Dendreon: Is It Time to Take Some Off the Table?

By Investor Village poster q1000

Provenge Approval and Background

Dendreon issued a press release on April 29th announcing that the FDA had approved Provenge for the treatment of men with advanced prostate cancer (“PC”).
http://tinyurl.com/23pbpfn

A very interesting 19-page FDA document summarizes all of the issues relating to Provenge and the FDA’s consideration of it. This document will be referred to as FDA Summary Document. The FDA document says that, when all three Phase 3 trials involving 737 patients were integrated the p-value for survival was 0.0009 (p.13); this means that there were only 9 chances in 10,000 that the good results were random. The FDA Summary Document is an interesting read although made less so by many “b(4)” deletions—presumably confidential information of Dendreon.
http://tinyurl.com/25mwqwh

What Dendreon has done in creating a therapeutic vaccine has its roots in the 19th century. Fifty years to the day before I was born, Dr. William Coley gave a 16-year old boy with massive abdominal cancer Coley’s Toxins—basically infectious material. Coley believed the general immune system response to the toxins would encourage the immune system to kill the cancer. Seven months later the boy had little evidence of the tumor; he lived another 26 years. Radiation and chemo were popular at the time and Dr. Coley’s approach dropped out of favor after his death in 1936.
http://en.wikipedia.org/wiki/William_Coley

Bioworld points out that using a vaccine to harness the immune system and fight cancer has long captivated scientists and notes that seven biotech companies have already failed in that effort.
http://tinyurl.com/2d897t4

It has been a long and bumpy road for Dendreon, for men with prostate cancer that would have benefited from Provenge and for my investment. One poster estimates that 90,000 men have died in the three years that have passed since the FDA delayed Provenge.
http://tinyurl.com/297p59f

I am convinced that many of these men would be alive today if the FDA had not taken an overly statistical approach three years ago and had instead followed the opinion of the experts on the Advisory Committee. However, if the FDA had approved Provenge three years ago, many of the 90,000 probably would have died long before they could have received Provenge; Dendreon did not have the manufacturing plants then. But then a lot of men are still going to die in the next year or two without getting access to Provenge due to shortages since only 25% of the New Jersey plant is operating at the outset; if Provenge had been approved three years ago, the three plants would presumably all be capable of producing Provenge at capacity today. [1]

I made my first investments in December 2000 and in early 2001, all in the $13.00 to $14.50 range. Later I added to my position, mostly at lower prices, so my average cost is $6+ per share. In early 2001, four of us flew to Seattle and met with Dendreon senior executives, including the then CEO, Chris Henney. We were most impressed but did not dream that success would take over nine years!

DNDN held a conference call to discuss the FDA Approval of Provenge (“Approval”) with analysts. It must have been a very special day for Dr. Mitchell Gold (“Gold”), the CEO, who at the beginning of the call said that his mother had died at age 26 of breast cancer when Gold was only 5 years old. He told a reporter that he would fly to New Jersey to see the first patient’s Provenge emerge from Dendreon’s plant there. [2] There were several important announcements during the conference call:

• The three rounds of Provenge taken over the course of four weeks will cost $93,000. Most projections I had seen expected the price to be in the $65,000 to $75,000 range.

• Dendreon has put partnership discussions for the Rest of the World aside for now and is initiating discussions with authorities in the EU and elsewhere regarding Approval.

• Demand will exceed supply at the outset and Dendreon expects to be able to handle only 2,000 patients during the first 12 months of operations. 2,000 patients at $93,000 would produce revenues of $186 million in the first 12 months—obviously the total would be less if Medicare cuts the price.

