Dendreon’s Provenge blockbuster opportunity

We’re a bit frustrated, as we the things we follow had quite a run, but now we don’t trust the markets anymore, to be honest. We’re looking for things that could be relatively immune to a market fall. This could be one of them, we already wrote about this company.

The one problem we have, we don’t like this sector, it’s a bit of a mine field, as is already made clear from the first sentence. Depending on what happens in the regulatory process, stock prices, especially of the smaller companies, often make dramatic moves that are very difficult to assess beforehand by an outsider (and even insiders can be taken by surprise). However, Provenge does seem to be well on it’s way, having cleared major hurdles already. The final approval is still a year away though. But they’re not sitting still..

Dendreon’s Gold: What’s Next for Provenge

Adam Feuerstein

05/20/09 – 10:43 AM EDT

Biotech executives can spend an entire career without ever pushing a new drug across the finish line. Dendreon’s(DNDN Quote) Mitch Gold doesn’t intend to be one of those executives.

The CEO of the Seattle-based drugmaker says he’s barely stopped to catch his breath, let alone see his family much, since April 28 when the company’s drug Provenge was shown to extend the lives of men with advanced prostate cancer.

In the three weeks since that transformative event for Dendreon, Gold and his team have raised a pile of money (including some for themselves), started the process of readying Provenge for another review by U.S. drug regulators, jump-started the hiring of a commercial sales operation and dusted off plans for a significant expansion of Provenge manufacturing capacity.

On top of all that, Gold and Dendreon’s CFO, Greg Shiffman, have been both courting and interrogated by institutional investors. For a long time, much of Wall Street looked askance at Dendreon; today many of those same investors are believers, and others are kicking the tires trying to decide if Dendreon, a $21 stock today, could double or triple on a Provenge approval and successful launch.

“We’re getting tons of investor interest in the company,” said Gold, speaking in a downtown Boston hotel room Tuesday afternoon during a short break from what had been two days of nonstop investor meetings.

“We used to come to these investment conferences and be handed a list of one-on-one [investor] meetings. Now, we’re booked into two- and three-on-one meetings, and seven- and eight-on-one meetings. It’s incredible.”

Financing and Insider Sales

Dendreon has cashed in on the newfound investor interest. The company raised $220 million in a follow-on equity financing on May 8.

“The financing was not something we were planning, but a bank approached us and said they wanted to bid on a block of stock. Within 30 hours or so, we had two banks vying for the business, and we did the deal that afternoon,” said Gold, adding that the deal was also an opportunity for Dendreon to transform its shareholder base.

The deal was over-subscribed, and the investors who participated were mostly long-only mutual funds, so it’s a much more long-term oriented investor base,” he said.

Before Dendreon’s financing, insiders including Gold unloaded some of their own company stock at higher prices. The insider sales angered some of Dendreon’s longtime investors, who questioned whether Gold and his team were putting their own financial interests ahead of the company.

Gold defended his decision to sell about 40% of his Dendreon holdings. “For me, almost all of my net worth is tied up in Dendreon, so this was an opportunity to get some diversification for my family. The vast majority of my net worth is still tied up in Dendreon, so it’s something that I’m committed to on multiple different levels.”

FDA Approval, Manufacturing Needs

On the regulatory front, Dendreon is working to put together a data package on Provenge that will be submitted to the U.S. Food and Drug Administration in the fourth quarter. The FDA reviewed Provenge already in 2007, so the latest data submission is technically an amendment to that pre-existing approval application.

Why, then, will it take into the fourth quarter to complete the FDA submission?

“Some people say, ‘Oh just put the data together and send it in,’ but it’s not the way it goes,” said Gold. “There is a formal process to resubmit. I do think we can leverage some of the advantages of having the BLA [Biologic License Application] in there, but it is a whole new study that you have to create an entirely new set of documents for.”

Gold says the FDA will take six months to review the resubmitted Provenge application.

Dendreon is also working to ensure that the FDA signs off on the New Jersey manufacturing facility where Provenge is processed for patients. In 2007, regulators inspected the plant and came away with some concerns.

“We believe that we substantially resolved the [manufacturing] issues; however, until you actually amend your BLA and resubmit, you do not get formal feedback,” said Dendreon CFO Schiffman.

Added Gold: “When that plant was inspected the last time, it had just completed build-out, and I don’t think it had processed any clinical product yet. Now, we’ve processed clinical product there for the last two-plus years. It’s a fully functioning plant, and we’ve integrated the feedback received from the FDA.”

The Dendreon manufacturing plant is capable of supporting between $500 million and $1 billion in Provenge sales at full capacity. However, the current plant is only built out to 25% capacity.

Dendreon plans to use some of the money raised in the last financing to boost the plant’s capacity to 100%, which will take about 12 to 14 months, said Schiffman.

The company is also working on plans to build entirely new Provenge manufacturing facilities, probably on the West Coast or somewhere in the Midwest, he said.

“The great thing about these plants is that they’re not like recombinant protein plants that cost $750 million to build and are five-year endeavors. We have a third party that does the recombinant protein for us in their own facility,” said Schiffman. “What we need on our end fits inside a large warehouse, and there are a lot of warehouses out there. We can spend $60 to $70 million to build a new manufacturing facility that takes 12 to 14 months to complete.”

Still, if Provenge is approved next year, Dendreon will launch the prostate cancer drug with a manufacturing plant operating at 25% capacity. Given the enormous interest expected from prostate cancer patients for Provenge, will that be enough to prevent shortages or wait lists for the drug?

Provenge Pricing, Sales

Even at 25% capacity, we can support $125 to $250 million in Provenge sales. None of the analysts in the first year after launch have us doing even north of $50 million,” says Gold, clearly trying to manage expectations for the Provenge launch even one year before it could occur.

“[Provenge] is not a product like Viagra where you just load up a truck and ship it across the country. We’re going to want to make sure that we launch this product in an appropriate fashion for the type of product that it is.”

More from Gold on the Provenge’s potential price and commercial market opportunity:

“Most people are modeling Provenge along the lines of Erbitux now,” said Gold, referring to the cancer drug from Eli Lilly(LLY Quote) and Bristol-Myers Squibb(BMY Quote). “I think Erbitux costs around $80,000 a year now. … I’m not saying that’s going to be the Provenge price, but that’s what analysts and people on the Street have in their heads when thinking about a Provenge price.

“If you use that assumption and say that the market size is 100,000, men then the total commercial market opportunity for Provenge is $8 billion.”

Gold on Provenge in Europe:

“We have only had superficial high-level discussions with the Europeans, so the European regulatory strategy and European commercial plans are things that we’re really going to look for a partner to oversee. Dendreon is going to focus on the U.S. market. ”

Gold on signing a partnership for Provenge or entertaining acquisition offers for the entire company:

“We are committed to commercializing Provenge ourselves in the U.S. and finding a partner outside the U.S. … If someone puts an offer on the table for the entire company we have a fiduciary responsibility to consider it, but that’s not how we’re building the company or how we’re planning on building the immunotherapy franchise.

Gold on the robustness of the Provenge data package:

“The Provenge data are robust and have held up to multiple sensitivity analyses and are consistent across subgroups. So we are not finding anything when we look at the data that is at odds with the overall survival benefit that we see.

“We have brought in external people to look at it, and what they’ve said is that you met the survival endpoint, which is the primary endpoint and is unequivocal. We are very happy with the data set the way it looks.”

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