Dendreon Annual Shareholder Meeting June 13, 2012 notes
CAVEAT
I am human. Mistakes will be made. The SEC and Investor Relations are the bastions of truth. So, feel free to correct me, ask them, or better yet, do all of that and then ask the other attendees what they think. Multiple points of view, a diversity of opinion. Good stuff. (Yada. Yada. I've done this often enough that the CAVEAT has become mostly a copy & paste, partly because I am lazy, mostly because I hope it's good enough.)
PRE-MEETING
Welcome back to Seattle! The meeting came back home, which meant I was able to attend by only using the ferry and bus system. The total trip cost less than three shares of DNDN!
Through 2009 the ASMs were held at the company headquarters. This time they rented the art museum. Nice venue. Check in required a photo ID. The typical small buffet. Lots of support staff, including uniformed security that looked like the Seattle Police. Usually I mingle a bit, but the crowd was mostly suits and the fashionably dressed. Some of them were in a roped off area.
They were quite particular about mentioning the rules for expulsion.
There were about 100 seats and they would've been filled but about two dozen folks decided to stand in the back.
FORMAL MEETING
John Johnson said hello (and said that it has been a year of transformation) and then handed the official meeting over to Mitch Gold. After introducing and thanking lots of people, they got to the voting. Everything passed.
BUSINESS PRESENTATION
They thanked "us", without defining who "us" is, for "putting the information out there that "we" were prevented from doing." (Question to the other attendees: Was that Mitch or John?)
John Johnson gave the business presentation.
They are overhauling the company for global enterprise.
They ran a short and well-produced video chronicling the life of one patient. Nicely done. No new news.
In 2001 the company made ~ $213,000,000. Revenues were limited by reimbursements and adoption, two areas that they think are in better control. Reimbursements are typically taking less than 30 days.
For PSA < 22.1 (go check various primers for that bit of biotech jargon) there is a 13 month survival benefit, which suggests treating lower scores and earlier stages.
Zytiga (JNJ) shows no survival benefit, is complimentary with Provenge, and had a trial with an atypical control survival trend.
They intend to grow the top line through marketing and improve the bottom line by also improving Cost of Goods Sold (20%-30%) and improving the processes through electronics and automations (2014).
EU is under review, though the time between approval and treatment is longer because of the structure of the health care systems in Europe.
The pipeline was briefly mentioned; particularly, the phase 2 bladder cancer study and the phase 2 Provenge + Zytiga study. He mentioned one or two others but I wasn't writing quickly enough.
They consider Provenge's future to be bright.
QUESTIONS & ANSWERS (paraphrased for expediency)
Instructions: Line up at the back of the room. Step forward to ask your one question. Remember to limit the topics to what's on the instruction sheet.
? Patrick, who owns about 100,000 shares, thanked the directors who bought shares for buying shares. He wanted to know if only 13 sales staff were directed at the urologists. Evidently, all 100 call on urologists.
? Brad, with about 1,000 shares, stated that there was a lack of effective independent oversight, and that was happening while management received an embarrassment of riches. They should take their jobs more seriously.
? Charles, with about 10,000 shares and who has held for 8 years, stated that the firm's actions and inactions have put this and other companies at risk. He said they were a poster child for the failure of tort reform and should all be fired for cause.
? Rob, who helped craft the IPO and has 110,000 shares and is a PC survivor and is on the board of a local hospital (Virginia Mason), was going to say more but others said it first. He wished he was as good at selling stock as some of those who are on the board. (Scattered chuckles ensued.) He wanted to know if there would be interim data or only quarterly, and felt that the company had retreated into a cocoon. Johnson said they would limit the data to quarterlies.
Johnson also noted that no one else in the room wanted the price to go higher than he did. (My note: In large part because of DNDN's collapse I have been looking for a job (see My Jobs Report Month 9), am having to sell my house (see Home For Sale Alas), and have never had more uncertainty in my life (see Too Many IFs). I contend that he is not having to sell his house to find money for living expenses, is not looking for a job, and has not had to sell off 66% of his shares and most of an IRA in the interim. I strongly suspect that returning DNDN to $60 would have a much greater affect on my life than it would on his.)
? Heather, with 4,000 shares, asked about a large compensation package for someone (Mitch?). Evidently it was felt necessary to ensure a smooth transition. The Compensation committee would consult with her.
? Brent?, with thousands of shares, asked if they had sufficient cash to further the Provenge improvements, the pipeline, and the EU expansion. The target cash flow figure for break-even is about $500,000,000, which will reduce as process improvements accrue. Euro expansion will require about $200,000,000 for capital expenditure, and about $200,000,000 for labor and such (I missed this detail.), but that may be part of a partnering deal.
? Doug Kilgore, from the Worker's Union (building trades) represents 132,000 shares from the pension fund. He stated that equity grants are important, but was disappointed that the company did not "retain the shares". This unfortunately aligns those shares with traders instead of investors. The board does not feel the need to make a change.
MY SUMMARY AND CONCLUSION
My impression is that the technology and the market exist and are well-matched. Provenge's benign side effects and the lack of efficacious competition are the reasons I became a DNDN investor. The expansion of the pipeline to the earlier patient population, geographically, and across other cancers were multipliers to my expectations. To some regard they still are. If I had been able to hold onto my original 8,000 shares I would continue to be positive in the ever-lengthening long run. (It is difficult to disassociate my feelings from my financial situation, which is why I am glad I have a blog. Go to Corporations Meet Owners DNDN 2012 if you want more detail on the personal side of this investor's story.)
The main concern of the company seems to be that of control. The character of the meeting, the answers, the retreat from interim information look like much more of a retrenchment than simple cocooning. Maybe it was the uniformed guard, the need for photo ID, and the roped off suits that reinforced that notion.
I noticed what wasn't presented. There were no slides. The projector was on the entire time, but it never wavered from showing a pretty graphic of Dendreon. Some data was discussed, but there were no slides of clinical trial data, financial data, market development, or even graphical representations of how the various treatments collaborate (e.g. Does this clinical trial that involves another company compete with or complement some other clinical trial?). For me, Annual Stockholders Meetings are when the corporations meet their owners. Managements treatment all of the owners, regardless of the number of shares, is a measure of the company. I was not positively impressed.
Without my understanding of Provenge and Dendreon's cassette technology I doubt that I would be interested in Dendreon, except that it is a local company with surprisingly low price-to-sales and price-to-book. I'm glad I know more, but I wonder how anyone besides the residents of Investor Village's very active DNDN board would ever find out about the appeal of the company, the treatment, and the revolutionary potential in the War Against Cancer. Lack of demand directly affects stock price. Maybe that's why it is so low.
I would rather be buying, but after attending the meeting my purchases would be based on my past knowledge and the current financials. Unfortunately, I must continue to sell to pay the bills. At this rate and at this price I will not be able to attend the next meeting because I will have no shares left. I hoped and continue to hope for better.
DISCLAIMER
LTBH since 2002. |
