2.2.0.25falsefalse0201 - Disclosure - Organization and Summary of Significant Accounting Policiestruefalsefalse1falsefalseUSDfalsefalse1/1/2010 - 12/31/2010 USD ($) USD ($) / shares $Jan-01-2010_Dec-31-2010http://www.sec.gov/CIK0001107332duration2010-01-01T00:00:002010-12-31T00:00:00USDStandardhttp://www.xbrl.org/2003/iso4217USDiso42170SharesStandardhttp://www.xbrl.org/2003/instancesharesxbrli0USDEPSDividehttp://www.xbrl.org/2003/iso4217USDiso4217http://www.xbrl.org/2003/instancesharesxbrli0USDUSD$2true0dndn_SummaryOfSignificantAccountingPoliciesAbstractdndnfalsenadurationSummary of Significant Accounting Policies.falsefalsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringSummary of Significant Accounting Policies.falsefalseOrganization and Summary of Significant Accounting Policies [Abstract]3false0us-gaap_SignificantAccountingPoliciesTextBlockus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseverboselabel1falsefalsefalse00  <div align="left" style="margin-left: 0%">  <div align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent"> <b><font style="font-family: 'Times New Roman', Times"> </font></b> </div> <div style="margin-top: 0pt; font-size: 1pt"></div> <div align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent"> <b><font style="font-family: 'Times New Roman', Times"> </font></b> </div> <div style="margin-top: 12pt; font-size: 1pt">  </div> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent; text-align: left"> <tr> <td width="3%"></td> <td width="97%"></td> </tr> <tr valign="top"> <td> <b><font style="font-family: 'Times New Roman', Times">1.  </font></b> </td> <td> <b><font style="font-family: 'Times New Roman', Times">ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</font></b> </td> </tr> </table> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent"> <b><i><font style="font-family: 'Times New Roman', Times">Organization</font></i></b> </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> Dendreon Corporation (“Dendreon”, the “Company”, “we”, “us”, or “our”), a Delaware corporation, is a biotechnology company focused on the discovery, development and commercialization of novel therapeutics that may significantly improve cancer treatment options for patients. Our product portfolio includes active cellular immunotherapy and small molecule product candidates to treat a wide range of cancers. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> On April 29, 2010, the U.S. Food and Drug Administration (“FDA”) licensed PROVENGE<sup style="font-size: 85%; vertical-align: text-top">®</sup> (sipuleucel-T), our first in class autologous cellular immunotherapy for the treatment of asymptomatic or minimally symptomatic, metastatic, castrate-resistant (hormone-refractory) prostate cancer. Commercial sale of PROVENGE began in May 2010. Prostate cancer is the most common non-skin cancer among men in the United States, with over one million men currently diagnosed with the disease, and the second leading cause of cancer deaths in men in the United States. We own worldwide rights for PROVENGE. </div> <div style="margin-top: 12pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent"> <b><i><font style="font-family: 'Times New Roman', Times">Principles of Consolidation</font></i></b> </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> During 2010, we established four new entities, Dendreon UK Ltd (“Dendreon UK”), Dendreon Manufacturing, LLC (“Dendreon Manufacturing”), Dendreon Holdings, LLC (“Dendreon Holdings”) and Dendreon Distribution, LLC (“Dendreon Distribution”). Dendreon UK and Dendreon Holdings are wholly-owned subsidiaries of the Company, and Dendreon Distribution and Dendreon Manufacturing are wholly-owned subsidiaries of Dendreon Holdings. The consolidated financial statements for the year ended December 31, 2010 include the accounts of Dendreon and its direct and indirect wholly-owned subsidiaries, Dendreon UK, Dendreon Holdings, Dendreon Distribution and Dendreon Manufacturing. The consolidated financial statements for the years ended December 31, 2009 and 2008 include the accounts of Dendreon and its wholly-owned subsidiary, Dendreon San Diego, LLC, through February 2, 2009, the effective date of dissolution of the entity. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> All intercompany transactions and balances have been eliminated in consolidation. </div> <div style="margin-top: 12pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent"> <b><i><font style="font-family: 'Times New Roman', Times">Reclassifications</font></i></b> </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> Certain prior period balances have been reclassified in order to conform to the current period presentation. </div> <div style="margin-top: 12pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent"> <b><i><font style="font-family: 'Times New Roman', Times">Use of Estimates</font></i></b> </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> Our financial statements 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 assets and 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 ongoing basis, we evaluate our estimates, including those related to revenue recognition, investments, fair values of acquired assets, income taxes, financing activities, long-term service contracts, clinical trial accruals and other contingencies. Management bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could differ from these estimates. </div> <div style="margin-top: 12pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent"> <b><i><font style="font-family: 'Times New Roman', Times">Revenue Recognition</font></i></b> </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> We