UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 10-Q

Mark One

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002

[ ] 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 (IRS Employer Identification No.)
incorporation or organization)

3005 FIRST AVENUE, SEATTLE, WASHINGTON 98121
(Address of principal executive offices)

(206) 256-4545
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [_] No

The number of shares of the registrant's common stock, $.001 par value,
outstanding as of April 30, 2002 was 25,030,725.

DENDREON CORPORATION

INDEX

PAGE NO.
--------
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

a) Condensed Balance Sheets as of March 31, 2002 (unaudited) 2
and December 31, 2001

b) Condensed Statements of Operations for the Three Months 3
Ended March 31, 2002 and 2001 (unaudited)

c) Condensed Statements of Cash Flows for the Three Months 4
Ended March 31, 2002 and 2001 (unaudited)

d) Notes to Condensed Financial Statements 5

Item 2. Management's Discussion and Analysis of Financial 6
Condition and Results of Operations

Item 3. Qualitative and Quantitative Disclosures About Market 16
Risk

PART II. OTHER INFORMATION

Item 2. Changes in Securities and Use of Proceeds 16

Item 6. Exhibits and Reports on Form 8-K 16

SIGNATURES 17

EXHIBIT INDEX 18

PART 1 - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

DENDREON CORPORATION
CONDENSED BALANCE SHEETS
(in thousands, except share and per share amounts)

March 31, December 31,
2002 2001
----------- ------------
(unaudited)

ASSETS
Current assets:
Cash and cash equivalents $ 24,852 $ 13,912
Short-term investments 46,348 56,969
Accounts receivable 1,806 1,955
Other current assets 2,668 3,253
--------- ---------
Total current assets 75,674 76,089

Property and equipment, net 3,990 3,858
Long-term investments -- 10,361
Deposits and other assets 770 774
--------- ---------
Total Assets $ 80,434 $ 91,082
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 961 $ 932
Accrued liabilities 4,078 4,524
Accrued compensation 819 1,975
Deferred revenue 7,262 7,572
Current portion of long-term debt -- 281
Current portion of capital lease obligations 1,090 1,120
--------- ---------
Total current liabilities 14,210 16,404

Deferred revenue, less current portion 6,361 7,454
Capital lease obligations, less current portion 1,765 2,013
Commitments -- --

Stockholders' equity:
Common stock, $0.001 par value; 80,000,000 shares authorized,
25,030,724 and 24,919,696 shares issued and outstanding at
March 31, 2002 and December 31, 2001, respectively 25 25
Additional paid-in capital 156,819 156,481
Deferred stock-based compensation (769) (987)
Accumulated other comprehensive income 200 486
Accumulated deficit (98,177) (90,794)
--------- ---------
Total stockholders' equity 58,098 65,211
--------- ---------
Total Liabilities and Stockholders' Equity $ 80,434 $ 91,082
========= =========

DENDREON CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)

Three Months Ended
March 31,
----------------------
2002 2001
-------- --------

Revenue:
Collaborative and license revenue $ 3,028 $ 3,066
Grant revenue -- 51
-------- --------
Total revenue 3,028 3,117

Operating expenses:
Research and development 8,376 5,260
General and administrative 2,317 1,639
Sales and marketing 261 634
-------- --------
Total operating expenses 10,954 7,533
-------- --------
Loss from operations (7,926) (4,416)

Interest income, net:
Interest income 632 1,508
Interest expense (89) (134)
-------- --------
Interest income, net 543 1,374
-------- --------
Net loss (7,383) (3,042)
======== ========

Basic and diluted net loss per share $ (0.30) $ (0.12)
======== ========
Shares used in computation of basic and
diluted net loss per share 24,983 24,589
======== ========

DENDREON CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

Three Months Ended
March 31,
----------------------------
2002 2001
------------- -------------

OPERATING ACTIVITIES
Net loss $ (7,383) $ (3,042)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense 423 219
Non-cash stock-based compensation expense 200 321
Non-cash interest expense 3 24
Changes in current assets and liabilities
Accounts receivable 149 5,967
Other current assets 582 (1,239)
Deposits and other assets -- (49)
Deferred revenue (1,403) (2,332)
Accounts payable 29 (491)
Accrued liabilities and compensation (1,602) (691)
------------- -------------
Net cash used in operating activities (9,002) (1,313)
------------- -------------
INVESTING ACTIVITIES
Purchases of investments (31,054) (31,808)
Maturities of investments 51,754 22,320
Purchases of property and equipment (555) (613)
------------- -------------
Net cash provided by (used in) investing activities 20,145 (10,101)
------------- -------------
FINANCING ACTIVITIES
Payments on long-term debt (281) (373)
Net payments on capital lease obligations (278) (131)
Proceeds from exercise of stock options 32 139
Issuance of common stock under the Employee Stock Purchase Plan 324 426
------------- -------------
Net cash provided by (used in) financing activities (203) 61
------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 10,940 (11,353)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 13,912 50,493
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 24,852 $ 39,140
============= =============

DENDREON CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)

NOTE 1 - BUSINESS AND BASIS OF PRESENTATION

Dendreon Corporation (the Company) was founded in 1992 as a Delaware-based
corporation headquartered in Mountain View, California. The Company relocated to
Seattle, Washington in 1999.

The Company is dedicated to the discovery and development of novel products
for the treatment of diseases through its innovative manipulation of the immune
system. Dendreon's product pipeline is focused on cancer, and includes
therapeutic vaccines, monoclonal antibodies and a pathway to small molecules.
The products most advanced in development are therapeutic vaccines that are
designed to stimulate a patient's immunity for the treatment of cancer.

