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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, 2007
 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
  o þ o
 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, 2007 and December 31, 2006
    
    
    3Consolidated Statements of Operations for the Three Months Ended March 31, 2007 and 2006
    
    
    4Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2007 and 2006
    
    
    5Notes to Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    10Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    14Item 4. Controls and Procedures
    
    
    15PART II. OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    15Item 6. Exhibits
    
    
    16SIGNATURES
    
    
    17EXHIBIT INDEX
    
    
    18CERTIFICATION OF CEO PURSUANT TO SECTION 302 OF SARBANES OXLEYCERTIFICATION OF CFO PURSUANT TO SECTION 302 OF SARBANES OXLEYCERTIFICATION OF CEO AND CFO PURSUANT TO SECTION 906 OF SARBANES OXLEY
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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 31,2007
    
    
    2006(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    32,066
    
    
    $
    60,964Short-term investments
    
    
    45,060
    
    
    
    45,492Restricted cash
    
    
    1,789
    
    
    
    1,440Prepaid and other current assets
    
    
    1,966
    
    
    
    2,082Total current assets
    
    
    80,881
    
    
    
    109,978Property and equipment, net
    
    
    30,139
    
    
    
    30,530Long-term investments
    
    
    11,373
    
    
    
    14,827Long-term restricted cash
    
    
    7,374
    
    
    
    7,723Deposits
    
    
    585
    
    
    
    585Total assets
    
    $
    130,352
    
    
    $
    163,643LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    1,048
    
    
    $
    1,503Accrued liabilities
    
    
    6,618
    
    
    
    6,788Accrued compensation
    
    
    3,119
    
    
    
    5,312Deferred revenue
    
    
    332
    
    
    
    95Current portion of capital lease obligations
    
    
    1,159
    
    
    
    1,253Current portion of long-term debt and facility lease obligation
    
    
    5,602
    
    
    
    5,470Total current liabilities
    
    
    17,878
    
    
    
    20,421Deferred revenue, less current portion
    
    
    458
    
    
    
    478Capital lease obligations, less current portion
    
    
    550
    
    
    
    735Long-term debt, less current portion
    
    
    6,479
    
    
    
    7,879Facility lease obligation, less current portion
    
    
    8,373
    
    
    
    8,413Commitments 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,
81,664,966 and 81,323,638 shares issued and outstanding at
March 31, 2007 and December 31, 2006, respectively
    
    
    81
    
    
    
    81Additional paid-in capital
    
    
    519,790
    
    
    
    518,127Accumulated other comprehensive loss
    
    
    (14
    )
    
    
    (106
    )Accumulated deficit
    
    
    (423,243
    )
    
    
    (392,385
    )Total stockholders equity
    
    $
    96,614
    
    
    $
    125,717Total liabilities and stockholders equity
    
    $
    130,352
    
    
    $
    163,643
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DENDREON CORPORATION
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (In thousands, except share and per share amounts)
 (Unaudited)
 Three Months EndedMarch 31,2007
    
    
    2006Revenue
    
    $
    80
    
    
    $
    25Operating expenses:Research and development
    
    
    24,962
    
    
    
    20,401General and administrative
    
    
    7,075
    
    
    
    5,164Total operating expenses
    
    
    32,037
    
    
    
    25,565Loss from operations
    
    
    (31,957
    )
    
    
    (25,540
    )Interest income
    
    
    1,392
    
    
    
    1,696Interest expense
    
    
    (293
    )
    
    
    (513
    )Net loss
    
    $
    (30,858
    )
    
    $
    (24,357
    )Basic and diluted net loss per share
    
    $
    (0.38
    )
    
    $
    (0.34
    )Shares used in computation of basic and diluted net loss per share
    
    
    81,576,739
    
    
    
    71,170,914
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DENDREON CORPORATION
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (In thousands)
 (Unaudited)
 Three Months EndedMarch 31,2007
    
