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Dendreon Corporation (NASDAQ:DNDN)

Q4 2007 Earnings Call

March 13, 2008 11:00 am ET

Executives

Gregory T. Schiffman - Chief Financial Officer, Senior Vice President & Treasurer

Mitchell H. Gold, M.D. - President, Chief Executive Officer & Director

David L. Urdal, Ph.D. - Senior Vice President, Chief Scientific Officer & Director

Analysts

Mark Monane, M.D. – Needham & Company, Inc.

David Miller - Biotech Stock Research

Greg [Civonovich] – UBS

Aaron S. Reames – Wachovia Capital Markets, LLC

Charles Duncan, Ph.D. – JMP Securities

William Ho - Bank of America

Ren Benjamin - Rodman & Renshaw, LLC

Operator

Good day and welcome to the Dendreon Corporation’s fourth quarter 2007 earnings conference call. Today’s conference is being recorded. At this time I would like to turn the conference over to Mr. Greg Schiffman. Please go ahead, sir.

Gregory T. Schiffman

Good morning everyone. We’re pleased that you can join us today for our conference call. On the call today with me will be Dr. Mitchell Gold, President and CEO; Dr. David Urdal, Senior Vice President and Chief Scientific Officer; and myself, Greg Schiffman, Senior Vice President and CFO.

Before we begin I’d like to remind you that during this call we will be making forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ from the results discussed in the forward-looking statements. Reference to these risks and uncertainties is made in today’s press release and they are disclosed in detail in our most recent 10-K and other public disclosure filing with the US Securities and Exchange Commission.

I’ll now turn the call over to Dr. Gold.

Mitchell H. Gold

Hello everyone and thank you for joining us for our fourth quarter and year end 2007 conference call. I want to briefly recap our accomplishments and review some of the highlights of 2007 following which I will discuss our plans for 2008. I’ll then turn the call over to Greg to review the financial results for 2007 and financial guidance for 2008.

On the regulatory front our biological license application or BLA for PROVENGE was accepted for priority review in January, 2007 and we participated in an FDA Advisory Committee review of the safety and efficacy of PROVENGE on March 29th. At this meeting we received a positive vote from the Advisory Committee that there is substantial evidence of efficacy and safety of PROVENGE in men with late stage prostate cancer. The FDA subsequently requested that we provide additional evidence in support of our efficacy claim for PROVENGE and clarified that either a positive interim or a final analysis of survival as described in the IMPACT Special Protocol Assessment or SPA would support licensure and enable us to amend our BLA for PROVENGE. We completed enrollment in the IMPACT study in October and as we announced yesterday the FDS agreed to amend the SPA for the IMPACT study enabling us to expect final results in that study in the second half of next year with comparable power to the previous SPA. We will discuss this in greater detail later in our prepared comments. We continue to expect interim results from this study in the second half of this year but now final results of the drug are expected nearly a year earlier.

Operationally we ramped up the manufacturing volumes at our New Jersey facility in the fourth quarter last year enabling us to produce substantially all of our clinical product needs in Dendreon owned facilities in the fourth quarter. As we completed enrollment in the IMPACT trial we experienced the highest level of clinical throughput in the company's history. Internationally we were granted a European patent covering the company’s lead product candidate PROVENGE and we began to evaluate and establish regulatory strategies for PROVENGE outside of the United States. Financially we strengthened our balance sheet through an $85 million convertible note offering and we also implemented an equity financing facility enabling the company to sell up to $130 million of its registered common stock to Azimuth Opportunity over an 18 month period. We finished the year with over $120 million of cash, cash equivalents and short and long term investments on the balance sheet and we still have access to our equity line.

We cannot close out such an eventful year like 2007 without acknowledging and thanking all the patients, patient advocates and physicians that continue to show their support for PROVENGE. It is clear that there was strong interest in therapeutic PROVENGE that are target is front line treatments for patients with cancer. The patient advocates in particular are helping to provide patient education about these new treatments. This is an important role and their efforts continue to remind us of the reason that we are which is to bring breakthrough new therapies like PROVENGE to the many patients in need of better tolerated and less toxic forms of therapy.

I’d like to begin my comments for 2008 with a discussion of our development plans. As you may recall we essentially ceased all development activities outside of the IMPACT clinical trial a few years ago. This was done to ensure that we would have sufficient cash resources to bring PROVENGE to the marketplace and allow us to focus on our POA related activities. We are still very conscious of our cash expenditures. To reduce expenses we reduced headcount at our New Jersey manufacturing facility at the end of last year to the minimum level that allows us to operate the site on a validated basis. We still have a base level of production capacity at our New Jersey facility along with our Seattle facility which we want to continue to use. The facilities will be busy this year with two new clinical trials we are planning on initiating.

