issued patents and patent
applications.
The fact that we have filed a patent application or that a patent has issued, however, does
not ensure that we will have meaningful protection from competition with regard to the underlying
technology or product. Patents, if issued, may be challenged, invalidated, declared unenforceable
or circumvented or may not cover all applications we may desire. Our pending patent applications as
well as
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those we may file in the future may not result in issued patents. Patents may not provide us
with adequate proprietary protection or advantages against competitors with, or who could develop,
similar or competing technologies or who could design around our patents.
We also rely on trade secrets and know-how that we seek to protect, in part, through
confidentiality agreements. Our policy is to require our officers, employees, consultants,
contractors, manufacturers, outside scientific collaborators and sponsored researchers and other
advisors to execute confidentiality agreements. These agreements provide that all confidential
information developed or made known to the individual during the course of the individuals
relationship with us be kept confidential and not disclosed to third parties except in specific
limited circumstances. We also require signed confidentiality agreements from companies that
receive our confidential data. For employees, consultants and contractors, we require
confidentiality agreements providing that all inventions conceived while rendering services to us
shall be assigned to us as our exclusive property. It is possible, however, that these parties may
breach those agreements, and we may not have adequate remedies for any breach. It is also possible
that our trade secrets or know-how will otherwise become known to or be independently developed by
competitors.
We are also subject to the risk of claims, whether meritorious or not, that our products or
immunotherapy candidates infringe or misappropriate third party intellectual property rights. If we
are found to infringe or misappropriate third party intellectual property, we could be required to
seek a license or discontinue our products or cease using certain technologies or delay
commercialization of the affected product or products, and we could be required to pay substantial
damages, which could materially harm our business.
We may be subject to litigation with respect to the ownership and use of intellectual property that
will be costly to defend or pursue and uncertain in its outcome.
Our business may bring us into conflict with our licensees, licensors or others with whom we
have contractual or other business relationships, or with our competitors or others whose interests
differ from ours. If we are unable to resolve those conflicts on terms that are satisfactory to all
parties, we may become involved in litigation brought by or against us. That litigation is likely
to be expensive and may require a significant amount of managements time and attention, at the
expense of other aspects of our business.
Litigation relating to the ownership and use of intellectual property is expensive, and our
position as a relatively small company in an industry dominated by very large companies may cause
us to be at a disadvantage in defending our intellectual property rights and in defending against
claims that our immunotherapy candidates infringe or misappropriate third party intellectual
property rights. Even if we are able to defend our position, the cost of doing so may adversely
affect our profitability. We have not yet experienced patent litigation. We may in the future be
subject to such litigation and may not be able to protect our intellectual property at a reasonable
cost if such litigation is initiated. The outcome of litigation is always uncertain, and in some
cases could include judgments against us that require us to pay damages, enjoin us from certain
activities or otherwise affect our legal or contractual rights, which could have a significant
adverse effect on our business.
We are exposed to potential product liability claims, and insurance against these claims may not be
available to us at a reasonable rate in the future.
Our business exposes us to potential liability risks inherent in the research, development,
manufacturing and marketing of drug candidates and products. If any of our drug candidates in
clinical trials or our marketed products harm people or allegedly harm people, we may be subject to
costly and damaging product liability claims. Most, if not all, of the patients who participate in
our clinical trials are already seriously ill when they enter a trial. We have clinical trial
insurance coverage, and commercial product liability insurance coverage. However, this insurance
coverage may not be adequate to cover all claims against us. There is also a risk that adequate
insurance coverage will not be available in the future on commercially reasonable terms, if at all.
The successful assertion of an uninsured product liability or other claim against us could cause us
to incur significant expenses to pay such a claim, could adversely affect our product development
or product sales and could cause a decline in our product revenues. Even a successfully defended
product liability claim could cause us to incur significant expenses to defend such a claim, could
adversely affect our product development and could cause a decline in our product revenues.
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Risks Relating to an Investment in Our Common Stock
We are currently subject to certain pending litigation and a stockholder demand and may be subject
to similar claims in the future.
Four proposed securities class action suits have been filed in The United States District
Court for the Western District of Washington, which the Court has consolidated and which name our
company, and our Chief Executive Officer and one of our executive officers, and purport to state
claims for securities law violations stemming from our disclosures in 2007 related to PROVENGE and
the FDAs actions regarding our BLA for PROVENGE. A similar suit was filed in the same court,
naming plaintiffs who allegedly purchased options rather than the Companys common stock, not a
class action but asserting the same claims. It is possible that
additional suits will be filed, or allegations received from stockholders, with respect to these
same matters and also naming our company and/or our executive officers and directors. We cannot
predict the outcome of any of these suits. Monitoring and defending against legal actions, whether
or not meritorious, and considering stockholder demands is time-consuming for our management and
detracts from our ability to fully focus our internal resources on our business activities. In
addition, legal fees and costs incurred in connection with such activities are costly. We are not
currently able to estimate the possible cost to us from these matters, and we cannot be certain how
long it may take to resolve these matters or the possible amount of any damages that we may be
required to pay. We have not established any reserves for any potential liability relating to the
suits or other claims related to the same matters. It is possible that we could, in the future,
incur judgments or enter into settlements of claims for monetary damages. A decision adverse to our
interests on these actions or resulting from these matters could result in the payment of
substantial damages and could have a material adverse effect on our cash flow, results of
operations and financial position.