    
    2006Operating Activities:Net loss
    
    $
    (30,858
    )
    
    $
    (24,357
    )Adjustments to reconcile net loss to net cash used in operating activities:Depreciation and amortization expense
    
    
    1,518
    
    
    
    932Non-cash stock-based compensation expense
    
    
    1,571
    
    
    
    807Gain on sale of fixed assets
    
    
    (11
    )
    
    
    Impairment of fixed assets
    
    
    
    
    
    
    419Changes in operating assets and liabilities:Accounts receivable
    
    
    
    
    
    
    (86
    )Other current assets
    
    
    54
    
    
    
    337Deposits
    
    
    
    
    
    
    84Accounts payable
    
    
    (455
    )
    
    
    623Accrued liabilities and compensation
    
    
    (2,363
    )
    
    
    (5,283
    )Deferred revenue
    
    
    217
    
    
    
    49Net cash used in operating activities
    
    
    (30,327
    )
    
    
    (26,475
    )Investing Activities:Purchases of investments
    
    
    (121,446
    )
    
    
    (130,003
    )Maturities of investments
    
    
    125,424
    
    
    
    141,824Purchases of property and equipment
    
    
    (1,116
    )
    
    
    (2,475
    )Net cash provided by investing activities
    
    
    2,862
    
    
    
    9,346Financing Activities:Payments on long-term debt
    
    
    (1,279
    )
    
    
    (582
    )Payments on capital lease obligations
    
    
    (279
    )
    
    
    (488
    )Payments on facility lease obligation
    
    
    (29
    )
    
    
    (33
    )Net proceeds from exercise of stock options and other
    
    
    154
    
    
    
    133Proceeds from equipment financing arrangement, net of debt financing costs
    
    
    
    
    
    
    1,661Net cash (used in) provided by financing activities
    
    
    (1,433
    )
    
    
    691Net decrease in cash and cash equivalents
    
    
    (28,898
    )
    
    
    (16,438
    )Cash and cash equivalents at beginning of year
    
    
    60,964
    
    
    
    81,949Cash and cash equivalents at end of period
    
    $
    32,066
    
    
    $
    65,511
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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
  2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Research and Development Expenses
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Accounting for Stock-Based Compensation
    Employee Stock Options
    
    Employee Stock Purchase PlanMarch 31,
    
    March 31,2007
    
    2006
    
    2007
    
    2006Weighted average estimated fair value
    
    $2.73
    
    $3.49
    
    $1.97
    
    $1.94Weighted Average AssumptionsDividend yield (A)
    
    0.0%
    
    0.0%
    
    0.0%
    
    0.0%Expected volatility (B)
    
    78.6%
    
    80.5%
    
    123.5%
    
    45.9%Risk-free interest rate (C)
    
    4.8%
    
    4.6%
    
    5.0%
    
    4.7%Expected life (D)
    
    4.5 years
    
    5.0 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, 2007
    
    
    5,664,958
    
    
    $
    7.48Granted
    
    
    390,740
    
    
    
    4.31Exercised
    
    
    (43,100
    )
    
    
    6.59Forfeited
    
    
    (153,648
    )
    
    
    6.69Outstanding, March 31, 2007
    
    
    5,858,950
    
    
    $
    7.29
    
    
    
    7.24
    
    
    $
    34,185,476Exercisable, March 31, 2007
    
    
    4,255,445
    
    
    $
    8.21
    
    
    
    6.53
    
    
    $
    21,235,444
  Restricted Stock Awards
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2007
    
    
    2006Weighted
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    AverageGrant Date
    
    
    Stock
    
    
    Grant DateStock Awards
    
    
    Fair Value
    
    
    Awards
    
    
    Fair ValueOutstanding at beginning of period
    
    
    1,106,160
    
    
    $
    3.54
    
    
    
    20,143
    
    
    $
    4.58Granted
    
    
    252,129
    
    
    
    4.31
    
    
    