The first study, PO7-1, will assess the safety and immune response of PROVENGE in men with localized prostate cancer undergoing surgery. The study will enroll approximately 40 patients at a single study. Each patient will receive PROVENGE prior to radical protastectomy. The immune response to PROVENGE will be assessed in the prostatectomy specimen and in the peripheral blood. All patients will be scheduled to receive active treatment. This study may provide insight into the mechanism advantage of PROVENGE as well as its potential role in patients at high risk for recurrence after surgery.

The second study, prostate active [silar] therapy or PROACT PO7-2, will enroll approximately 120 patients in multiple centers using essentially the same enrollment criteria as our current IMPACT study. All patients in the trial will receive active therapy with PROVENGE made with different concentrations and immunizing antigens. We are excited to be able to initiate this study for two primary reasons. First, we will gain new scientific insights into the biology of PROVENGE. For example we will be collecting additional data in immune response and CB54 UP regulation. Second within our financial ability we are able to provide patients access to PROVENGE while we work to provide the FDA with the additional data they have requested from the IMPACT study. It is important to understand that PROVENGE is based on a platform technology causing Antigen Delivery Cassette. By changing the targeted antigen we may be able to develop therapies for other indications. PROVENGE utilizes prosthetic acid phosphatase while NEUVENGE makes use of the Her-2 antigen. We have access to antigens that target indications for prostate, breast, ovarian, lung, colon, cervical and kidney cancers.

We are also extremely excited about our small molecule program targeting the IN channel Trp-p8. Our lead product compound D3263 is an orally available small molecule that could have applicability to multiple types of cancers as well as Benign Prostatic Hyperplasia or BPH. This program provides us with an opportunity to expand our product pipeline beyond immunotherapies. We expect to complete development efforts and file an IND on this program by year end. In addition we will have a podium presentation on the efficacy of D3263 at the upcoming AUA meeting in May.

We continue to make ongoing enhancements to our operational infrastructure and systems. These efforts will help us to enable the company to address the growth opportunities that we believe exist for PROVENGE. First among these opportunities is time to market. As you saw yesterday the company has received approval of an amendment to the SPA for its IMPACT trial. This is the culmination of months of effort within the company. The changes accelerate the expected timing of the final results from the IMPACT trial by approximately one year while maintaining comparable powering for the trial’s interim and final results. Before I share more details on the amendment let me remind you about the design for the IMPACT trial and the innovative results from our two previous Phase III controlled clinical trials. The IMPACT trial is a randomized, double blind placebo controlled Phase III study which enrolled just over 500 men with metastatic androgen-independent prostate cancer. The primary endpoint of the trial is overall survival. Statistical plan of the trial was designed using the integrated results of our two previous Phase III randomized, double blind placebo controlled studies 9901 and 9902A. 9901 was the primary basis of our BLA submission for PROVENGE. The integrated results of 9901 and 9902A were based on 225 men who enrolled in the two studies, 164 of whom died during the three year follow up period. The analysis showed a 33% overall reduction in the risk of death in the PROVENGE arm which equates to a hazard ratio of 1.5 and statistically persuasive T-value of .011. With the new amendment to the SPA, the final analysis will occur after approximately 305 events instead of the 360 events described in the previous plan. The power for the new file analysis which is accelerated by approximately one year is comparable with the previous plan. By increasing the number of events and decreasing the alpha spending function for the interim analysis we are able to significantly reduce the number of events for the final analysis and still maintain comparable statistical power for both the interim and the final analyses.

Interim results are still expected in the second half of 2008 and if the treatment effect at the interim for the IMPACT trial is consistent with the final integrated results from our completed Phase III studies 9901 and 9902A we would expect to achieve the pre-specified criteria for statistical significance and would amend our BLA submission with the FDA based on these interim results. While we look forward to the interim analysis later this year, the final analysis by design has a higher probability of a successful outcome. As a result of the amendment announced yesterday we currently expect to receive the final results from the IMPACT study in the second half of next year. This will allow us to bring PROVENGE to patients substantially sooner should the trial be successful and we were to receive approval for marketing from the FDA.

With that I’ll now turn the call over to Greg to give you an update on the financial side of our business.

Gregory T. Schiffman

As Mitch indicated previously last year we took steps to strengthen our balance sheet through an $85 million convertible note offering. We also executed a $130 million equity financing facility. We finished the year with approximately $120 million in cash, cash equivalents and short and long term investments. We believe that with our cash on hand and the ability to access the equity facility we are well positioned to continue to advance PROVENGE through the regulatory process. This morning we reported our financial results for the fourth quarter of 2007 which included revenue of $28,000 compared to $86,000 for the quarter ended December 31st, 2006. Revenue for the 12 months ended December 31st, 2007 was $743,000 compared to $273,000 for the same period in 2006. The increase was primarily due to revenue related to the sale of certain intellectual properties. Dendreon’s total operating expenses for the fourth quarter were $27.1 million compared to $24 million in 2006. Operating expenses for the 12 months ended December 31st, 2007 were $102.4 million compared to $97.6 million for the same period in 2006.

