##### Table of Contents



UNITED STATES 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 MARCH 31, 2009
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 FOR THE TRANSITION PERIOD FROMTO
 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
(206) 256-4545
 (Address, including zip code, of registrants principal executive offices and telephone number,
including area code)
 
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




---



##### 



DENDREON CORPORATION
 INDEX
 PAGE NO.PART I. FINANCIAL INFORMATION
    
    
    3Item 1. Financial Statements
    
    
    3Balance Sheet as of March 31, 2009 (unaudited) and December 31, 2008
    
    
    3Statement of Operations for the Three Months Ended March 31, 2009 and 2008 (unaudited)
    
    
    4Statements of Cash Flows for the Three Months Ended March 31, 2009 and 2008 (unaudited)
    
    
    5Notes to Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    23Item 4. Controls and Procedures
    
    
    23PART II. OTHER INFORMATION
    
    
    24Item 1. Legal Proceedings
    
    
    24Item 6. Exhibits
    
    
    25SIGNATURES
    
    
    26EXHIBIT INDEX
    
    
    27EX-31.1EX-31.2EX-32
  2




---



##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 DENDREON CORPORATION
 
 BALANCE SHEETS
(In thousands, except share data)
 March 31,
    
    
    December 31,2009
    
    
    2008(Unaudited)
    
    
    (Consolidated)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    59,699
    
    
    $
    59,523Short-term investments
    
    
    29,981
    
    
    
    45,638Restricted cash
    
    
    3,000
    
    
    
    3,853Prepaid expenses and other current assets
    
    
    1,713
    
    
    
    1,867Total current assets
    
    
    94,393
    
    
    
    110,881Property and equipment, net
    
    
    29,384
    
    
    
    28,150Long-term investments
    
    
    1,519
    
    
    
    3,386Long-term restricted cash
    
    
    2,030
    
    
    
    2,030Debt issuance costs and other assets
    
    
    2,748
    
    
    
    2,757Total assets
    
    $
    130,074
    
    
    $
    147,204LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    596
    
    
    $
    237Accrued liabilities
    
    
    6,476
    
    
    
    6,004Accrued compensation
    
    
    2,622
    
    
    
    3,686Deferred revenue
    
    
    82
    
    
    
    82Warrant liability
    
    
    11,811
    
    
    
    14,190Current portion facility lease obligation
    
    
    231
    
    
    
    219Current portion of long-term debt
    
    
    1,374
    
    
    
    2,194Total current liabilities
    
    
    23,192
    
    
    
    26,612Deferred revenue, less current portion
    
    
    294
    
    
    
    314Facility lease obligation, less current portion
    
    
    7,958
    
    
    
    8,022Convertible senior subordinated notes
    
    
    85,250
    
    
    
    85,250Commitments and contingencies (Note 8)Stockholders equity:Preferred stock, $0.001 par value; 10,000,000 shares authorized, no shares issued or outstanding
    
    
    
    
    
    
    Common stock, $0.001 par value; 150,000,000 shares authorized, 95,817,346 and 95,577,664 shares
issued and outstanding at March 31, 2009 and December 31, 2008, respectively
    
    
    95
    
    
    
    95Additional paid-in capital
    
    
    591,963
    
    
    
    590,159Accumulated other comprehensive income
    
    
    (1
    )
    
    
    45Accumulated deficit
    
    
    (578,677
    )
    
    
    (563,293
    )Total stockholders equity
    
    $
    13,380
    
    
    $
    27,006Total liabilities and stockholders equity
    
    $
    130,074
    
    
    $
    147,204
  3




---



##### Table of Contents



DENDREON CORPORATION
 
 STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 Three Months EndedMarch 31,2009
    
    
    2008(Consolidated)Revenue
    
    $
    30
    
    
    $
    31Operating expenses:Research and development
    
    
    11,797
    
    
    
    13,478General and administrative
    
    
    5,217
    
    
    
    5,675Total operating expenses
    
    
    17,014
    
    
    
    19,153Loss from operations
    
    
    (16,984
    )
    
    
    (19,122
    )Interest income
    
    
    333
    
    
    
    1,137Interest expense
    
    
    (1,112
    )
    
    
    (1,531
    )Gain from valuation of warrant liability
    
    
    2,379
    
    
    
    Net loss
    
    $
    (15,384
    )
    
    $
    (19,516
    )Basic and diluted net loss per share
    
    $
    (0.16
    )
    
    $
    (0.23
    )Shares used in computation of basic and diluted net loss per share
    
