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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, 2008
 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
(206) 256-4545
(Address, including zip code, of registrants principal executive offices and telephone number, including area code)
 
 þ 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




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##### 



DENDREON CORPORATION
 INDEX
 PAGE NO.PART I. FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    3Consolidated Balance Sheets as of March 31, 2008 (unaudited) and December 31, 2007
    
    
    3Consolidated Statements of Operations for the Three Months Ended March 31, 2008 and 2007 (unaudited)
    
    
    4Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2008 and 2007 (unaudited)
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 4. Controls and Procedures
    
    
    20PART II. OTHER INFORMATION
    
    
    21Item 1. Legal Proceedings
    
    
    21Item 6. Exhibits
    
    
    22SIGNATURES
    
    
    23EXHIBIT INDEX
    
    
    24EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32
  2




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PART I. FINANCIAL INFORMATION
 
 ITEM 1. FINANCIAL STATEMENTS
 
 DENDREON CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
 March 31,
    
    
    December 31,2008
    
    
    2007(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    63,214
    
    
    $
    75,721Short-term investments
    
    
    23,552
    
    
    
    27,115Restricted cash
    
    
    1,553
    
    
    
    1,553Prepaid expenses and other current assets
    
    
    2,094
    
    
    
    2,508Total current assets
    
    
    90,413
    
    
    
    106,897Property and equipment, net
    
    
    26,780
    
    
    
    27,454Long-term investments
    
    
    12,775
    
    
    
    17,739Long-term restricted cash
    
    
    5,030
    
    
    
    6,288Debt issuance costs and other assets
    
    
    3,176
    
    
    
    3,284Total assets
    
    $
    138,174
    
    
    $
    161,662LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    283
    
    
    $
    2,221Accrued liabilities
    
    
    11,654
    
    
    
    11,545Accrued compensation
    
    
    2,388
    
    
    
    4,598Deferred revenue
    
    
    82
    
    
    
    82Current portion of capital lease obligations
    
    
    532
    
    
    
    780Current portion facility lease obligation
    
    
    183
    
    
    
    172Current portion of long-term debt
    
    
    5,277
    
    
    
    5,843Total current liabilities
    
    
    20,399
    
    
    
    25,241Deferred revenue, less current portion
    
    
    376
    
    
    
    397Capital lease obligations, less current portion
    
    
    
    
    
    
    73Long-term debt, less current portion
    
    
    1,335
    
    
    
    2,083Facility lease obligation, less current portion
    
    
    8,189
    
    
    
    8,241Convertible 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, 83,350,884 and 83,258,210 shares
issued and outstanding at March 31, 2008 and December 31, 2007, respectively
    
    
    83
    
    
    
    83Additional paid-in capital
    
    
    533,542
    
    
    
    531,891Accumulated other comprehensive income
    
    
    165
    
    
    
    52Accumulated deficit
    
    
    (511,165
    )
    
    
    (491,649
    )Total stockholders equity
    
    $
    22,625
    
    
    $
    40,377Total liabilities and stockholders equity
    
    $
    138,174
    
    
    $
    161,662
  3




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DENDREON CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
 Three Months EndedMarch 31,2008
    
    
    2007Revenue
    
    $
    31
    
    
    $
    80Operating expenses:Research and development
    
    
    13,478
    
    
    
    24,962General and administrative
    
    
    5,675
    
    
    
    7,075Total operating expenses
    
    
    19,153
    
    
    
    32,037Loss from operations
    
    
    (19,122
    )
    
    
    (31,957
    )Interest income
    
    
    1,137
    
    
    
    1,392Interest expense
    
    
    (1,531
    )
    
    
    (293
    )Net loss
    
    $
    (19,516
    )
    
    $
    (30,858
    )Basic and diluted net loss per share
    
    $
    (0.23
    )
    
    $
    (0.38
    )Shares used in computation of basic and diluted net loss per share
    
    
    83,313
    
    
    
    81,577
  4




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DENDREON CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 Three Months EndedMarch 31,2008
    
    
    2007Operating Activities:Net loss
    
    $
    (19,516
    )
    
    $
    (30,858
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization expense
    
    
    1,456
    
    
    
    1,518Non-cash stock-based compensation expense
    
    
    1,659
    
    
    
    1,571Amortization of securities discount and premium
    
    
    31
    
    
    
    21Gain on sale of fixed assets
    
    
    (5
    )
    
    
    (11
    )Changes in operating assets and liabilities:Restricted cash related to operating lease
    
    
    1,258
    
    
    
    Prepaid expenses and other assets
    
    
    522
    
    
    
    54Accounts payable
    
    
    (1,938
    )
    
    
    (455
    )Accrued liabilities and compensation
    
    
    (2,101
    )
    
    
    (2,363
    )Deferred revenue
    
    
    (21
    )
    