BASIS OF PRESENTATION

The accompanying unaudited financial statements reflect, in the opinion of
management, all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the Company's financial position, results
of operations and cash flows for each period presented in accordance with
accounting principles generally accepted in the United States for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States have been condensed or
omitted from the accompanying statements. These interim financial statements
should be read in conjunction with the audited financial statements and related
notes thereto, which are included in the Company's Annual Report on Form 10-K
for the year ended December 31, 2001. Operating results for the three-month
periods ended March 31, 2002 and 2001 are not necessarily indicative of future
results that may be expected for the year ending December 31, 2002.

NOTE 2 - RECENT ACCOUNTING PRONOUNCEMENTS

In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 141, "Business Combinations" ("SFAS 141") and Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS
142"). SFAS 141 requires all business combinations to be accounted for using the
purchase method of accounting and became effective for all business combinations
initiated after June 20, 2001. SFAS 142 requires goodwill to be tested for
impairment under certain circumstances, and written off when impaired, rather
than being amortized as previous standards required. SFAS 142 is effective for
fiscal years beginning after December 15, 2001. The adoption by the Company of
these new standards as of January 1, 2002, did not have an effect on our
operating results or financial condition.

In October 2001, FASB issued Statement of Financial Accounting Standards
No. 144, Accounting for Impairment or Disposal of Long-Lived Assets, effective
for fiscal years beginning after December 15, 2001, with transition provisions
for certain matters. The FASB's new rules on asset impairment supersede FASB
Statement No. 121, Accounting for Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of, and provide a single accounting model for
long-lived assets to be disposed of. The adoption of SFAS No. 144 did not have a
material impact on the Company's operating results or financial condition.

NOTE 3 - SUBSEQUENT EVENTS

In April 2002, the Food and Drug Administration, or FDA, granted orphan
drug status to Mylovenge(TM), the Company's therapeutic vaccine for multiple
myeloma. As a result, we are eligible for certain tax credits for development
costs related to Mylovenge, assistance from the FDA to facilitate the regulatory
review and approval process, and market exclusivity for six years.

In April 2002, the FDA asked the Company to suspend new patient enrollment
in its second Phase III clinical trial of Provenge in men with hormone
refractory prostate cancer pending clarification regarding the specific
composition of cellular components in the Provenge vaccine. The Company intends
to submit its response to the FDA shortly.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

This report contains forward-looking statements that involve risk and
uncertainties. The statements contained in this report that are not purely
historical are forward-looking statements within the meaning of Section 21E of
the Securities Exchange Act of 1934, as amended, and Section 27A of the
Securities Act of 1933, as amended. These forward-looking statements concern
matters that involve risks and uncertainties that could cause actual results to
differ materially from those projected in the forward-looking statements. Words
such as "believe," "expects," "likely," "may" and "plans" are intended to
identify forward-looking statements, although not all forward-looking statements
contain these words.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of the forward-looking
statements. We are under no duty to update any of the forward-looking statements
after the date hereof to conform such statements to actual results or to changes
in our expectations.

The following discussion should be read in conjunction with the condensed
financial statements and the notes thereto included in Item 1 of this Quarterly
Report on Form 10-Q. In addition, readers are urged to carefully review and
consider the various disclosures made by us which attempt to advise interested
parties of the factors which affect our business, including without limitation,
"Factors That May Affect Our Results of Operations and Financial Condition" set
forth in this Form 10-Q, and the audited financial statements and the notes
thereto and disclosures made under the captions, "Management's Discussion and
Analysis of Financial Condition and Results of Operations", included in our
Annual Report on Form 10-K for the year ended December 31, 2001, filed with the
Securities and Exchange Commission.

OVERVIEW

Dendreon Corporation is dedicated to the discovery and development of novel
products for the treatment of diseases through its innovative manipulation of
the immune system. Dendreon's product pipeline is focused on cancer, and
includes therapeutic vaccines, monoclonal antibodies and a pathway to small
molecules.

The products most advanced in development are therapeutic vaccines that are
designed to stimulate a patient's immunity for the treatment of cancer.
Provenge(TM) is a therapeutic vaccine for the treatment of prostate cancer and
has advanced to Phase III clinical trials, the final stage of product
development. We are conducting Phase II clinical trials for Mylovenge, our
therapeutic vaccine for the treatment of multiple myeloma, and Phase I clinical
trials for APC8024, our therapeutic vaccine for the treatment of breast, ovarian
and colon cancers. We have received clearance from the Food and Drug
Administration to begin a Phase I clinical trial for CTL8004, our collaborative
project with R.W. Johnson Pharmaceutical Research and Development, L.L.C., or
J&J PRD, for the treatment of breast, ovarian and colon cancers. We have
additional therapeutic vaccines, monoclonal antibodies and a pathway to small
molecule drug discovery in preclinical development for the treatment of cancer.
We also intend, over time, to pursue the application of our technologies in the
fields of autoimmune diseases, allergies and infectious diseases.