    
    95,767
    
    
    
    83,313
  4




---



##### Table of Contents



DENDREON CORPORATION
 
 STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Three Months EndedMarch 31,2009
    
    
    2008(Consolidated)Operating Activities:Net loss
    
    $
    (15,384
    )
    
    $
    (19,516
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization expense
    
    
    1,120
    
    
    
    1,456Non-cash stock-based compensation expense
    
    
    1,822
    
    
    
    1,659Gain on valuation of warrant liability
    
    
    (2,379
    )
    
    
    Gain on sale of fixed assets
    
    
    
    
    
    
    (5
    )Changes in operating assets and liabilities:Amortization of securities discount and premium
    
    
    (4
    )
    
    
    31Restricted cash related to operating lease
    
    
    
    
    
    
    1,258Prepaid expenses and other assets
    
    
    163
    
    
    
    522Accounts payable
    
    
    359
    
    
    
    (1,938
    )Accrued liabilities and compensation
    
    
    (592
    )
    
    
    (2,101
    )Deferred revenue
    
    
    (20
    )
    
    
    (21
    )Net cash used in operating activities
    
    
    (14,915
    )
    
    
    (18,655
    )Investing Activities:Maturities of investments
    
    
    17,482
    
    
    
    17,709Purchases of investments
    
    
    
    
    
    
    (9,100
    )Purchases of property and equipment
    
    
    (2,354
    )
    
    
    (777
    )Net cash provided by investing activities
    
    
    15,128
    
    
    
    7,832Financing Activities:Proceeds from release of security deposit associated with debt
    
    
    853
    
    
    
    Payments on long-term debt
    
    
    (820
    )
    
    
    (1,314
    )Payments on capital lease obligations
    
    
    
    
    
    
    (321
    )Payments on facility lease obligation
    
    
    (52
    )
    
    
    (41
    )Net proceeds from exercise of stock options and other
    
    
    (18
    )
    
    
    (8
    )Net cash used in financing activities
    
    
    (37
    )
    
    
    (1,684
    )Net increase (decrease) in cash and cash equivalents
    
    
    176
    
    
    
    (12,507
    )Cash and cash equivalents at beginning of year
    
    
    59,523
    
    
    
    75,721Cash and cash equivalents at end of period
    
    $
    59,699
    
    
    $
    63,214
  5




---



##### Table of Contents



DENDREON CORPORATION
 
 NOTES TO FINANCIAL STATEMENTS (Unaudited)
 1. BUSINESS, PRINCIPLES OF AND BASIS OF PRESENTATION
 Business
 ®
  Basis of Presentation
  Principles of Consolidation
  6




---



##### Table of Contents



Net Loss Per Share
  2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Research and Development Expenses
  Accounting for Stock-Based Compensation
      7




---



##### Table of Contents



Employee Stock Options
    
    Employee Stock Purchase PlanFor the Three Months ended March 31,
    
    For the Three Months ended March 31,2009
    
    2008
    
    2009
    
    2008Weighted average estimated fair value (A)
    
    
    N/A
    
    
    $
    4.34
    
    
    $
    3.37
    
    
    $
    1.44Weighted Average AssumptionsDividend yield (A,B)
    
    
    N/A
    
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Expected volatility (A,C)
    
    
    N/A
    
    
    
    91.2
    %
    
    
    157.5
    %
    
    
    62.5
    %Risk-free interest rate (A,D)
    
    
    N/A
    
    
    
    2.5
    %
    
    
    0.63
    %
    
    
    1.5
    %Expected life (A,E)
    
    
    N/A
    
    
    4.5 years
    
    
    1.3 years
    
    
    0.5 years
 
 (A)
    
    During the quarter ended March 31, 2009, we did not grant stock options; therefore the
above-described assumptions and the weighted average estimated fair value are 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 historical volatility of our stock.(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.(E)
    
    The expected life 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 life of
awards under the employee stock purchase plan represents the purchase period under the plan.  Shares
    
    Weighted-Average
    
    Weighted-AverageSubject to
    
    Exercise Price per
    
    Remaining
    
    Aggregate IntrinsicOptions
    
    Share
    
    Contractual Life
    
    ValueOutstanding, January 1, 2009
    
    
    4,877,268
    
    
    $
    6.99Granted
    
    
    
    
    
    
    Exercised
    
    
    (18,650
    )
    
    
    1.26Forfeited or expired
    
    
    (177,763
    )
    
    
    7.30Outstanding, March 31, 2009
    
    
    4,680,855
    
    
    $
    7.01
    
    
    