    
    217Net cash used in operating activities
    
    
    (18,655
    )
    
    
    (30,306
    )Investing Activities:Maturities of investments
    
    
    17,709
    
    
    
    16,339Purchases of investments
    
    
    (9,100
    )
    
    
    (12,382
    )Purchases of property and equipment
    
    
    (777
    )
    
    
    (1,116
    )Net cash provided by investing activities
    
    
    7,832
    
    
    
    2,841Financing Activities:Payments on long-term debt
    
    
    (1,314
    )
    
    
    (1,279
    )Payments on capital lease obligations
    
    
    (321
    )
    
    
    (279
    )Payments on facility lease obligation
    
    
    (41
    )
    
    
    (29
    )Proceeds from exercise of stock options and other
    
    
    (8
    )
    
    
    154Net cash used in financing activities
    
    
    (1,684
    )
    
    
    (1,433
    )Net decrease in cash and cash equivalents
    
    
    (12,507
    )
    
    
    (28,898
    )Cash and cash equivalents at beginning of year
    
    
    75,721
    
    
    
    60,964Cash and cash equivalents at end of period
    
    $
    63,214
    
    
    $
    32,066
  5




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




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Reclassifications
  2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Research and Development Expenses
  Accounting for Stock-Based Compensation
   7




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Employee Stock Options
    
    Employee Stock Purchase PlanMarch 31,
    
    March 31,2008
    
    2007
    
    2008
    
    2007Weighted average estimated fair value
    
    $
    4.34
    
    
    $
    2.73
    
    
    $
    1.44
    
    
    $
    1.97Weighted Average AssumptionsDividend yield (A)
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %
    
    
    0.0
    %Expected volatility (B)
    
    
    91.2
    %
    
    
    78.6
    %
    
    
    62.5
    %
    
    
    123.5
    %Risk-free interest rate (C)
    
    
    2.5
    %
    
    
    4.8
    %
    
    
    1.5
    %
    
    
    5.0
    %Expected life (D)
    
    4.5 years
    
    4.5 years
    
    0.5 years
    
    0.5 years
 
 (A)
    
    We have not paid dividends in the past and do not plan to pay any dividends in the near
future.(B)
    
    The expected stock price volatility is based on the historical volatility of our stock.(C)
    
    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 on the date of grant.(D)
    
    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
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, 2008
    
    
    5,223,439
    
    
    $
    7.10Granted
    
    
    376,564
    
    
    
    6.39Exercised
    
    
    (6,903
    )
    
    
    3.49Forfeited
    
    
    (134,596
    )
    
    
    7.01Outstanding, March 31, 2008
    
    
    5,458,504
    
    
    $
    7.06
    
    
    
    6.82
    
    
    $
    695,648Exercisable, March 31, 2008
    
    
    3,633,473
    
    
    $
    7.95
    
    
    
    5.71
    
    
    $
    510,295
  Restricted Stock Awards
  8




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2008
    
    2007Weighted
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    AverageGrant Date
    
    Stock
    
    Grant DateStock Awards
    
    Fair Value
    
    Awards
    
    Fair ValueOutstanding at beginning of period
    
    
    1,449,687
    
    
    $
    5.96
    
    
    
    1,106,160
    
    
    $
    3.54Granted
    
    
    529,488
    
    
    
    6.37
    
    
    
    252,129
    
    
    
    4.31Vested
    
    
    (90,824
    )
    
    
    4.38
    
    
    
    (329,018
    )
    
    
    4.39Forfeited or expired
    
    
    (32,313
    )
    
    
    4.38
    
    
    
    (7,450
    )
    
    
    4.13Outstanding at end of period
    
    
    1,856,038
    
    
    $
    6.14
    
    
    
    1,021,821
    
    
    $
    3.46
  3. RECENT ACCOUNTING PRONOUNCEMENTS
 Recent Accounting Pronouncements
   
    
    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
    
    Asset retirement obligations initially measured under SFAS No. 143, Accounting for Asset Retirement Obligations
  New Accounting Standards Not Yet Adopted
 
 9




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4. FAIR VALUE MEASUREMENTS
      Quoted Prices in
    
    
    
    
    
    
    SignificantActive Markets for
    
    
    Significant Other
    
    
    UnobservableBalance as of
    
    
    Identical Assets
    
    
    Observable Inputs
    
    
    InputsDescription
    
    March 31, 2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Money Market
    
    $
    4,548
    
    
    $
    4,548
    
    
    $
    
    
    
    $
    Commercial paper
    
    
    56,640
    
    
    
    
    
    
    
    56,640
    
    
    
    Corporate debt securities
    
    
    23,301
    
    
    
    
    
    
    
    23,301
    
    
    
    Government-sponsored enterprises
    
    
    8,493
    
    
    