recognize revenue primarily from the sale of PROVENGE and collaborative research agreements. Revenue from the sale of PROVENGE is recorded net of product returns and estimated healthcare provider contractual chargebacks. Revenue from sales of PROVENGE is recognized upon our confirmed product delivery to and issuance of the product release form to the physician site. As we executed a drop shipment agreement with a credit worthy third party wholesaler (“Wholesaler”) to sell PROVENGE, the Wholesaler assumes all bad debt risk from the physician, and no allowance for bad debt is recorded. Due to the limited usable life of our product, actual returns are credited against sales in the month they are incurred. Healthcare provider contractual chargebacks are the result of contractual commitments by us to provide products to healthcare providers at specified prices or discounts such as pursuant to mandatory federal programs. Chargebacks occur when a contracted healthcare provider purchases our products through the Wholesaler at fixed contract prices that are lower than the price we charge the Wholesaler. The Wholesaler, in turn, charges us back for the difference between the price initially paid by the Wholesaler and the contract price paid to the Wholesaler by the healthcare providers. These chargebacks will be recognized in the same period that the related revenue is recognized, resulting in a reduction in product sales revenue, and will be recorded as other accrued liabilities. For the year ended December 31, 2010, we did not have any chargebacks. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> We recognize collaborative research revenue from up-front payments, milestone payments, and personnel-supported research funding. We also recognize license revenue from intellectual property and technology agreements. The payments received under these research collaboration agreements are generally contractually not refundable even if the research effort is not successful. Performance under our collaborative agreements is measured by scientific progress, as mutually agreed upon by us and our collaborators. Such revenue was insignificant for the years ended December 31, 2010, 2009 and 2008. </div> <div style="margin-top: 12pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent"> <b><i><font style="font-family: 'Times New Roman', Times">Inventory</font></i></b> </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> Inventories are determined at the lower of cost or market value with cost determined under the specific identification method. Inventories consisted of raw materials at December 31, 2010 and 2009, but we may also have work in process and finished goods at any given time. We began capitalizing raw material inventory in mid-April 2009 in preparation for our PROVENGE product launch when the product was considered to have a high probability of regulatory approval and the related costs were expected to be recoverable through the commercialization of the product. Costs incurred prior to mid-April 2009 have been recorded as research and development expense in our statement of operations. As a result, inventory balances and cost of revenue for the next few quarters will reflect a lower average per unit cost of materials. </div> <div style="margin-top: 12pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent"> <b><i><font style="font-family: 'Times New Roman', Times">Prepaid Antigen Costs</font></i></b> </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> The Company utilizes a third party supplier to manufacture and package the recombinant antigen used in the manufacture of PROVENGE. The Company takes title to this material when accepted from the third party supplier and stores it as raw material inventory for manufacturing and eventual sale. Upon successful manufacturing of the antigen, the prepaid costs of these materials are capitalized and transferred to inventory as antigen is received. </div> <div style="margin-top: 12pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent"> <b><i><font style="font-family: 'Times New Roman', Times">Research and Development Expenses</font></i></b> </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> Nonrefundable prepayments for research and development goods and services are deferred and recognized as the services are rendered. Research and development expenses include, but are not limited to, payroll and personnel expenses, lab expenses, clinical trial and related clinical manufacturing costs, facilities and related overhead costs. </div> <div style="margin-top: 12pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent"> <b><i><font style="font-family: 'Times New Roman', Times">Property and Equipment</font></i></b> </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> Property and equipment are stated at cost and are depreciated using the straight-line method over the estimated useful lives of the assets, which range from two to sixteen years. Included in fixed assets is the cost of internally developed software. We expense all costs related to internally developed software, other than those incurred during the application development stage. Costs incurred during the application development stage are capitalized and amortized over the estimated useful life of the software. Estimated useful lives of furniture and fixtures and laboratory and manufacturing equipment are seven years, office equipment is five years, buildings are sixteen years and computers and software are three years. Computers and equipment financed under capital leases are amortized over the shorter of the useful lives of