At December 31st, 2007 Dendreon had approximately $120.6 million in cash, cash equivalents and short and long term investments. Net loss for the quarter ended December 31st, 2007 was $27 million or $0.32 per share compared to a net loss of $21.5 million or $0.28 per share for the same quarter a year ago. The net loss for the 12 months ended December 31st, 2007 was $99.3 million or $1.20 per share compared to $91.6 million or $1.27 per share for the 12 months ended December 31st, 2006. For the year our net cash usage excluding the net cash raised from our convertible note offering was approximately $82 million. This is approximately $15 million favorable to our previous guidance of around $95 million of net cash usage plus litigation expenses. The majority of the savings is related to the timing of antigen inventory purchases which will be paid in 2008. In addition the company has been carefully managing its commercial infrastructure projects and the associated timing of engaging external resources. We have been able to delay of some of these cash flows from 2007 into 2008. We expect to see these cash flows to be incurred this year.

For 2008 we are projecting cash expenses of approximately $80 million which includes approximately $15 million of delayed FY07 cash flows. Our expected cash usage for 2007 and 2008 is projected to be around $160 million. This is consistent with our previous high level guidance of around $155 million for the same two year period. The majority of the $5 million increase to our prior guidance is associated with the decision to accelerate the development efforts of our Trp-p8 compound enabling us to move the product into the clinic late this year. In breaking down our projected spending for 2008 approximately $10 million of the projected $80 million of cash usage is related to inventory purchases most of which are associated with the antigen for PROVENGE. In addition we have net debt repayment and financing charges of approximately $7 million. The majority of this is not tied to our convertible notes as the income we received on the cash from the sale of the convertible notes offsets the interest expense for the most of the year. The remaining $63 million is funding our ongoing business activities which include the three new clinical trials that Mitch had discussed earlier in this call.

At this time I’ll turn the call back over to the Operator and we’ll open the phones for questions.

Question-And-Answer Session

Operator

(Operator Instructions) We’ll go first to Mark Monane with Needham & Company.

Mark Monane, M.D. – Needham & Company, Inc.

Let’s spend some more time with the statistical calculator in hand looking at your comments on power for the interim analysis. If I understand it right, you’ll have more events in the interim analysis than originally expected, the alpha spend will be less. The question is will there be enough power in the interim analysis, does it affect the power for the final analysis?

Mitchell H. Gold

So what we were able to do was as you said increase the number of events for the interim, at the same time decrease our alpha spending function and as a result of that what we said is that we have a comparable power for both the interim and the final analysis. To be more specific let me say that the power for the interim analysis actually increased slightly and the power for the final analysis essentially stayed the same so I think the guidance we gave previously on the final was that it’s powered at 90% and I think now it’s about 88%. So we were able to accelerate the timing of the final analysis by a year, maintain comparable power and still get our interim in the second half of 2008 with a slightly increased powering for the interim.

Mark Monane, M.D. – Needham & Company, Inc.

In terms of the guidance for the final result, you say 2009. That’s a big year. Is there any way to tell at this point if it’ll be closer to the Presidency or Fourth of July holiday or closer toward Thanksgiving?

Mitchell H. Gold

I think in the release we put out yesterday I think we gave more specific guidance that it would be second half of 2009. Keep in mind it’s an event driven analysis and we’re giving that broad range now. If we’re able to give more granular in the future, we will.

Mark Monane, M.D. – Needham & Company, Inc.

And last question is on the two new trials that you announced. It was good to hear about these new trials. One other observation you‘ve made in the past is that opportunity for boosting showing that patients that got PROVENGE a year after their original series of injections showed risk of immunal response again. Any trials on boosting going along that are going to investigate that in PROACT or 072?

David L. Urdal

In the neo-antigen trial PO7-1, that’s an interesting trial to us because we’ll be able to look at patients that we treat with PROVENGE before they undergo a radical prostatectomy at which time we’ll be able to look at the organ and look for immune response within the prostate tissue. But following that patients will be randomized actually to receive a boost or not to receive a boost. So we’ll be able to follow those patients after their radical for the effects of a boost within that treatment protocol.

Mark Monane, M.D. – Needham & Company, Inc.

And what’s the timing of that boost?

David L. Urdal

About three months after the radical prostatectomy.