We have incurred significant losses since our inception. As of March 31,
2002, our accumulated deficit was $98.2 million. We have incurred net losses as
a result of research and development expenses, general and administrative
expenses in support of our operations, clinical trial expenses and marketing
expenses. We anticipate incurring net losses over at least the next several
years as we continue our clinical trials, apply for regulatory approvals,
develop our technology, expand our operations and develop systems that support
commercialization.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our financial condition and results of
operations is based upon our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
The preparation of these financial statements requires us to make estimates and
judgments in certain circumstances that affect the reported amounts of assets,
liabilities, revenues and expenses, and related disclosure of contingent
liabilities. In preparing these financial statements, management has made its
best estimates and judgments of certain amounts included in the financial
statements, giving due consideration to materiality. On an on-going basis, we
evaluate our estimates, including those related to revenue recognition,
investments, income taxes, financing operations, long-term service contracts,
and other contingencies. Management bases its estimates on historical experience
and on various other assumptions that are believed to be reasonable under the
circumstances.

THREE MONTHS ENDED MARCH 31, 2002 AND 2001

Revenue. Revenue decreased slightly to $3.0 million for the three months
ended March 31, 2002, from $3.1 million for the three months ended March 31,
2001. Collaborative and license revenue represented $3.0 million and $3.1
million of total revenue in the three months ended March 31, 2002 and 2001,
respectively. The period over period decrease was primarily due to the
expiration of grant revenue in September 2001.

Research and Development Expenses. Research and development expenses
increased to $8.4 million for the three months ended March 31, 2002, from $5.3
million for the three months ended March 31, 2001. The period over period
increase of $3.1 million was due to increased product development expenses,
including fees paid to third parties conducting clinical trials, increased
personnel-related expenses, facilities and depreciation expenses, and supplies
expense.

Our research and development-related activities can be divided into two
areas:

1) research and pre-clinical programs, and
2) clinical programs.

The cost of the two areas are as follows (in thousands):

March 31, 2002 2001
--------- ------ ------
Research and pre-clinical programs $1,518 $1,540
Clinical programs 6,858 3,720
------ ------
Total research and development $8,376 $5,260
====== ======

General and Administrative Expenses. General and administrative expenses
increased to $2.3 million for the three months ended March 31, 2002, from $1.6
million for the three months ended March 31, 2001. The increase in general and
administrative expense was primarily due to an increase in the support of our
operations. Our general and administrative expenses consist primarily of
personnel costs for finance, human resources, business development, legal,
facilities, information technologies and general management, as well as facility
costs and third party professional fees, such as legal and accounting.

Marketing. Marketing expenses decreased to $261,000 for the three months
ended March 31, 2002, from $634,000 for the three months ended March 31, 2001.
Our marketing expenses consist primarily of salaries and other personnel-related
costs and consulting expenses. The decrease in marketing expense is primarily
due to consulting expenses related to commercial infrastructure analysis
incurred in the three months ended March 31, 2001 that were not incurred in the
three months ended March 31, 2002.

Interest Income. Interest income decreased to $632,000 for the three months
ended March 31, 2002, from $1.5 million for the three months ended March 31,
2001. The decrease in 2002 was attributable to lower average balances of cash,
cash equivalents, and short- and long-term investments, and lower average
interest rate yield on our investment portfolio.

Interest Expense. Interest expense decreased to $89,000 for the three
months ended March 31, 2002, from $134,000 for the three months ended March 31,
2001. The decrease in 2002 was attributable to lower average balances of capital
lease obligations and long-term debt.

LIQUIDITY AND CAPITAL RESOURCES

Cash, cash equivalents and short and long-term investments were $71.2
million at March 31, 2002 and $81.2 million at December 31, 2001. We have
financed our operations since inception through our initial and follow-on public
offerings, the private placement of equity securities, revenue from
collaborative arrangements, grant revenue, interest income earned, equipment
lease line financings and loan facilities. Since January 1, 2000, we received
net proceeds of $9.1 million from private financing activities and $84.0 million
from our initial and follow-on public offerings. To date, inflation has not had
a material effect on our business.

Since our inception, investing activities, other than purchases and
maturities of investments, have consisted primarily of purchases of property and
equipment. At March 31, 2002, our investment in equipment and leasehold
improvements was $8.7 million. We have an agreement with a financing company
under which we have financed purchases of $4.6 million of leasehold
improvements, laboratory, computer and office equipment. The lease terms are
from 36 to 48 months and bear interest at rates ranging from 8.73% to 14.3% per
year. We had a tenant improvement allowance of $3.5 million from the lessor of
our Seattle, Washington facility. As of March 31, 2002, we had committed all of
the allowance for laboratory and manufacturing space at this facility. The
improvement allowance bears interest at the rate of 12.5% per year and is repaid
monthly over the length of the original lease.

Net cash used in operating activities for the three months ended March 31,
2002 was $9.0 million. During the three months ended March 31, 2001, the Company
used $1.3 million of net cash in its operating activities. Expenditures in both
periods were a result of research and development expenses and general and
administrative expenses in support of our operations and sales and marketing
expenses.

In June 1999, we obtained a loan in the amount of $3.0 million from a
financial lender. The loan was re-paid on March 7, 2002.

We anticipate that our cash on hand and cash generated from our
collaborative arrangements will be sufficient to enable us to meet our
anticipated expenditures for at least the next 21 months, including, among other
things:

. supporting our clinical trial efforts;
. continuing internal research and development;
. development of manufacturing capabilities; and
. development of sales and marketing capabilities.

However, we may need additional financing prior to that time. Additional
financing may not be available on favorable terms or at all. If we are unable to
raise additional funds should we need them, we may be required to delay, reduce
or eliminate some of our development programs and some of our clinical trials.