    205,131
    
    
    $
    5.01Vested
    
    
    (329,018
    )
    
    
    4.39
    
    
    
    (21,627
    )
    
    
    1.98Forfeited or expired
    
    
    (7,450
    )
    
    
    4.13
    
    
    
    (21,250
    )
    
    
    5.50Outstanding at end of period
    
    
    1,021,821
    
    
    $
    3.46
    
    
    
    182,397
    
    
    $
    5.26
  3. RECENT ACCOUNTING PRONOUNCEMENTS
     New
Accounting Standards Not Yet Adopted
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4. PROPERTY AND EQUIPMENT
  March 31,
    
    
    December 31,(in thousands)
    
    2007
    
    
    2006Furniture and office equipment
    
    $
    1,216
    
    
    $
    1,260Laboratory and manufacturing equipment
    
    
    10,640
    
    
    
    9,259Computer equipment and software
    
    
    9,461
    
    
    
    9,308Leasehold improvements
    
    
    15,652
    
    
    
    4,526Buildings
    
    
    1,730
    
    
    
    Construction in progress
    
    
    8,842
    
    
    
    22,12047,541
    
    
    
    46,473Less accumulated depreciation and
amortization
    
    
    (17,402
    )
    
    
    (15,943
    )$
    30,139
    
    
    $
    30,530
  5. ACCRUED LIABILITIES
  March 31,
    
    
    December 31,(in thousands)
    
    2007
    
    
    2006Clinical trial costs
    
    $
    2,422
    
    
    $
    2,699Construction in progress
    
    
    142
    
    
    
    210Antigen manufacturing
    
    
    350
    
    
    
    350Deferred rent
    
    
    607
    
    
    
    667Other accrued liabilities
    
    
    3,097
    
    
    
    2,862$
    6,618
    
    
    $
    6,788
 6. COMPREHENSIVE LOSS
  Three months endedMarch 31,(in thousands)
    
    2007
    
    
    2006Net loss
    
    $
    (30,858
    )
    
    $
    (24,357
    )Net unrealized gain (loss) on securities
    
    
    92
    
    
    
    (18
    )Comprehensive loss
    
    $
    (30,766
    )
    
    $
    (24,375
    )
 7. COMMITMENTS AND CONTINGENCIES
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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    OVERVIEW
     10




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CRITICAL ACCOUNTING POLICIES AND ESTIMATES
    Accounting for Uncertainty in Income Taxes
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RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2007 AND 2006
 Revenue
  Research and Development Expenses
   Three months endedMarch 31,2007
    
    
    2006Clinical programs:Cancer
    
    $
    12.2
    
    
    $
    7.6Indirect costs
    
    
    12.1
    
    
    
    11.3Total clinical programs
    
    
    24.3
    
    
    
    18.9Discovery research
    
    
    0.7
    
    
    
    1.5Total research and development expense
    
    $
    25.0
    
    
    $
    20.4
   
    
    the timeframe over which our clinical programs 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
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Interest Income
  Interest Expense
  LIQUIDITY AND CAPITAL RESOURCES
 Cash Uses and Proceeds
     
    
    costs for the development of marketing, manufacturing, information technology and other infrastructure
and activities related to the commercialization of Provenge;
    
    working capital needs;
    
    supporting clinical trials of Provenge and for our other products under development;
    
    operating and expanding our New Jersey manufacturing facility, including increased personnel costs; and
    
    continuing our internal research and development programs.
  Construction and Facility Expenses
  13




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Production and Supply Expenses
   Equity Financings
  
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  14




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ITEM 4. CONTROLS AND PROCEDURES
     
 PART II. OTHER INFORMATION
 
 ITEM 1. LEGAL PROCEEDINGS
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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.
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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 FinancialOfficerand Treasurer (Principal FinancialOfficer)By:
    

/s/
GREGORY R.
COXGregory R. Cox(Principal Accounting Officer)
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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.
 18