Operator

We’ll take our next question from David Miller with Biotech Stock Research.

David Miller – Biotech Stock Research

Also keep your statistical calculator in hand, when we did a statistical analysis back in 2005 trying to predict the outcome of the 9902A study we had our statistician essentially lop off the tail end of the 9901 curve at 30 months and censor everything else and this made 9901 go from 01 to 07 in terms of statistical significance. I’ve been getting a lot of questions about moving the final analysis up and losing 57 patients. Did you model that loss that could potentially come from the tail of the curve given the fact that the tail of the curve is so important to the statistical significance for the earlier studies?

Mitchell H. Gold

That’s a great question, David, and allows us to bring up an important point I think that’s often forgotten about the IMPACT trial and that is that the IMPACT trial was actually started in August of 2003. So we have a lot of follow up time on these patients and we did model out and we have looked comparably at the powering and how things look over time and we’re very comfortable with the way the statistical plan is set up based on that. But the cutting off the tail won’t occur because of the long follow up time that we have in these patients. [Inaudible] is another key important element of immunotherapies in general and we’ve emphasized this before and most people in the field have taken note of it and that is that immunotherapies take a little while to ramp up the immune system but once they do their effects tend to be more durable and seen over longer term end points like survival and the IMPACT trial I think is well designed to measure that.

David Miller – Biotech Stock Research

But in your assumptions you did model that kind of potential effect before you made this change?

Mitchell H. Gold

Correct. Yeah one of the things you want to look at is average length of follow up in the patients which we’ve modeled out.

David Miller – Biotech Stock Research

That’s a good segue into my next question which is can you give us some idea what the expected median follow up is at the two trigger points, the interim and the final?

Mitchell H. Gold

You know we’re not in a position to give additional details on the interim and the final other than we’ve given which will be roughly 304 events for the final analysis and it’ll have comparable power to the previous plan. And the interim is the power for the interim goes up slightly and the timing stays the same.

David Miller – Biotech Stock Research

In the PROACT study you talk about differing antigen concentrations, can you explain that a little bit more about what that means?

David L. Urdal

What we’re looking at we’re keenly interested in the relationship that we observe between the CD-54 up-regulation on the release of the product and the survival outcome that we measured in patients and one of the things that we’ve observed in our development efforts is that we can actually achieve similar levels of CD-54 up-regulation at lower concentrations in antigen in the culture. And so we’re interested in pursuing that scientific question more closely to look at the current culture conditions that we used for PROVENGE the way it’s defined and the way it was used and is used in our Phase III program with tight trading down to lower levels of antigen in culture to see if we can achieve the same type of response in patients immunilogically. And the other key important thing is that it also provides us with an opportunity to provide patients with the late stage of prostate cancer access to the drug over the course of the next year as we’re awaiting new results and ultimate approval of the drug.

David Miller – Biotech Stock Research

Do you have any sense of when we might see data from the 07-1 and the PROACT trial?

Mitchell H. Gold

We’ll give guidance on that as we get closer. We expect to start the trials in the first of this year actually but as we see how accrual goes and stuff we’ll give tighter guidance on when we expect results in upcoming calls.

David Miller – Biotech Stock Research

And then my final question is how is the SUS partnering going and particularly how are the discussions going with the EU regulators?

Mitchell H. Gold

Our primary focus as an organization has been on gaining approval of PROVENGE in the US market. That being said we have initiated the process of seeking scientific advice from the EMEA and we will provide additional input as we learn more from those authorities. But the primary focus of the company to date has been on the US marketplace.

Operator

We’ll go ahead and take our next question from Greg Civonovich with UBS.

Greg Civonovich – UBS

Just to revisit on the interim analysis, so you won’t be able to provide any more statistics as it relates to T-value assumptions and the alpha spend off either the interim or the final. Is that correct?

Mitchell H. Gold

Well let me just make sure that you understood what we’ve already commented on, Greg. The final analysis previously was scheduled at 360 events, it’s now dropped down to 304. The previous powering was around 90%, it’s around 88% now so it’s essentially the same powering for the final and the final analysis has been accelerated by a year. The interim analysis is still planned in the second half of this year, we haven’t commented on what number of events will trigger that interim analysis. We have made comments that the powering for the interim analysis did increase slightly based on the Special Protocol Assessment amendment and we have reiterated in our press release yesterday that if we see the same treatment effect at the interim as we saw in the integrated results from 9901 and 9902A we would expect to achieve the pre-specified level of significance that will allow us to amend our BLA.

Greg Civonovich – UBS

And that was on a statistical methodology was the Cox multivariable methodology?

Mitchell H. Gold

Correct.