FACTORS THAT MAY AFFECT OUR RESULTS OF OPERATIONS AND FINANCIAL CONDITION

We have a history of operating losses; we expect to continue to incur
losses and we may never be profitable.

As of March 31, 2002, we had an accumulated deficit of $98.2 million. These
losses have resulted principally from costs incurred in our research and
development programs and from our general and administrative costs. We have
derived no significant revenues from product sales or royalties. We do not
expect to achieve significant product sales or royalty revenue for a number of
years, and are not able to predict when we might do so. We expect to incur
additional operating losses in the future. These losses may increase
significantly as we expand development and clinical trial efforts.

Our ability to achieve long-term profitability is dependent upon obtaining
regulatory approvals for our products and successfully commercializing our
products alone or with third parties. We may not be successful in obtaining
regulatory approval and commercializing our products, and our operations may not
be profitable even if any of our products under development are commercialized.

We may take longer to complete our clinical trials than we project, or we
may not be able to complete them at all.

Although for planning purposes we project the commencement, continuation
and completion of our clinical trials, a number of factors, including regulatory
requirements, scheduling conflicts with participating clinicians and clinical
institutions, and difficulties in identifying and enrolling patients who meet
trial eligibility criteria, may cause significant delays. We may not commence or
complete clinical trials involving any of our products as projected or may not
conduct them successfully.

We rely on academic institutions or clinical research organizations to
conduct, supervise or monitor some or all aspects of clinical trials involving
our products. We have less control over the timing and other aspects of these
clinical trials than if we conducted them entirely on our own. Third party
clinical investigators may not perform our clinical trials on our anticipated
schedules or consistent with a clinical trial protocol, and may not perform data
collection and analysis in a timely manner.

In April 2002, the FDA asked us to suspend new patient enrollment in our
second Phase III clinical trial of Provenge in men with hormone refractory
prostate cancer, or HRPC, pending clarification regarding the specific
composition of cellular components in the Provenge vaccine. If we fail to
complete our second Phase III clinical trial of Provenge, or otherwise fail to
commence or complete, or experience further delays in, any of our other present
or planned clinical trials, our stock price and our ability to conduct our
business as currently planned could be harmed. In addition, our development
costs will increase if the current delays or any future delays in our clinical
trials are significant or if we need to perform more or larger clinical trials
than planned. If the delays are significant, our financial results and the
commercial prospects for our product candidates will be adversely affected.

If testing of a particular product does not yield successful results, then
we will be unable to commercialize that product.

We must demonstrate our products' safety and efficacy in humans through
extensive preclinical and clinical testing. We may experience numerous
unforeseen events during, or as a result of, the testing process that could
delay or prevent commercialization of our products, including the following:

. safety and efficacy results obtained in early human clinical trials,
as in our prostate cancer and multiple myeloma trials, may not be
indicative of results that are obtained in later clinical trials;

. the results of preclinical studies may be inconclusive, or they may
not be indicative of results that will be obtained in human clinical
trials;

. after reviewing test results, we or our collaborators may abandon
projects that we might previously have believed to be promising,
including Provenge;

. we, our collaborators or regulators, may suspend or terminate clinical
trials if the participating subjects or patients are being exposed to
unacceptable health risks or for other reasons; and

. the effects of our potential products may not be the desired effects
or may include undesirable side effects or other characteristics that
preclude regulatory approval or limit their commercial use if
approved.

Clinical testing is very expensive, takes many years, and the outcome is
uncertain. The interim results from the first of our two Phase III clinical
trials of Provenge in HRCP patients were inconclusive, and indicated that it is
possible, but not probable, that the primary endpoint of the trial will be
achieved. Additional data is required for a final analysis, and the final
analysis is expected to be completed in mid-2002. The final data from this
clinical trial and/or our other Phase III trials, if completed, may not be
sufficient to support approval by the FDA of Provenge. Data from our other
clinical trials may not be sufficient to support approval by the FDA of our
other potential products. The clinical trials of Provenge, Mylovenge, and our
other products under development may not be completed as planned and the FDA may
not ultimately approve any of our product candidates for commercial sale. If we
fail to adequately demonstrate the safety, efficacy or physiology of a cancer
vaccine under development, this will delay or prevent regulatory approval of the
vaccine, which could prevent us from achieving profitability.

If our products are not accepted by the market, we will not generate
significant revenues or become profitable.

The success of any product we may develop will depend upon the medical
community, patients and third-party payors accepting our products as medically
useful, cost-effective, and safe. We cannot guarantee that any of our products
in development, if approved for commercialization, will be used by doctors to
treat patients. The degree of market acceptance for our products depends upon a
number of factors, including:

. the receipt and scope of regulatory approvals;
. demonstrating the efficacy and safety of our products to the medical
and patient community;

. the cost and advantages of our products compared to other available
therapies; and
. reimbursement policies of government and third-party payors.

We may require additional funding, and our future access to capital is
uncertain.

It is expensive to develop cancer vaccines, conduct clinical trials for
vaccines, and commercialize our products. We plan to continue to simultaneously
conduct clinical trials and preclinical research for many different cancer and
autoimmune disease vaccines, which is costly. Our future revenues may not be
sufficient to support the expenses of our operations, the development of
commercial infrastructure and the conduct of our clinical trials and preclinical
research. We will need to raise additional capital to:

. fund operations;
. continue the research and development of our therapeutic vaccines; and
. commercialize our vaccines.

