Dendreon Corporation (DNDN) reported fourth-quarter 2013 loss (including stock-based compensation expenses and depreciation) of 23 cents per share, narrower than the Zacks Consensus Estimate of a loss of 37 cents and the year-ago loss of 46 cents per share. The narrower loss was attributable to lower operating costs incurred in the quarter. The results positively impacted the shares of the company.

Quarterly Highlights

Total revenues in the reported quarter declined to $74.8 million from $81.6 million (excluding a $3.8 million favorable adjustment to the company's chargebacks reserve due to a change in estimate) in the year-ago quarter.

The decrease was primarily due to lower Provenge sales. Revenues marginally surpassed the Consensus Estimate of $74 million.

The year over year decline in Provenge sales was due to increased competition in the prostate cancer market, primarily in the form of Zytiga and Xtandi. Provenge sales during the reported quarter were nonetheless up 10.7% on a sequential basis.

Provenge, a therapeutic vaccine, was launched in the U.S. in May 2010, for treating advanced prostate cancer. Dendreon recently had a meeting with the U.S. Food and Drug Administration (:FDA) about automation of the manufacturing process of Provenge. The FDA expressed its support for this initiative. Automation will help the company in reducing its cost of goods sold and improve the global availability of the drug.

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

Provenge will be made available in Europe through a cost-effective approach. Firstly, Dendreon will make this drug available in Europe (beginning with Germany and U.K.) through Centers of Excellence using Contract Manufacturing Organization (PharmaCell).

The reach of Provenge in Europe will improve further with the approval of automation. Currently, Dendreon is preparing for discussions with European regulatory authorities regarding the same.

Dendreon’s research & development (R&D) expenses in the reported quarter were $16.6 million, down 12.2% year over year. Selling, general & administrative (SG&A) expenses for the fourth quarter decreased 35.6% to $47.4 million.

Annual Results

Dendreon reported 2013 loss of $1.40 per share, narrower than the Zacks Consensus Estimate of a loss of $1.73 and the 2012 loss of $2.14 per share.

Full year revenues were $283.7 million, down 12.8% year over year but in line with the Zacks Consensus Estimate.

Outlook

Dendreon expects first quarter 2014 revenues to be in line with the year-ago number. Dendreon is on track to generate profits on the back of restructuring and cost reduction plans. The company is aiming to achieve cash flow breakeven at the earliest.

Our Take

We are impressed by the sequential improvement in Provenge sales in the final quarter of 2013. After competition came into play, this was the first quarter which saw a sequential growth of greater than 10%. The company lacks a decent pipeline with none of its candidates likely to hit the market in the near future. This increases its dependence on Provenge. Below par sales of the drug will hamper the company’s growth prospects significantly.

Dendreon carries a Zacks Rank #3 (Hold). Investors looking for better-ranked stocks in the biopharma sector may consider companies like Gilead Sciences Inc. (GILD), Shire (SHPG) and Alkermes (ALKS), all of which carry a Zacks Rank #1 (Strong Buy).

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