Greg Civonovich – UBS

Could you just remind us what the current thinking on the communication plan around you getting the results from the IDMC and is that like a press release that either you have to continue the trial or that the trial has been dropped and you can further discuss the details of that?

Mitchell H. Gold

Let me just remind folks how interim analyses are done. The interim analysis for the IMPACT study will be performed by our independent data monitoring committee or IDMC. It will remain blinded to the individual patient treatment assignment unless we achieve the pre-specified level of statistical significance as defined in the Special Protocol Assessment at which point we’d be unblended and be able to amend our BLA. If not we’ll remain blinded to the individual patient assignments at that time.

Greg Civonovich – UBS

As it relates to how you will communicate to investors on the street? Is that the IDMC will relay to you that the trial continues or that it’s hit its pre-specified end point and then you can stop the trial? Is that –

Mitchell H. Gold

That’s essentially correct. Yes.

David L. Urdal

Absolutely. When we get the information we will certainly in a very, very prompt fashion get that out into the marketplace so people are aware of what’s happening.

Greg Civonovich – UBS

And last question before I jump back in the queue, can you remind us what gives you comfort around the population that you’ve enrolled in IMPACT and its comparability with 9901?

Mitchell H. Gold

The first thing that we’ve looked at, Greg, is we’ve done something called a [Holloby] analysis which is a methodology that you can use to assess the overall demographics of the patient population. So firstly on gross morphology, there’s no gross differences in the demographics from the IMPACT study to those in 9901. When you look at the Holloby model we see that the predicted survival from the IMPACT study is consistent with that seen from the 9901 study.

Operator

We’ll go ahead and take our next question from Aaron Reames with Wachovia.

Aaron S. Reames – Wachovia Capital Markets, LLC

I just had just a general question on when you decided to modify the statistics, was it considered internally to maybe just conserve additional alpha spend and do away with the interims since now we’re in a position where you’re going to have a n interim and final analysis roughly anywhere from 9 to 12 months apart?

Mitchell H. Gold

That was something that we considered but when you look at the plan, we essentially look at the interim analysis and its ability to take a free shot on goal without significantly compromising the final analysis and where it would accelerate the final analysis by a year. The reason we were able to do that is because the study’s been going on since August of 2003 so we have a lot of events that we can use to provide power to the study.

Aaron S. Reames – Wachovia Capital Markets, LLC

On the alpha spent at the interim originally it was I guess described as being a significant spend or a material spend, is that still an accurate representation or has it been decreased I guess substantially when you think about the overall change?

Mitchell H. Gold

The most important way and Dave can chime in here after I make my initial comments, the most important way to think about alpha spending is really how much powering is the alpha that you’re allocating for the interim analysis providing. And the important thing to take home here is that while we did decrease the alpha spending function at the interim allocating more to the final analysis the power of the interim analysis actually went up slightly. What you mean by that is when you say the power it means the power to detect the treatment difference between the treatment group and the control arm. So while we’re allocating less alpha at the interim the power actually went up slightly because of the increased number of events.

David L. Urdal

I think they key to the calculus if you will is that the later you do an interim analysis and the greater the number of events that you use to perform that interim analysis, you’re also closer to your final analysis and the way the alpha spending functions work you’re actually can have an increased power but a decreased alpha spend as a result of doing that adjustment and the way when you choose to actually look at your interim result.

Operator

And we’ll go next to Charles Duncan with JMP Securities.

Charles Duncan, Ph.D. – JMP Securities

I had a question regarding the two new clinical trials, Mitch. I’m wondering if the design of these trials was the response to a specific question that was asked for information by the FDA or is there some other as you outlined scientific reason to conduct these trials?

Mitchell H. Gold

That’s a great question, Charles, and let me emphasize these trials are not a response to any specific information that was asked by the FDA. These were Dendreon initiated studies. Dave mentioned a little bit earlier about what our rationale was for but a couple of key reasons. One is the New Jersey facility is a validated facility, we have key employees there and key staff there that has experience in our manufacturing processes and we wanted to keep them up to speed and active in moving PROVENGE type products through the facilities. So both of these studies allow us to keep that facility in a validated state. The PO7-2 trial that Dave described earlier is a study that gives patients access to PROVENGE while we provide the FDA with additional data from the impact study and it allows us to assess the value of decreasing concentrations of the immunizing antigen. The PO7-1 study is our first study looking at two things. One PROVENGE in a neo-antigen study prior to radical prostatectomy which gives a chance to assess machinations of action particularly immune response within the prostatectomy specimen but it also gives us a sense – I think David Miller asked this question earlier – to better understand the boosting effects of PROVENGE which we think is very important to our product such as in active cellular immunotherapy.