    
    
    
    
    8,493
    
    
    
    U.S. Treasury Note
    
    
    4,533
    
    
    
    
    
    
    
    4,533
    
    
    
    Total financial assets
    
    $
    97,515
    
    
    $
    4,548
    
    
    $
    92,967
    
    
    $
    
    5. PROPERTY AND EQUIPMENT
  March 31,
    
    
    December 31,(in thousands)
    
    2008
    
    
    2007Furniture and office equipment
    
    $
    1,280
    
    
    $
    1,263Laboratory and manufacturing equipment
    
    
    10,908
    
    
    
    10,905Computer equipment and software
    
    
    9,794
    
    
    
    9,794Leasehold improvements
    
    
    15,672
    
    
    
    15,681Buildings
    
    
    1,730
    
    
    
    1,730Construction in progress
    
    
    10,460
    
    
    
    9,96649,844
    
    
    
    49,339Less accumulated depreciation and amortization
    
    
    (23,064
    )
    
    
    (21,885
    )$
    26,780
    
    
    $
    27,454
 10




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6. ACCRUED LIABILITIES
  March 31,
    
    
    December 31,(in thousands)
    
    2008
    
    
    2007Antigen manufacturing costs
    
    $
    5,328
    
    
    $
    5,987Clinical trial costs
    
    
    1,789
    
    
    
    1,949Accrued interest expense
    
    
    1,181
    
    
    
    169Deferred rent
    
    
    795
    
    
    
    697Accrued legal costs
    
    
    540
    
    
    
    640Other accrued liabilities
    
    
    2,021
    
    
    
    2,103$
    11,654
    
    
    $
    11,545
 7. CONVERTIBLE SENIOR SUBORDINATED NOTES
    11




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8. COMMITMENTS AND CONTINGENCIES
  McGuire v. Dendreon Corporation, et al. McGuire, et al. v. Dendreon Corporation, et al.,
  Loh v. Gold,
et al.
   12




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9. COMPREHENSIVE LOSS
  Three months endedMarch 31,(in thousands)
    
    2008
    
    
    2007Net loss
    
    $
    (19,516
    )
    
    $
    (30,858
    )Net unrealized gain on securities
    
    
    113
    
    
    
    92Comprehensive loss
    
    $
    (19,403
    )
    
    $
    (30,766
    )
 10. RESTRUCTURING
  Paid
    
    
    
    
    
    
    BalanceAt January 1,
    
    
    in
    
    
    
    
    
    
    As ofRestructuring Charges
    
    2008
    
    
    2008
    
    
    Adjustments
    
    

March
31,
2008(In thousands)Severance and outplacement costs
    
    $
    334
    
    
    $
    (244
    )
    
    $
    (35
    )
    
    $
    55
 11. SUBSEQUENT EVENT
  13




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    OVERVIEW
       14




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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
    Recent Accounting Pronouncements
   
    
    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
    
    Asset retirement obligations initially measured under SFAS No. 143, Accounting for Asset
Retirement Obligations
 15




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New Accounting Standards Not Yet Adopted
 
 RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
 Revenue
  Research and Development Expenses
      Three months endedMarch 31,2008
    
    
    2007Clinical programs:Direct costs
    
    $
    9.7
    
    
    $
    12.2Indirect costs
    
    
    2.9
    
    
    
    12.1Total clinical programs
    
    
    12.6
    
    
    
    24.3Discovery research
    
    
    0.9
    
    
    
    0.7Total research and development expense
    
    $
    13.5
    
    
    $
    25.0
  16




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
    
    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.
 General and Administrative Expenses
  Interest Income
  Interest Expense
  LIQUIDITY AND CAPITAL RESOURCES
 Cash Uses
    17




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
    
    costs for the development of marketing, manufacturing, information technology and other
infrastructure and activities related to the commercialization of Provenge;
    
    working capital needs;
    
    supporting additional clinical trials of Provenge and for our other products under
development;
    
    operating and expanding the Facility;
    
    increased personnel needs; and
    
    continuing our internal research and development programs.
  Leases and Credit Facility
     18




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Production and Supply Expenses
  Financings from the Sale of Securities and Issuance of Convertible Notes
 Equity Investments Proceeds
  Convertible Notes
   19




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Equity Line Arrangement
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
     
 ITEM 4. CONTROLS AND PROCEDURES
    20




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PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
 McGuire v. Dendreon Corporation, et al. McGuire, et al. v. Dendreon Corporation, et al.,
  Loh v. Gold,
et al.
   21




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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.
 22




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SIGNATURES
   DENDREON CORPORATIONBy:
    /s/ MITCHELL H. GOLD, M.D.Mitchell H. Gold, M.D.President and Chief Executive OfficerBy:
    /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) 23




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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.
 24