the related assets or the lease term. Leasehold improvements are stated at cost and amortized using the straight-line method over the remaining life of the lease or ten years, whichever is shorter. Construction in progress is reclassified to the appropriate fixed asset classifications and depreciated accordingly when related assets are deemed ready for their intended use and placed in service. We capitalize interest on borrowings during the construction period of major capital projects. Capitalized interest is added to the cost of the underlying assets and is amortized over the useful lives of the related assets. </div> <div style="margin-top: 12pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent"> <b><i><font style="font-family: 'Times New Roman', Times">Impairment of Long-Lived Assets</font></i></b> </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> Losses from impairment of long-lived assets used in operations are recognized when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets’ carrying amount. We periodically evaluate the carrying value of long-lived assets to be held and used when events and circumstances indicate that the carrying amount of an asset may not be recovered. </div> <div style="margin-top: 12pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent"> <b><i><font style="font-family: 'Times New Roman', Times">Cash, Cash Equivalents, and Investments</font></i></b> </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> We consider investments in highly liquid instruments purchased with an original maturity at purchase of 90 days or less to be cash equivalents. The amounts are recorded at cost, which approximates fair value. Our cash equivalents and short-term and long-term investments consist principally of commercial paper, money market securities, treasury notes, agency bonds, corporate bonds/notes and certificates of deposit. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> We have classified our entire investment portfolio as <font style="white-space: nowrap">available-for-sale.</font> <font style="white-space: nowrap">Available-for-sale</font> securities are carried at fair value, with unrealized gains and losses reported as a separate component of stockholders’ equity and included in accumulated other comprehensive income (loss). The amortized cost of investments is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion are included in interest income. Interest earned on securities is included in interest income. Gains are recognized when realized in our consolidated statements of operations. Losses are recognized when realized or when we have determined that an <font style="white-space: nowrap">other-than-temporary</font> decline in fair value has occurred. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> We periodically evaluate whether declines in fair values of our investments below their cost are <font style="white-space: nowrap">other-than-temporary.</font> This evaluation consists of several qualitative and quantitative factors regarding the severity and duration of the unrealized loss as well as our ability and intent to hold the investment until a forecasted recovery occurs. Additionally, we assess whether it is more likely than not we will be required to sell any investment before recovery of its amortized cost basis. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> We consider an investment with a maturity greater than twelve months from the balance sheet date as long-term and a maturity less than twelve months as short-term at the balance sheet date. The cost of securities sold is based on the specific identification method. </div> <div style="margin-top: 12pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent"> <b><i><font style="font-family: 'Times New Roman', Times">Warrant Liability</font></i></b> </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> On April 3, 2008, we issued 8.0 million shares (the “Shares”) of our common stock, and warrants (the “Warrants”) to purchase up to 8.0 million shares of common stock to an institutional investor (the “Investor”). The Investor purchased the Shares and Warrants for a negotiated price of $5.92 per share of common stock purchased. The Warrants were exercisable at any time prior to October 8, 2015, with an original exercise price of $20.00 per share of common stock and included a net exercise feature. On May 18, 2010 (the “Exercise Date”), we entered into an amendment (the “Amendment”) to the warrant agreement. Pursuant to the terms of the Amendment, the exercise price of the Warrants was amended from $20.00 to $8.92 per share, and the Investor concurrently exercised the warrant for 8,000,000 shares of common stock, resulting in aggregate cash proceeds to the Company of $71.4 million. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> The Warrants were recorded at fair value at issuance and were adjusted to fair value at each reporting period until the Exercise Date. Any change in fair value between reporting periods was recorded as other income (expense). The Warrants continued to be reported as a liability until they were exercised, at which time the Warrants were adjusted to fair value and reclassified from liabilities to stockholders’ equity. The fair value of the Warrants was estimated using the Black-Scholes-Merton (“BSM”) option pricing model. The fair value of the Warrants on the Exercise Date was $275.5 million, compared with $133.0 million at December 31, 2009. During the years ended December 31, 2010 and 2009, losses of $142.6 million and $118.8 million, respectively, were recognized from valuation of the warrant liability. During the year ended December 31, 2008, we recorded a gain of $371,000 from valuation of the warrant liability. </div> <div style="margin-top: 12pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent"> <b><i><font style="font-family: 'Times New Roman', Times">Fair Value</font></i></b> </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> We measure and report at fair value our cash equivalents and investment securities. We also measured and reported at fair value our warrant liability, prior to exercise of the Warrants in the second quarter of 2010. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability, an exit price, in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value maximize the use of observable inputs and minimize the use of unobservable inputs. The hierarchy of fair value measurements is described below: </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="text-align: left"> <tr> <td width="4%"></td> <td width="10%"></td> <td width="86%"></td> </tr> <tr valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> <td> </td> <td> Level 1 — </td> <td align="left"> Observable inputs for identical assets or liabilities such as quoted prices in active markets; </td> </tr> <tr style="line-height: 6pt; font-size: 1pt"> <td> </td> </tr> <tr valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> <td> </td> <td> Level 2 — </td> <td align="left"> Inputs other than quoted prices in active markets that are either directly or indirectly observable; and </td> </tr> <tr style="line-height: 6pt; font-size: 1pt"> <td> </td> </tr> <tr valign="top" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> <td> </td> <td> Level 3 — </td> <td align="left"> Unobservable inputs in which little or no market data exists, therefore determined using estimates and assumptions developed by us, which reflect those that a market participant would use. </td> </tr> </table> <div style="margin-top: 12pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent"> <b><i><font style="font-family: 'Times New Roman', Times">Debt Issuance Costs</font></i></b> </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> Debt issuance costs of approximately $3.0 million related to our 4.75% Convertible Senior Subordinated Notes due 2014 (the “2014 Notes”) issued in June and July of 2007 are amortized over the life of the 2014 Notes. Amortization expense, including amounts expensed due to the conversion of the notes into equity, was approximately $1.4 million, $428,000 and $428,000 for the years ended December 31, 2010, 2009 and 2008, respectively, and is reported as interest expense. </div> <div style="margin-top: 12pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent"> <b><i><font style="font-family: 'Times New Roman', Times">Accounting for Stock-Based Compensation</font></i></b> </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> Stock-based compensation cost is estimated at the grant date based on the award’s fair value and is recognized on the accelerated method as expense over the requisite service period. Compensation cost for all stock-based awards is measured at fair value as of the grant date. The fair value of our stock options is calculated using the BSM model. The BSM model requires various highly judgmental assumptions including volatility, forfeiture rates and expected option life. If any of the assumptions used in the BSM model change significantly, stock-based compensation expense for new awards may differ materially in the future from that recorded in the current period. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> We also grant restricted stock awards that generally vest over a four year period; however in 2006 and 2007, we granted restricted stock awards with certain performance conditions to all employees. The restricted stock awards granted in 2006 and 2007 with remaining performance conditions all vested upon marketing approval for PROVENGE by the FDA on April 29, 2010 (the “Approval Date”). In addition, in December 2010 we granted restricted stock awards with certain performance conditions to certain executive officers. At each reporting date, we are required to evaluate whether achievement of the performance condition is probable. Compensation expense is recorded based upon our assessment of accomplishing each performance provision, over the appropriate service period. For the year ended December 31, 2010, no expense was recognized related to these awards. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> We determine the fair value of awards under our Employee Stock Purchase Plan using the BSM model. </div>  </div>   <div style="margin-left: 0%">  <div align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent"> <b> <font style="font-family: 'Times New Roman', Times"> </font> </b> </div> <div style="margin-top: 0pt; font-size: 1pt"> </div> <div align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent"> <b> <font style="font-family: 'Times New Roman', Times"> </font> </b> </div>  <div style="margin-top: 12pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent"> <b><i><font style="font-family: 'Times New Roman', Times">Net Loss Per Share</font></i></b> </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> Basic net loss per share is calculated by dividing net loss by the weighted average number of common shares outstanding. Because we report a net loss, diluted net loss per share is the same as basic net loss per share. We have excluded all outstanding stock options, Warrants and unvested restricted stock, as well as shares issuable in connection with the conversion of the 2014 Notes and our Common Stock Purchase Agreement with Azimuth Opportunity