Charles Duncan, Ph.D. – JMP Securities

And that makes sense to me in potentially label expansion opportunity but let me just make sure I’m clear on this, will you be submitting this data for the pending BLA or will that be something you submit perhaps or share with the FDA after they complete analysis of the IMPACT data.

David L. Urdal

The results from these studies will not be part of the amendment we file to our license application. The clinical data in that amendment will be the data from the IMPACT study together with an updated integrated safety assessment and estimate. But these studies won’t be completed in their full analysis by the time that amendment is hopefully made.

Charles Duncan, Ph.D. – JMP Securities

My second question is, if you could remind us of the treatment effect that you saw at the interim analysis in the previous studies, D9901, and if you believe that the interim that you’re using for IMPACT is roughly at the same time or is it slightly later in terms of number of events?

Mitchell H. Gold

What I have said publicly is that if you look at the 9901 and 9902A studies combined they’re about 164 events at the final analysis from that study. At the time of the interim analysis for the IMPACT study we’ll have substantially more than the 164 events that we saw in the integrated analyses which is why I think you’ve heard us comment in the past that we believe the interim is reasonably powered. We’ve also expanded on that and said if we have the same treatment effect at the interim in the IMPACT study as we had in 9901 and 9902A just given the fact that we have more events we would expect to achieve the pre-specified level of statistical significance that would allow us to amend our BLA.

Charles Duncan, Ph.D. – JMP Securities

Mitch, just to be clear you are specifically referring to the effect that you saw in the previous interim and if it’s the same as that then you think that you’ll get over the goal line in this one as well?

Mitchell H. Gold

You mean the previous file from 9901 and 9902A?

Charles Duncan, Ph.D. – JMP Securities

Yeah are you referring to the treatment of fact at the final, if you see that in this interim or the previous treatment of fact at the interim that resulted in that final?

Mitchell H. Gold

For the 9901 study trial as you may recall there was no formal interim analysis for survival in the 9901 or 9902A studies. So what we’re referring to specifically just to be clear is that if the treatment effect for the interim analysis for the IMPACT study is consistent with that of the final analysis we would expect to achieve the pre-specified levels of significance. The big difference here is we’re going to have a lot more events which provides more power and we also have a lot of areas underneath the curve because while the 9901 and 9902A studies have a file time of three years the IMPACT study has been going on since August of 2003.

Charles Duncan, Ph.D. – JMP Securities

A much longer tail?

David L. Urdal

The interim that was done on 01 just so you know was that the primary end point of that study was progression and so the interim in that evaluation was done on progression end point. The primary end point in the IMPACT study is survival and the interim that we’re doing is for a survival outcome in this study.

Charles Duncan, Ph.D. – JMP Securities

Yeah and that makes sense. I think there was some confusion in the market on that but as you look back at those previous studies was there at some portion of the curve in the interim analysis could you see a treatment effect and is that if you look at the relative number of events at the end versus approximately where you’re going to do the interim do you expect to see an interim treatment effect?

Mitchell H. Gold

I think you may recall that the 9901 study we were monitoring survival and we saw that it was, we didn’t see treatment effects underneath the curves. It’s difficult to say exactly when that was, Charles, in retrospect but the curve separated about 10 months and continued to be separated throughout the remainder of the study if you recall.

Operator

We’ll go ahead and take our next question from William Ho with Bank of America.

William Ho - Bank of America

The first question I guess is for Greg, with respect to R&D expenses, they went up significantly in the fourth quarter, I’m assuming that’s due to manufacturing. But given that you’re initiating two new trials do you think R&D expenses should stay high or will they come down because you’ve completed most of that manufacturing?

Gregory T. Schiffman

Actually in the fourth quarter R&D expenses do look like they’re quite a bit higher than in the prior quarters and that’s actually due to a reclass of facility expenses in New Jersey where we have been classing those as G&A and when it went into operation of clinical sample it should have been classed as R&D. And so the increase there was not a growth in actual spending but just a reclass for the prior couple of quarters. As we look throughout the remainder of the year and this year an awful lot of our expenses and infrastructure does get classed as development. I think from that standpoint they’re not going to be substantially different than what we saw this year just because a lot of the facility other infrastructures does flow through there and so it’s not just – if you look at the direct costs the direct costs will probably be down somewhat but the total expenses aren’t going to be different by a lot.

William Ho - Bank of America

So it should roughly stay around the same level that we saw in the fourth quarter because of that reclassification?

Gregory T. Schiffman

The reclass was a catch up for the prior quarter so it will go down. But it’s just a reclass between SG&A and R&D. The total it has no impact on the bottom line P&L. It’s just a shift between those two categories.