Market volatility may affect our stock price, and the value of an investment in our common stock
may be subject to sudden decreases.
The trading price for our common stock has been, and we expect it to continue to be, volatile.
The price at which our common stock trades depends on a number of factors, including the following,
many of which are beyond our control:
| the relative success of our commercialization efforts for PROVENGE; |
| preclinical and clinical trial results and other product development activities; |
| our historical and anticipated operating results, including fluctuations in our financial and operating results; |
| changes in government regulations affecting product approvals, reimbursement or other aspects of our or our competitors businesses; |
| announcements of technological innovations or new commercial products by us or our competitors; |
| developments concerning our key personnel; |
| our ability to protect our intellectual property, including in the face of changing laws; |
| announcements regarding significant collaborations or strategic alliances; |
| publicity regarding actual or potential performance of products under development by us or our competitors; |
| market perception of the prospects for biotechnology companies as an industry sector; and |
| general market and economic conditions. |
In addition, during periods of extreme stock market price volatility, share prices of many
biotechnology companies have often fluctuated in a manner not necessarily related to their
individual operating performance. Accordingly, our common stock may be subject to greater price
volatility than the stock market as a whole.
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Anti-takeover provisions in our charter documents and under Delaware law and our stockholders
rights plan could make an acquisition of us, which may be beneficial to our stockholders, more
difficult.
Provisions of our amended and restated certificate of incorporation, as amended
(certification of incorporation) and amended and restated bylaws (bylaws) will make it more
difficult for a third party to acquire us on terms not approved by our board of directors and may
have the effect of deterring hostile takeover attempts. Our certificate of incorporation authorizes
our board of directors to issue up to 10,000,000 shares of preferred stock, of which
1,000,000 shares have been designated as Series A Junior Participating Preferred Stock, and to
fix the price, rights, preferences, privileges and restrictions, including voting rights, of those
shares without any further vote or action by the stockholders. The rights of the holders of our
common stock will be subject to, and may be junior to the rights of the holders of any preferred
stock that may be issued in the future. The issuance of preferred stock could reduce the voting
power of the holders of our common stock and the likelihood that common stockholders will receive
payments upon liquidation.
In addition, our certificate of incorporation divides our board of directors into three
classes having staggered terms. This may delay any attempt to replace our board of directors. We
have also implemented a stockholders rights plan, also called a poison pill, which would
substantially reduce or eliminate the expected economic benefit to an acquirer from acquiring us in
a manner or on terms not approved by our board of directors. These and other impediments to a third
party acquisition or change of control could limit the price investors are willing to pay in the
future for shares of our common stock. Our executive officers have employment agreements that
include change of control provisions providing severance benefits in the event that their
employment terminates involuntarily without cause or for good reason within twelve months after a
change of control of us. These agreements could affect the consummation of and the terms of a third
party acquisition.
We are also subject to provisions of Delaware law that could have the effect of delaying,
deferring or preventing a change in control of our company. One of these provisions prevents us
from engaging in a business combination with any interested stockholder for a period of three years
from the date the person becomes an interested stockholder, unless specified conditions are
satisfied.
ITEM 6. | EXHIBITS |
Exhibit | |||
Number | Description | ||
31.1
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
31.2
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
32
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C § 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
101
|
INSTANCE DOCUMENT | ||
101
|
SCHEMA DOCUMENT | ||
101
|
CALCULATION LINKBASE DOCUMENT | ||
101
|
LABELS LINKBASE DOCUMENT | ||
101
|
PRESENTATION LINKBASE DOCUMENT |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.
Date: August 3, 2010
DENDREON CORPORATION | ||||||
By: | /s/ MITCHELL H. GOLD, M.D. | |||||
President and Chief Executive Officer | ||||||
By: | /s/ GREGORY T. SCHIFFMAN | |||||
Senior Vice President, | ||||||
Chief Financial Officer and Treasurer | ||||||
(Principal Financial Officer) | ||||||
By: | /s/ GREGORY R. COX | |||||
(Principal Accounting Officer) |
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EXHIBIT INDEX
Exhibit | |||
Number | Description | ||
31.1
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
31.2
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
32
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C § 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
101
|
INSTANCE DOCUMENT | ||
101
|
SCHEMA DOCUMENT | ||
101
|
CALCULATION LINKBASE DOCUMENT | ||
101
|
LABELS LINKBASE DOCUMENT | ||
101
|
PRESENTATION LINKBASE DOCUMENT |
46