    6.06
    
    
    $
    155,464Exercisable, March 31, 2009
    
    
    3,686,164
    
    
    $
    7.47
    
    
    
    5.47
    
    
    $
    153,867
  Restricted Stock Awards
  8




---



##### Table of Contents



2009
    
    
    2008Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageGrant Date
    
    
    
    
    
    
    Grant DateStock Awards
    
    
    Fair Value
    
    
    Stock Awards
    
    
    Fair ValueOutstanding at beginning of period
    
    
    1,462,936
    
    
    $
    6.13
    
    
    
    1,449,687
    
    
    $
    5.96Granted
    
    
    1,236,957
    
    
    
    4.55
    
    
    
    529,488
    
    
    
    6.37Vested
    
    
    (230,717
    )
    
    
    5.54
    
    
    
    (90,824
    )
    
    
    4.38Forfeited or expired
    
    
    (84,658
    )
    
    
    5.69
    
    
    
    (32,313
    )
    
    
    4.38Outstanding at end of period
    
    
    2,384,518
    
    
    $
    5.39
    
    
    
    1,856,038
    
    
    $
    6.14
  Fair Value
  
    
    Long-lived assets measured at fair value due to an impairment assessment under SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets; and
    
    Asset retirement obligations initially measured under SFAS No. 143, Accounting for Asset Retirement Obligations.
  Warrant Liability
   9




---



##### Table of Contents



3. RECENT ACCOUNTING PRONOUNCEMENTS
 Recent Accounting Pronouncements
 
  New Accounting Standards Not Yet Adopted
   4. FAIR VALUE MEASUREMENTS
     10




---



##### Table of Contents



Quoted Prices in
    
    
    
    
    
    SignificantActive Markets for
    
    
    Significant Other
    
    
    UnobservableBalance as of
    
    
    Identical Assets
    
    
    Observable Inputs
    
    
    InputsDescription
    
    March 31, 2009
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Money Market
    
    $
    8,057
    
    
    $
    8,057
    
    
    $
    
    
    
    $
    Commercial paper
    
    
    50,313
    
    
    
    
    
    
    
    50,313
    
    
    
    Corporate debt securities
    
    
    16,731
    
    
    
    
    
    
    
    16,731
    
    
    
    Government-sponsored enterprises
    
    
    12,329
    
    
    
    
    
    
    
    12,329
    
    
    
    U.S. Treasury Note
    
    
    2,441
    
    
    
    
    
    
    
    2,441
    
    
    
    Total financial assets
    
    $
    89,871
    
    
    $
    8,057
    
    
    $
    81,814
    
    
    $
    Liabilities:Warrants
    
    $
    11,811
    
    
    $
    
    
    
    $
    
    
    
    $
    11,811Total financial liabilities
    
    $
    11,811
    
    
    $
    
    
    
    $
    
    
    
    $
    11,811
   Three Months
    
    
    YearEnded
    
    
    EndedMarch 31,
    
    
    December 31,Description
    
    2009
    
    
    2008Beginning balance
    
    $
    14,190
    
    
    $
    Purchases, issuances, and settlements
    
    
    
    
    
    
    14,561Total (gain) loss included in net loss (1)
    
    
    (2,379
    )
    
    
    (371
    )Ending balance
    
    $
    11,811
    
    
    $
    14,190
 
 (1)
    
    The gain for the quarter ended March 31, 2009 relates to the revaluation of the warrant
liability from December 31, 2008 through March 31, 2009. The gain is reflected in our
statement of operations as a component of other income.   5. PROPERTY AND EQUIPMENT
  March 31,
    
    
    December 31,(in thousands)
    
    2009
    
    
    2008Furniture and office equipment
    
    $
    1,190
    
    
    $
    1,188Laboratory and manufacturing equipment
    
    
    11,552
    
    
    
    11,427Computer equipment and software
    
    
    10,156
    
    
    
    10,134Leasehold improvements
    
    
    15,482
    
    
    
    15,478Buildings
    
    
    1,730
    
    
    
    1,730Construction in progress
    
    
    17,333
    
    
    
    15,13257,443
    
    
    
    55,089Less accumulated depreciation and amortization
    
    
    (28,059
    )
    
    
    (26,939
    )$
    29,384
    
    
    $
    28,150
 11




---



##### Table of Contents



6. ACCRUED LIABILITIES
  March 31,
    
    
    December 31,(in thousands)
    