We believe that our cash on hand and cash generated from our collaborative
arrangements will be sufficient to meet our projected operating and capital
requirements for at least the next 21 months. However, we may need additional
financing within this time frame depending on a number of factors, including the
following:

. our degree of success in commercializing cancer vaccine products;

. the amount of milestone payments we receive from our collaborators;

. the rate of progress and cost of our research and development and
clinical trial activities;

. the costs of preparing, filing, prosecuting, maintaining and enforcing
patent claims and other intellectual property rights;

. emergence of competing technologies and other adverse market
developments;

. changes in or terminations of our existing collaboration and licensing
arrangements; and

. the cost of manufacturing scale-up and development of marketing
operations, if we undertake those activities.

We may not be able to obtain additional financing on favorable terms or at
all. If we are unable to raise additional funds, we may be required to delay,
reduce or eliminate some of our development programs and some of our clinical
trials. If we raise additional funds by issuing equity securities, further
dilution to stockholders may result.

We are subject to extensive regulation, which is costly, time-consuming and
may subject us to unanticipated delays; even if we obtain regulatory
approval for the commercial sale of some of our products, those products
may still face regulatory difficulties.

All of our potential products, cell processing and manufacturing
activities, are subject to comprehensive regulation by the FDA in the United
States and by comparable authorities in other countries. The process of
obtaining required FDA and other regulatory approvals, including foreign
approvals, is expensive and often takes many years and can vary substantially
based upon the type, complexity and novelty of the products involved. Provenge,
Mylovenge and our other products are novel; therefore, regulatory agencies lack
experience with them, which may lengthen the regulatory review process, increase
our development costs and delay or prevent commercialization of Provenge,
Mylovenge and our other products. Unless the FDA allows our second Phase III
clinical trial of Provenge in men with HRPC to recommence, this potential
product may not be approved for commercial sale. The FDA also may suspend
enrollment in other clinical trials we are conducting or refuse us permission to
commence new trials of our cancer vaccines.

No cancer vaccine using dendritic cell technologies has been approved for
commercial sale. Consequently, there is no precedent for the successful
commercialization of products based on our technologies. In addition, we have
had only limited experience in filing and pursuing applications necessary to
gain regulatory approvals for commercial sale, which may impede our ability to
obtain timely FDA approvals. We have not yet sought FDA

approval for any vaccine product. We will not be able to commercialize any of
our potential products until we obtain FDA approval. Therefore, any delay in
obtaining, or inability to obtain, FDA approval could harm our business.

If we violate regulatory requirements at any stage, whether before or after
marketing approval is obtained, we may be fined, forced to remove a product from
the market and experience other adverse consequences, including delay, which
could materially harm our financial results. Additionally, we may not be able to
obtain the labeling claims necessary or desirable for the promotion of our
products. We may also be required to undertake post-marketing trials. In
addition, if we or others identify side effects after any of our vaccines are on
the market, or if manufacturing problems occur, regulatory approval may be
withdrawn and reformulation of our vaccines, additional clinical trials, changes
in labeling of our vaccines, and additional marketing applications may be
required.

An investigational new drug application must become effective before human
clinical trials may commence. The investigational new drug application is
automatically effective 30 days after receipt by the FDA, unless before that
time the FDA requests an extension to review the application, or raises concerns
or questions about the conduct of the trials as outlined in the application. In
the latter case, the sponsor of the application and the FDA must resolve any
outstanding concerns before clinical trials can proceed. Thus, the submission of
an investigational new drug application may not result in the FDA authorizing us
to commence clinical trials in any given case. In addition, the FDA may suspend
enrollment in a clinical trial or may suspend ongoing treatment of patients for
any of a number of reasons including concerns about the conduct of the trial or
the safety or efficacy of the drug.

Preclinical studies involve laboratory evaluation of product
characteristics and animal studies to assess the efficacy and safety of the
product. The FDA regulates preclinical studies under a series of regulations
called the current Good Laboratory Practices regulations. If the sponsor
violates these regulations, the FDA, in some cases, may invalidate the studies
and require that the sponsor replicate those studies.

The availability and amount of reimbursement for our potential products and
the manner in which government and private payors may reimburse for our
potential products is uncertain; we may face challenges from government and
private payors that adversely affect reimbursement for our potential
products.

We expect that many of the patients who seek treatment with our products,
if approved for marketing, will be eligible for Medicare benefits. Other
patients may be covered by private health plans or uninsured. The application of
existing Medicare regulations and interpretive rulings to newly-approved
products, especially novel products such as ours, is not certain and those
regulations and interpretive rulings are subject to change. If we are unable to
obtain or retain adequate levels of reimbursement from Medicare or from private
health plans, our ability to sell our potential products will be adversely
affected. Medicare regulations and interpretive rulings also may determine who
provides certain services. This may adversely affect our ability to market or
sell our products, if approved.

Federal and state governments, as well as foreign governments, continue to
propose legislation designed to contain or reduce health care costs. Legislation
and regulations affecting the pricing of biologics may change or be adopted
before any of our products are approved for marketing. Cost control initiatives
could decrease the price that we receive for any one or all of our potential
products or increase patient coinsurance to a level that makes our products
under development unaffordable. In addition, government and private health plans
persistently challenge the price and cost-effectiveness of biologics and
pharmaceuticals. Therefore, any one or all of our products under development may
ultimately not be considered cost effective by these third party payors and thus
not be covered under their health plans or covered only at a lower price. Any of
these initiatives or developments could prevent us from successfully marketing
and selling any of our potential products.