William Ho - Bank of America

And then, Mitch, can you – sorry to harp on the statistical analysis again, but if I recall correctly the combination of 99021 and 9901 was at a T-value of .011 between the two. I’m still trying to understand or grasp how do you reduce the total number of events, have greater power in the interim and still get less alpha spend that’s based on that T-value. Was the prior T-value I guess the hurdle that you’re looking for alpha spend lower than this and then finally should be now assume that the interim because you have a greater number of events will be towards the late this year?

Mitchell H. Gold

So let me kind of take that starting at the back and then moving forward. So the interim analysis we’ve never given specific guidance on when in the second half of 2008 that would occur. Let me emphasize that we have been giving guidance for second half of 2008 working under the assumption that we were going to be able to get the FDA to agree to this amendment to our Special Protocol Assessment. You made a comment that we decreased the number of events at the interim and in fact we increased the number of events at the interim and as a result of increasing the number of events at the interim we were able to spend alpha function at the interim and allocate more towards the final. In allocating less alpha but having more number of events we actually increased the power of the interim analysis slightly and when I say increased power that means if we see a treatment affect our ability to detect it actually went up slightly at the interim. We then allocated more alpha spending function to the final analysis, we lowered the number of events, accelerated the timing because we need less events at the final because we have more alpha to allocate there and the power stayed essentially the same. We went from 90 down to roughly 88%. So the net of this is your interim is the same time, the powering function for the interim went up slightly, so no real effect there, the timing of the final analysis was accelerated by roughly one year with comparable power.

William Ho - Bank of America

And I’m correct basing it on the assumption that you saw the T-value .011 in the prior period?

David L. Urdal

Correct.

Mitchell H. Gold

Last on the T-value, Will, and the way you really model these out is based on the treatment effect assumptions, I think that’s what Dave was going to comment on.

David L. Urdal

The treatment effect in the integrated study was we saw a 33% decrease in the risk event than the placebo arm in that integrated result. We actually designed the impact study to measure a 31% increase risk of death in the placebo arm. So we actually powered it more conservatively than the outcome from that combined study would suggest. And then the other thing is that we – another part of the design of the trials that we discussed at the Advisory Committee meeting last spring was that the overall T-value between the interim and the final is T.05 that we need to achieve to be able to show a treatment of effect of 31% decrease risk of dying receiving PROVENGE.

Operator

And next we’ll hear from David Miller with Biotech Stock Research.

David Miller – Biotech Stock Research

Actually I think you just answered my question but I’ll ask anyway. You powered the IMPACT study off of the [Lawbrink] analysis of 01 and 02A and not off the Cox analysis, correct?

Mitchell H. Gold

The powering assumptions, David, are based off of the treatment effect which are the same for Cox and Lawbrink.

David Miller – Biotech Stock Research

Oh, yes, you’re right. Dumb question.

Operator

And we’ll go back to Greg Civonovich with UBS.

Greg Civonovich – UBS

I think my question has been answered but I will ask a different question. It seems that by reducing the number of events on the final analysis regardless of where the alpha spend is, to me, just decreases the probability of seeing the treatment effect just from the 30,000 foot view, so aside from that does this necessarily put more of an emphasis on hitting on the interim versus the final or is that really not how we as investors should be looking at it?

Mitchell H. Gold

I think both Dave and I are going to want to comment on this but by reducing the number of events what we’re able to do is maintain the same power and the key thing you should be focusing on is not how many events are there but there’s two key assumptions. One is what is the treatment effect and we think we have a pretty good handle on the treatment effect from the integrated results from the completed Phase III clinical studies and Dave just described that. And then based on that treatment effect how many events do you need to achieve to meet a hurdle of statistical significance and what we’ve done is allocate more alpha towards our final analysis which essentially lowers the bar for the final analysis and as a result we have more power with less events to meet that hurdle. So in fact it’s incorrect to think that if you lower the number of events that you’ve kind of allocated more towards the interim, that’s not actually true. What we’ve actually done is we’ve lowered the number of events but we actually lowered the bar that we were required to meet for statistical significance for the final and as a result we have comparable power to achieve that. Went from 90 to 88%.

David L. Urdal

And just echo Mitch’s reply really. What we looked carefully was the overall power to be able to measure the difference that we hypothesized in this study design and we felt it was the right thing to do to go from – we view 88% as essentially equivalent to 90% and it allowed us to see the outcome from the study a year sooner than not. So we felt it was the right decision to make to get these results and get this amendment into the FDA as quickly as we can.