Ltd. (the “Common Stock Purchase Agreement”) that expired during October 2010, from the calculation of diluted net loss per common share because all such securities are anti-dilutive to the computation of net loss per share. Shares excluded from the computation of net loss per share were 7.6 million, 31.7 million and 35.6 million for the years ended December 31, 2010, 2009 and 2008, respectively. </div> <div style="margin-top: 12pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent"> <b><i><font style="font-family: 'Times New Roman', Times">Income Taxes</font></i></b> </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> Deferred taxes are measured using enacted tax rates expected to be in effect in a year in which the basis difference is expected to reverse. We continue to record a valuation allowance for the full amount of deferred tax assets, which would otherwise be recorded for tax benefits relating to operating loss and tax credit carryforwards, as realization of such deferred tax assets cannot be determined to be more likely than not. </div> <div style="margin-top: 12pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent"> <b><i><font style="font-family: 'Times New Roman', Times">Concentrations of Risk</font></i></b> </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> We are subject to concentration of risk from our investments and single-source vendors for some components necessary for PROVENGE and our active cellular immunotherapy product candidates. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> Our investment portfolio is maintained in accordance with our investment policy, which specifies credit quality standards, limits our credit exposure to any single issuer and defines allowable investments. Pursuant to our policy, auction rate or asset-backed securities without a guarantee by the U.S. government are not permitted to be purchased. The fair value of our cash equivalents and marketable securities is subject to change as a result of changes in market interest rates and investment risk related to the issuers’ credit worthiness. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> We proactively monitor and manage our portfolio. If necessary, we believe we are able to liquidate our investments within the next year without significant loss. We currently believe these securities are not significantly impaired, primarily due to the government and major corporate guarantees of the underlying securities; however, it could take until the final maturity of the underlying notes to realize our investments’ recorded values. Based on our expected operating cash flows, and our other sources of cash, we do not anticipate the potential lack of liquidity on these investments will affect our ability to execute our current business plan. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> Our risk for single-source vendors is managed by maintaining a certain level of existing stock of components and a continued effort to establish additional suppliers. </div> <div style="margin-top: 12pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 2%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent"> <b><i><font style="font-family: 'Times New Roman', Times">Recent Accounting Pronouncements</font></i></b> </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> Effective during the quarter ended March 31, 2010, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) <font style="white-space: nowrap">2010-09,</font> “Subsequent Events” (“ASU <font style="white-space: nowrap">2010-09”),</font> amending ASC 855, “Subsequent Events,” to state that an entity that is a SEC filer is required to evaluate subsequent events through the date that the financial statements are issued, but is not required to disclose the date. The amendment was effective commencing with the quarter ended March 31, 2010. The adoption of ASU <font style="white-space: nowrap">2010-09</font> did not have a significant impact on our financial statements. </div> <div style="margin-top: 6pt; font-size: 1pt">  </div> <div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 4%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent"> During the quarter ended March 31, 2010, we adopted ASU <font style="white-space: nowrap">2010-06,</font> “Fair Value Measurements and Disclosures” (“ASU <font style="white-space: nowrap">2010-06”),</font> which updated ASC 820, “Fair Value Measurements and Disclosures.” ASU <font style="white-space: nowrap">2010-06</font> requires disclosure as to the amounts and purpose of significant asset transfers between Level 1 and 2 fair value measurements. ASU <font style="white-space: nowrap">2010-06</font> also requires separate disclosure of Level 3 fair value measurement activity as it relates to purchases, sales, issuances and settlements. The disclosure requirements related to Level 1 and Level 2 fair value measurements were effective commencing with the quarter ended March 31, 2010. The disclosure requirements related to the Level 3 fair value measurements are effective commencing with the quarter ending March 31, 2011. The adoption of ASU <font style="white-space: nowrap">2010-06</font> did not have a material impact on our financial statements. </div> </div>  <!-- Begin Block Tagged NotefalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringThis element may be used to describe all significant accounting policies of the reporting entity.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 22 -Paragraph 8 falsefalseORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES12Organization and Summary of Significant Accounting PoliciesUnKnownUnKnownUnKnownUnKnownfalsetrue