We rely on third parties to perform a variety of functions and have limited
manufacturing and cell processing capabilities, which could limit our
ability to commercialize our products.

We rely in part on collaborators and other third parties to perform for us
or assist us with a variety of important functions, including research and
development, manufacturing and clinical trials management. We also license
technology from others to enhance or supplement our technologies. We have never
manufactured our cancer vaccines and other products on a commercial scale. It
may be difficult or impossible to economically manufacture our products on a
commercial scale. We have contracted with Diosynth RTP, Inc. to assist us in the
scale-up to commercial level production of the antigen used in the preparation
of Provenge. We cannot be certain that this contract will result in our ability
to produce the antigen for Provenge on a commercial scale, if Provenge is
successful.

We intend to rely on third party contract manufacturers to produce large
quantities of materials needed for clinical trials and product
commercialization. Third party manufacturers may not be able to meet our needs
with respect to timing, quantity or quality. If we are unable to contract for a
sufficient supply of needed materials on acceptable terms, or if we should
encounter delays or difficulties in our relationships with manufacturers, our
clinical testing may be delayed, thereby delaying the submission of products for
regulatory approval or the market introduction and subsequent sales of our
products. Any delay may lower our revenues and potential profitability and
adversely affect our stock price.

In addition, we and any third-party manufacturers that we may use must
continually adhere to current Good Manufacturing Practices, or cGMP, regulations
enforced by the FDA through its facilities inspection program. If our facilities
or the facilities of these manufacturers cannot pass a pre-approval plant
inspection, the FDA pre-market approval of our vaccines will not be granted. In
complying with cGMP and foreign regulatory requirements, we and any of our
third-party manufacturers will be obligated to expend time, money and effort in
production, record-keeping and quality control to assure that our products meet
applicable specifications and other requirements. If we or any of our
third-party manufacturers fail to comply with these requirements, we may be
subject to regulatory action.

We have constructed two facilities for cell processing, the manufacture of
antigens for our clinical trials, and final formulation of our cancer vaccines.
We also use three third-party cell processing centers. These five facilities may
not be sufficient to meet our needs for our prostate, multiple myeloma and other
clinical trials. Additionally, if we decide to manufacture our products in
commercial quantities ourselves, we will require substantial additional funds
and will be required to hire and train significant numbers of employees,
construct additional facilities and comply with applicable regulations for these
facilities, which are extensive. We may not be able to develop production
facilities that both meet regulatory requirements and are sufficient for all
clinical trials or commercial use.

If we lose or are unable to secure collaborators, or if our collaborators,
including Kirin, do not apply adequate resources to their collaboration
with us, our product development and potential for profitability may
suffer.

We intend to enter into collaborations for one or more of the research,
development, manufacturing, marketing and other commercialization activities
relating to some of our products under development. We have entered into a
collaboration with Kirin relating to the development and commercialization of
our products based on our dendritic cell technologies in Asia. As our
collaborator, Kirin funds testing, makes regulatory filings and may manufacture
and market our products in Asia. The amount and timing of resources applied by
Kirin or other potential collaborators to our joint efforts are not within our
control.

If any collaborator breaches or terminates its agreement with us, or fails
to conduct its collaborative activities in a timely manner, the
commercialization of our products under development could be slowed down or
blocked completely. It is possible that Kirin or other potential collaborators
will change their strategic focus, pursue alternative technologies or develop
alternative products, either on their own or in collaboration with others, as a
means for developing treatments for the diseases targeted by our collaborative
programs. The effectiveness of our collaborators in marketing our products will
also affect our revenues and earnings.

Our collaboration with Kirin may not continue or be successful and we may
not receive any further research funding, milestone or royalty payments. We
recognized approximately 36% of our revenue in 2001, and approximately 57% of
our revenue in the three months ended March 31, 2002, from our collaboration
with Kirin. We intend to continue to enter into new collaborative agreements in
the future. However, we may not be able to successfully negotiate any additional
collaborative arrangements. If established, these relationships may not be
scientifically or commercially successful. Any additional collaborations would
likely subject us to some or all of the risks described above with respect to
our collaboration with Kirin. Disputes may arise between us and our existing or
potential collaborators, as to a variety of matters, including financial or
other obligations under our agreements. These disputes may be both expensive and
time-consuming and may result in delays in the development and commercialization
of products.

We are dependent on single-source vendors for some of our components.

We currently depend on single-source vendors for some of the components
necessary for our vaccine candidates such as cell culture media. There are, in
general, relatively few alternative sources of supply for these products. While
these vendors have produced our products with acceptable quality, quantity and
cost in the past, they may be unable or unwilling to meet our future demands.
Establishing additional or replacement suppliers for these products could take a
substantial amount of time. If we have to switch to a replacement vendor, the
manufacture and delivery of our vaccines could be interrupted for an extended
period.

If we are unable to protect our proprietary rights, we may not be able to
compete effectively or operate profitably.

Our success is dependent in part on obtaining, maintaining and enforcing our
patents and other proprietary rights and our ability to avoid infringing the
proprietary rights of others. Patent law relating to the scope of claims in the
biotechnology field in which we operate is still evolving and, consequently,
patent positions in our industry may not be as strong as in other more
well-established fields. Accordingly, the United States Patent and Trademark
Office may not issue patents from the patent applications owned by or licensed
to us. If issued, the patents may not give us an advantage over competitors with
similar technology. It is also possible that third parties may successfully
avoid our patents through design innovation.