Mitchell H. Gold

Greg, let me make this one additional comment on that. I think it’s very important and that is where small cap biotech typically fails is they try to extrapolate non-controlled Phase II data into placebo controlled or controlled Phase III clinical studies and historically the correlation between non-controlled Phase II data and controlled Phase III studies as you know has been very poor in the industry as a whole. What we have here is we have already completed two Phase III placebo controlled studies in the same patient population as the IMPACT study. We have a very good sense of how that treatment or how the drug works in this patient population. The data has been presented in front of Advisory Committees so it’s out there in all its details and as a result of that control data we were able to very I think effectively design the statistical plan for the ongoing studies based on the results from that and it’s more in line with what you see big pharma doing with their Phase II and Phase III studies. This is very rate in biotech that you have two completed Phase III studies and then you have an ongoing set that you’re basing the statistical plan off of and that’s why I think we’re excited about the design of the IMPACT, we’re excited about the amendments we’ve made to the Special Protocol Assessment because we know that there’s a huge unmet need out there, that patients need these treatment options and it allows us to accelerate to plan to bring these forms of therapies forward to help these men with late stage prostate cancer that you have few forms of therapy available to them today.

Operator

We’ll go next to Joe [inaudible] with AG Edwards.

Joe [Inaudible] – AG Edwards

We had a couple of questions. Number one we were wondering where we stand with the CMC issue that was addressed in the CR Letter and then secondly we were curious about how the stopping boundaries were established in the IMPACT analysis and whether or not we are using a group sequential method?

Mitchell H. Gold

Joe, what was your first question again?

Joe [Inaudible] – AG Edwards

Where do we stand on the CMC, on the CR Letter?

Mitchell H. Gold

The CMC issues that were raised during the pre-approval inspection Dendreon has substantially responded to – you have an echo on your phone there. If you’re on speaker phone I’d ask you to take it off.

Operator

We’ll take your next question from Ren Benjamin with Rodman & Renshaw.

Ren Benjamin - Rodman & Renshaw, LLC

Just going back to the stats if you can just help me understand this, so the interim analysis you’re assuming now an increased number of events but the timeframe as to when the interim analysis takes place stays the same, the second half of 09.

David L. Urdal

The second half of 08, Ren.

Ren Benjamin - Rodman & Renshaw, LLC

So does that mean that the event rate has changed compared to your original assumptions or how should I be thinking of that?

Mitchell H. Gold

That’s a great question. I’m glad you asked it. When we’ve given guidance in the past for the interim analysis in the second half of 08 we have given that guidance under the assumption that we would be able to have this amendment completed with the FDA. I’m happy to be able to share with you that we tracked the number of events as they occur across natural curves that’s modeled off of 9901 and 9902A and it’s right in line with that, it’s spot on in our assumptions. So we’re not seeing an increased event rate to drive the interim analysis or to drive the final to [inaudible] and it has to do more with how we’re allocating the alpha spending function.

Operator

And we’ll go back to Mark Monane with Needham.

Mark Monane, M.D. – Needham & Company, Inc.

Have you been tracking the use of other medications, chemotherapy in particular in these patients after they progress on PROVENGE? Do we have any data on that? Is it expected to be similar to what we saw in the 9901 and 9902A? I think maybe you can go over what trends you know about [inaudible]

Mitchell H. Gold

As you know, Mark, [Voltaxture] is approved in this patient population and had not garnished widespread uptake as of yet, mostly because of its toxicity profile. But when we look at what’s going on in terms of the chemotherapy role in the PROVENGE clinical trials what we are seeing is that there is a slightly higher use of chemotherapy at baseline and it’s comparable to what we saw post-progression the 9901 and 9902A clinical studies. As you know and Dan [Patrolac] presented some of this data in the past, PROVENGE and chemotherapy tend to work well together so more men getting chemo tend to have an amplifying effect on the treatment effect of PROVENGE and that was presented by Dan Patrolac in a presentation last year.

Operator

And we’ll go back to Greg Civonovich with UBS.

Greg Civonovich – UBS

Just one last question, it’s more out of curiosity more than anything else. Could you tell us when you started the efforts to amend the SPA? It sounds like when you had given comments you said that you had guidance, given guidance for the second half of 08 for the interim but kind of knowing that you had the amendment in the works. So I’m trying to –

Mitchell H. Gold

I don’t remember the exact date, Greg, that we actually started the process of amending the SPA.

Greg Civonovich – UBS

Was it after the proof of approval response letter from the FDA?

Mitchell H. Gold

Yes. Yeah.

Operator

And at this time it appears we have no further questions. Dr. Gold, I’ll hand the conference back to you for any closing comments.

Mitchell H. Gold

I would like to thank you all again for joining us today. We’ve had a very exciting start to 2008 and we look forward to providing you with updates as we make progress throughout the course of this year. Thanks very much.

Operator

And that does conclude our conference. Again, thank you all for your participation. We do hope you enjoy the rest of your day.

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Source: Dendreon Corporation Q4 2007 Earnings Call Transcript
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