Case Study

Dendreon Questions

Required: Prepare a memo addressing the questions below.

Please note: Your memo should be a stand-alone document, so that the reader can understand which issue you are addressing without referring back to this assignment. While you do not have to address each question in order, the questions are ordered so that it should make sense to answer them in order, and doing so will make it much easier to grade. The memo should be in Times New Roman, 12-point font with 1” margins on each side (double-spaced). This is a professional writing assignment, so please proof your report before submitting it. Clearly state your information sources

1. How informative are GAAP earnings about Dendreon’s “success?” What measure(s) of success would you find more informative (be specific – what measures would you use if you were considering investing in a biotech firm)?

2. At the end of fiscal 2007, Dendreon’s book value (assets less liabilities) was $40,377,000. At the same time Dendreon’s market value (price per share times the number of outstanding shares) was $517,866,066. What do you think accounts for the difference between these two numbers?

3. Do you think it makes sense to expense all of Dendreon’s R&D? If not, what criteria would you use to determine how much R&D expense to capitalize as an asset? How would your answer affect the income statement and balance sheet (in general…not in dollar terms)?

Instruction:

1. Research relevant materials :

· Dendreon case (A)

· Dendreon (B)

· Dendreon (C)

2. Prepare a memo addressing the questions.

3. Times New Roman, 12-point font with 1” margins on each side, double- spaced.

4. Clearly state your information sources.