The issuance of a patent is not conclusive as to its validity or
enforceability and it is uncertain how much protection, if any, will be given to
our patents if we attempt to enforce them and they are challenged in court or in
other proceedings, such as oppositions, which may be brought in domestic or
foreign jurisdictions to challenge the validity of a patent. A third party may
challenge the validity or enforceability of a patent after its issuance by the
Patent Office. It is possible that a third party may successfully challenge our
patents or patents licensed by us from others, or that a challenge will result
in limiting their coverage. The cost of litigation to uphold the validity of
patents and to prevent infringement can be substantial and, if the outcome of
litigation is adverse to us, third parties may be able to use our patented
invention without payment to us. Moreover, it is possible that third parties may
infringe our patents. To stop these activities we may need to file a lawsuit.
Even if we were successful in stopping the violation of our patent rights, these
lawsuits are expensive and consume time and other resources. In addition, there
is a risk that a court would decide that our patents are not valid and that we
do not have the right to stop the other party from using the invention. There is
also the risk that, even if the validity of our patents is upheld, a court will
refuse to stop the other party on the grounds that its activities are not
covered by, that is, do not infringe, our patents.

In addition to the intellectual property rights described above, we also
rely on unpatented technology, trade secrets and confidential information.
Therefore, others may independently develop substantially equivalent information
and techniques or otherwise gain access to or disclose our technology. We may
not be able to effectively protect our rights in unpatented technology, trade
secrets and confidential information. We require each of our employees,
consultants and advisors to execute a confidentiality agreement at the
commencement of an employment or consulting relationship with us. However, these
agreements may not provide effective protection of our information or, in the
event of unauthorized use or disclosure, they may not provide adequate remedies.

The use of our technologies could potentially conflict with the rights of
others.

Our competitors or others may have or acquire patent rights that they could
enforce against us. If they do so, then we may be required to alter our
products, pay licensing fees or cease activities. If our products conflict with
patent rights of others, third parties could bring legal actions against us
claiming damages and seeking to enjoin manufacturing and marketing of the
affected products. If these legal actions are successful, in addition to any
potential liability for damages, we could be required to obtain a license in
order to continue to manufacture or market the affected products. We may not
prevail in any legal action and a required license under the patent may not be
available on acceptable terms or at all.

We may incur substantial costs as a result of litigation or other
proceedings relating to patent and other intellectual property rights.

The cost to us of any litigation or other proceeding relating to
intellectual property rights, even if resolved in our favor, could be
substantial. Some of our competitors may be better able to sustain the costs of
complex patent litigation because they have substantially greater resources. If
there is litigation against us, we may not be able to continue our operations.

Should third parties file patent applications, or be issued patents
claiming technology also claimed by us in pending applications, we may be
required to participate in interference proceedings in the United States Patent
and Trademark Office to determine priority of invention. We may be required to
participate in interference proceedings involving our issued patents and pending
applications. We may be required to cease using the technology or to license
rights from prevailing third parties as a result of an unfavorable outcome in an
interference proceeding. A prevailing party in that case may not offer us a
license on commercially acceptable terms or at all.

We are exposed to potential product liability claims, and insurance against
these claims may not be available to us at a reasonable rate in the future.

Our business exposes us to potential product liability risks, which are
inherent in the testing, manufacturing, marketing and sale of pharmaceutical
products. We have clinical trial insurance coverage and we intend to obtain
product liability insurance coverage in the future. However, such insurance
coverage may not be available to us at an acceptable cost, if at all. We may not
be able to obtain future insurance coverage that will be adequate to satisfy any
liability that may arise. Regardless of their merit or eventual outcome, product
liability claims may result in decreased demand for a product, injury to our
reputation, withdrawal of clinical trial volunteers and loss of revenues. Thus,
whether or not we are insured, a product liability claim or product recall may
result in losses that could be material.

Competition in our industry is intense and many of our competitors have
substantially greater resources than we do.

Competition in the cancer, infectious disease, autoimmune disease and
allergy fields is intense and is accentuated by the rapid pace of technological
development. Research and discoveries by others may result in breakthroughs
which may render our products obsolete even before they generate any revenue.
There are products currently under development by others that could compete with
the products that we are developing. Many of our competitors have substantially
greater research and development capabilities and manufacturing, marketing,
financial and managerial resources than we do. Our competitors may:

. develop safer or more effective immunotherapeutics and other
therapeutic products;
. reach the market more rapidly, reducing the potential sales of our
products; or
. establish superior proprietary positions.

We understand that companies, including AVI BioPharma, Inc., Cell Genesys,
Inc., NW Biotherapeutics, Inc., Therion Biologics Corporation and Vical
Incorporated may be developing prostate cancer vaccines that could potentially
compete with Provenge, if Provenge is successfully developed. These competitors
may succeed in developing and marketing cancer vaccines that are more effective
than or marketed before Provenge.

We anticipate that we will face increased competition in the future as new
companies enter our markets and as scientific developments surrounding
immunotherapy and other cancer therapies accelerate. If our products receive
marketing approval but cannot compete effectively in the marketplace, our
profitability and financial position would suffer.

We must expand our operations to commercialize our products, which we may
not be able to do.

We will need to expand and effectively manage our operations and facilities
to successfully pursue and complete future research, development and
commercialization efforts. To grow we will need to add personnel and expand our
capabilities, which may strain our existing managerial, operational, financial
and other resources. To compete effectively and manage our growth, we must:

. train, manage and motivate a growing employee base;
. accurately forecast demand for our products; and
. expand existing operational, financial and management information
systems.