    2009
    
    
    2008Clinical trial costs
    
    $
    1,823
    
    
    $
    1,700Accrued interest expenses
    
    
    1,181
    
    
    
    169Deferred rent
    
    
    1,046
    
    
    
    1,089Accrued property and equipment
    
    
    784
    
    
    
    895Accrued legal costs
    
    
    190
    
    
    
    286Other accrued liabilities
    
    
    1,452
    
    
    
    1,865$
    6,476
    
    
    $
    6,004
 7. CONVERTIBLE SENIOR SUBORDINATED NOTES
   12




---



##### Table of Contents



8. COMMITMENTS AND CONTINGENCIES
 McGuire v. Dendreon Corporation, et al. McGuire, et al. v. Dendreon Corporation, et al
 Mountanos v. Dendreon Corporation, et al. McGuire v. Dendreon Corporation, et al McGuire v.
Dendreon
 Loh v. Gold,
et al.
 13




---



##### Table of Contents



McGuire v. Dendreon
 Loh v. Gold
  9. EQUITY
    14




---



##### Table of Contents



10. COMPREHENSIVE LOSS
  Three months endedMarch 31,(in thousands)
    
    2009
    
    
    2008Net loss
    
    $
    (15,384
    )
    
    $
    (19,516
    )Net unrealized (loss) gain on securities
    
    
    (46
    )
    
    
    113Comprehensive loss
    
    $
    (15,430
    )
    
    $
    (19,403
    )
 11. SUBSEQUENT EVENT
   15




---



##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    OVERVIEW
      16




---



##### Table of Contents



tm
 CRITICAL ACCOUNTING POLICIES AND ESTIMATES
    Fair Value
  17




---



##### Table of Contents



Warrant Liability
   Recent Accounting Pronouncements
 
  New Accounting Standards Not Yet Adopted
   18




---



##### Table of Contents



RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2009 AND 2008
 Revenue
  Research and Development Expenses
   1)
    
    Clinical programs; and2)
    
    Discovery research.
  Three months endedMarch 31,2009
    
    
    2008Clinical programs:Direct costs
    
    $
    1.4
    
    
    $
    2.9Indirect costs
    
    
    10.0
    
    
    
    9.7Total clinical programs
    
    
    11.4
    
    
    
    12.6Discovery research
    
    
    0.4
    
    
    
    0.9Total research and development expense
    
    $
    11.8
    
    
    $
    13.5
   
    
    the timeframe over which our projects are likely to be completed;
    
    whether they will be completed;
    
    if they are completed, whether they will provide therapeutic benefit
or be approved for commercialization by the necessary regulatory
agencies; or
    
    whether, if approved, they will be scalable to meet commercial demand.
 19




---



##### Table of Contents



General and Administrative Expenses
  Interest Income
  Interest Expense
  Warrant Liability
  LIQUIDITY AND CAPITAL RESOURCES
 Cash Uses
     20




---



##### Table of Contents




    
    the development of marketing, manufacturing, information technology
and other infrastructure and activities related to the
commercialization of Provenge,
    
    working capital needs,
    
    expanding our manufacturing capabilities,
    
    increased personnel needs, and
    
    continuing our internal research and development programs.
  Leases and Credit Facility
    21




---



##### Table of Contents



Financings from the Sale of Securities and Issuance of Convertible Notes
 Equity Offering Proceeds
      Convertible Notes
  22




---



##### Table of Contents



ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     
 ITEM 4. CONTROLS AND PROCEDURES
    23




---



##### Table of Contents



PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 McGuire v. Dendreon Corporation, et al. McGuire, et al. v. Dendreon Corporation, et al
 Mountanos v. Dendreon Corporation, et al. McGuire v. Dendreon Corporation, et al McGuire v.
Dendreon
 Loh v. Gold,
et al. McGuire v. Dendreon
  24




---



##### Table of Contents



Loh v. Gold
  
 ITEM 6. EXHIBITS
 ExhibitNumber
    
    Description31.1
    
    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.
 25




---



##### Table of Contents



SIGNATURES
   DENDREON CORPORATIONBy:
    /s/ MITCHELL H. GOLD, M.D.Mitchell H. Gold, M.D.President, Chief Executive Officer and Director
(Principal Executive Officer)By:
    /s/ GREGORY T. SCHIFFMANGregory T. SchiffmanSenior Vice President,
Chief Financial Officer and Treasurer
(Principal Financial Officer)By:
    /s/ GREGORY R. COXGregory R. Cox(Principal Accounting Officer) 26




---



##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description31.1
    
    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.
 27