Five Big Questions For Dendreon’s Analyst Day

Xconomy Seattle — 

Dendreon shocked the cancer research world back in April, proving for the first time in a major clinical trial that a drug which actively stimulates the immune system can be effective against tumors. Now the Seattle-based company has to wrestle with a whole new set of challenges to make sure it fully exploits the potential of its drug, sipuleucel-T (Provenge), which most analysts say has potential to easily top $1 billion in annual sales for patients with prostate cancer.

The company (NASDAQ: DNDN) has put off answering a few important questions about how it plans to accomplish that via manufacturing, partnering, pricing, and marketing strategy until its analyst day today in New York. I will not be attending this meeting, but I thought it would be useful, for Dendreon watchers, to provide a bit of a preview on the key issues the company will have to address at this forum. Investor expectations are running high, as the company touched a 52-week high of $30.42 a share on Tuesday.

Here are some key issues the company will be prepared to discuss:

FDA Timelines. While Dendreon clearly reached its goal of helping men live a median of four months longer than a placebo in its trial of 512 men with prostate cancer, it still needs to put together an airtight application to win FDA approval to start selling Provenge in the U.S. Dendreon has said it plans to gather all the data for its amended application, and turn the whole thing in to the FDA in the fourth quarter of this year. Since Dendreon already filed an application based on earlier data in 2007, and it really only needs to add the database from the latest big trial, this process shouldn’t drag on into 2010.

Dendreon has said it expects a six-month review of its Provenge application, so investors will set their calendars for that future date the minute Dendreon files its application. If Dendreon turns in its application in October, it could get FDA approval as soon as March.

Manufacturing. Putting together an airtight application to the FDA has to be a top priority, but manufacturing is right up there on the list. This is especially critical for Dendreon, because Provenge isn’t made like a conventional chemically synthesized pill, or even like a common genetically engineered protein drug like Amgen’s etanercept (Enbrel). The Dendreon treatment is made of a genetically engineered protein found on prostate cancer cells, called PAP, fused to an immune-boosting compound, called GM-CSF. This fusion protein is incubated for a couple of days with an individual patient’s own white blood cells to “teach” them to fight prostate cancer. The revved-up cells are personalized to each patient, and need to be shipped back to the clinic to be re-infused into the patient.

This requires a lot of back-and-forth shipping, so smooth logistics will be key. Dendreon’s initial manufacturing plant is in Morris Plains, NJ, which has capacity when it’s fully built out to supply about $500 million to $1 billion of Provenge for the U.S. market, Dendreon has said. Those sales won’t happen overnight, but initial demand could be very high for a product. Tens of thousands of patients every year with relapsed forms of prostate cancer, and about 93 percent of target physicians, are aware of Provenge, even before official marketing has begun, according to Dendreon’s market research. So the company is planning now to build out two new manufacturing plants in different regions of the country—suburban Atlanta, GA, and Orange County, CA—which will give it some breathing room to ensure it can meet demand for years to come, and some backup in case of a natural disaster or some other possible interruption to its all-important supply chain of potentially life-saving material.

Dendreon watchers with a sense of history know how important it is for the company’s management to get the manufacturing right. Chief scientific officer David Urdal, who spearheads manufacturing, was one of the early employees at Seattle-based Immunex in the 1980s. He remembers when that company failed to meet the demand for its blockbuster arthritis drug, Enbrel, which cost the company hundreds of millions in sales and ultimately led to its takeover by Amgen for $10 billion in 2002.

Marketing. Dendreon has said it plans to market the drug by itself in the U.S., but who will be in charge? The company needs a sales and marketing executive, following the departure last year of James Caggiano, who had been hired in 2004 from Abbott Laboratories to lead marketing of Provenge. Caggiano left Dendreon before the positive clinical trial results appeared in April. If Dendreon wants to stir up a little buzz, the New York analyst day would be a good time to show off a charismatic marketing guru to Wall Street.

Pricing. This has been a big variable on a lot of Wall Street analysts’ financial models. Will Provenge be priced at the outer edge of biotech drugs, like Eli Lilly’s cetuximab (Erbitux), at $10,000 per month, or has the whole health care reform effort forced companies like Dendreon to back off a little bit on the most aggressive pricing standards? CEO Mitchell Gold has been vague on this point, only saying the company will price its product “comparable” to other biotech drugs, which leaves him a lot of wiggle room. Expect the analysts to pin him down for a more specific range.

Partnering. Lots of rumors have circulated ever since Reuters reported in July that Dendreon hired JP Morgan to look for a partner to help commercialize Provenge in Europe, which some people naturally assumed might lead a partner to want to become an acquirer. Dendreon’s co-founder and former CEO, Christopher Henney, suggested this might be a possibility during an exclusive interview with Xconomy a few days later in July. If Dendreon wants to throw a little red meat to its rabid followers on the street—and Gold certainly has a flair for the dramatic—he might be ready to unveil a partnership deal in Europe that will bring in a lot more money and muscle for manufacturing and marketing.

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One response to “Five Big Questions For Dendreon’s Analyst Day”

  1. Luke, Your timing of this article is perfect. Investors who read this and want to tune in to the analyst day presentation by Dendreon now have an excellent score card to keep track of what really matters.