If we fail to manage our growth effectively, our product development and
commercialization efforts could be curtailed or delayed.

If we lose key management and scientific personnel or cannot recruit
qualified employees, our product development programs and our research and
development efforts will be harmed.

Our success depends, to a significant extent, upon the efforts and
abilities of our key employees. The loss of the services of one or more of our
key employees may delay our product development programs and our research and
development efforts. We do not maintain key person life insurance on any of our
officers, employees or consultants.

Competition for qualified employees among companies in the biotechnology
and biopharmaceutical industry is intense. Our future success depends upon our
ability to attract, retain and motivate highly skilled employees. In order to
commercialize our products successfully, we may be required to expand
substantially our workforce, particularly in the areas of manufacturing,
clinical trials management, regulatory affairs, business development and sales
and marketing. These activities will require the addition of new personnel,
including management, and the development of additional expertise by existing
management personnel.

Market volatility may affect our stock price and the value of an investment
in our common stock may be subject to sudden decreases.

The trading price for our common stock has been, and we expect it to
continue to be, volatile. The price at which our common stock trades depends
upon a number of factors, including our historical and anticipated operating
results, preclinical and clinical trial results, market perception of the
prospects for biotechnology companies as an industry sector and general market
and economic conditions, some of which are beyond our control. Factors such as
fluctuations in our financial and operating results, changes in government
regulations affecting product approvals, reimbursement or other aspects of our
or our competitors' businesses, the results of preclinical and clinical trials,
announcements of technological innovations or new commercial products by us or
our competitors, developments concerning key personnel and our intellectual
property rights, significant collaborations or strategic alliances and publicity
regarding actual or potential performance of products under development by us or
our competitors could also cause the market price of our common stock to
fluctuate substantially. In addition, the stock market has from time to time
experienced extreme price and volume fluctuations. These broad market
fluctuations may lower the market price of our common stock. Moreover, during
periods of stock market price volatility, share prices of many biotechnology
companies have often fluctuated in a manner not necessarily related to the
companies' operating performance. Accordingly, our common stock may be subject
to greater price volatility than the stock market as a whole.

Anti-takeover provisions in our charter documents and under Delaware law
could make an acquisition of us, which may be beneficial to our
stockholders, more difficult.

Provisions of our certificate of incorporation and bylaws will make it more
difficult for a third party to acquire us on terms not approved by our Board of
Directors and may have the effect of deterring hostile takeover attempts. For
example, our certificate of incorporation authorizes our Board of Directors to
issue up to 10,000,000 shares of preferred stock and to fix the price, rights,
preferences, privileges and restrictions, including voting rights, of those
shares without any further vote or action by the stockholders. The rights of the
holders of our common stock will be subject to, and may be harmed by, the rights
of the holders of any preferred stock that may be issued in the future. The
issuance of preferred stock could reduce the voting power of the holders of our
common stock and the likelihood that common stockholders will receive payments
upon liquidation. We are also subject to provisions of Delaware law that could
have the effect of delaying, deferring or preventing a change in control of our
company. One of these provisions prevents us from engaging in a business
combination with any interested stockholder, unless specified conditions are
satisfied. These and other impediments to a third-party acquisition or change of
control could limit the price investors are willing to pay in the future for
shares of our common stock.

ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

As of March 31, 2002, we had short-term investments of $46.3 million and no
long-term investments. Our short-term and long-term investments will decline by
an immaterial amount if market interest rates increase, and therefore, our
exposure to interest rate changes has been immaterial. Declines of interest
rates over time will, however, reduce our interest income from our short-term
investments. Our outstanding bank loans and capital lease obligations are all at
fixed interest rates and therefore have minimal exposure to changes in interest
rates.

PART II - OTHER INFORMATION

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

The Company's Registration Statement (SEC File No. 333-31920) for its
initial public offering (the "Offering") became effective June 16, 2000.
Offering proceeds, net of underwriting discounts and commissions and offering
expenses of approximately $4.7 million, were approximately $40.3 million. From
the effective date of the Registration Statement through March 31, 2002, the
Company used approximately $32.7 million of the Offering proceeds to fund
clinical trials, research, preclinical and commercialization activities for our
therapeutic vaccine products, to increase our dendritic cell processing and
antigen manufacturing capacity, and for general corporate purposes, including
working capital. The remaining proceeds from the Offering are invested in
commercial paper, money market securities and certificates of deposit.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Exhibit
Number Description
------ -----------
3.1 Amended and Restated Certificate of Incorporation (*)
3.2 Bylaws (1)
4.1 Specimen Common Stock certificate (1)
--------------------
(*) Filed herewith
(1) Filed as an exhibit to Registration Statement on Form S-1, File
No. 333-31920.

(b) Reports on Form 8-K

No reports on Form 8-K were filed during the period covered by this
report.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.

Dated this 14th day of May, 2002

DENDREON CORPORATION

By: /s/ Martin A. Simonetti
------------------------------------------
Martin A. Simonetti
Senior Vice President, Finance
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer and
Duly Authorized Officer)

EXHIBIT INDEX

Exhibit
Number Description
------- -----------
3.1 Amended and Restated Certificate of Incorporation (*)
3.2 Bylaws (1)
4.1 Specimen Common Stock certificate (1)
--------------------
(*) Filed herewith
(1) Filed as an exhibit to Registration Statement on Form S-1, File
No. 333-31920.