• The market in the EU is about twice the size of the U.S. I suspect that this figure is meant to be stated in terms of the number of patients, not the amount of revenues. The EU countries, especially the U.K., will undoubtedly force down the price before they approve Provenge. Earlier this year, the new COO, Hans Bishop, said that the Provenge “opportunity outside of North America is probably three times bigger than the opportunity in North America” but cautioned, “We have no manufacturing capacity outside of North America, so it is several years away.”[3]

• Dendreon ducked the question of how many patients could be handled when all three plants are fully built out, inspected and approved by the FDA, saying instead that the three plants could provide between $1.2 and $2.5 billion in revenue. In the Presentation on May 11, 2010, the Company explained that the wide range in revenues, despite having now set the $93,000 price, was due to uncertainties about plant utilization rates.

While it is supply-constrained, Dendreon will offer Provenge only through 50 centers across the country that were involved in the clinical trials, including Virginia Mason Medical Center in Seattle. Dr. John Corman of Virginia Mason, a PROSTATE CANCER specialist who has been involved in Provenge studies for eight years, declared Provenge “a potentially new era in treating cancer in general and prostate cancer specifically.”
http://tinyurl.com/26euykv

For DNDN devotees, Atlantic magazine had an interesting article by a former Harvard professor who wrote about the early days of dendritric cell research and of Dendreon’s founding.
http://tinyurl.com/2dan897

On May 3rd, Dendreon ran an excellent full page color advertisements regarding Provenge Approval in the New York Times, the Washington Post and some other newspapers. The NYTimes ad was on page A6.

On May 4th, the Seattle Times sponsored a “chat” with David Miller of Biotech Stock Research and Dr. Celestia Higano of the University of Washington, who was involved in the Provenge trials; Miller and Higano answered questions online. It is a bit disjointed to read but there are a few points that I will reference herein based upon “the Chat.” For example, in the Chat, Miller opined as to the number of patients to be treated, when all three facilities are completed in mid-2011: “I’d guess north of 20,000 a year conservatively.” 20,000 patients at $93,000 per patient would be $1.86 billion in revenues.
http://tinyurl.com/2dqaq3o

On May 4th, the National Cancer Institute, a federal agency, put out an upbeat news release about the Approval of Provenge. Here is a nice quotes from the release:

“The field of cancer immunotherapy received an important boost last week with the FDA’s approval of the first therapeutic cancer vaccine, sipuleucel-T (Provenge).

* * *

Unlike some other therapeutic cancer vaccines under development, sipuleucel-T is customized to each patient. In the days prior to treatment, patients undergo a procedure called leukapheresis to isolate antigen-presenting cells (APCs) from their blood. These APCs include dendritic cells and macrophages, among other cells, that can “present” markers, or antigens, on their surfaces that are recognized by other immune cells, thereby sparking an immune response.

The APCs are sent to a Dendreon facility where they are cultured with a proprietary manufactured protein. The end result is a vaccine with hundreds of millions of “activated” APCs loaded with an antigen commonly found on most prostate cancer cells, called prostatic acid phosphatase (PAP). The vaccine is returned to the patient’s treating physician and infused into the patient, with the intent of spurring powerful immune system cells, T cells, to neutralize tumor cells that express PAP.”
http://www.cancer.gov/ncicancerbulletin/050410/page2

Dendreon’s May 20th press release about ASCO presentations had a couple of great quotes from Dr. Petrylak of Columbia University:

"With the recent FDA approval of PROVENGE for asymptomatic or minimally symptomatic metastatic castrate resistant (hormone refractory) prostate cancer, patients now have a new treatment option available that prolongs survival. Cancer immunotherapy represents an entirely new era in medicine and patient care."

On May 21st, UCSF put out a Provenge press release, saying that it “within a few weeks” it would become the only center in Northern California that would be able to offer Provenge outside of clinical trials. It also noted that it was involved in a trial in early stage disease where Provenge is given before the prostatectomy.
http://tinyurl.com/2fb7tw8

Take Some Off the Table?

I have had several conversations with fellow DNDN shareholders about whether now is the time to “take some off the table” and sell some Dendreon. I have never sold a single share of Dendreon in over 9 years as a shareholder but may make some sales in the coming months (I will owe a bundle in taxes on April 15, 2011, due to five Roth conversions that I did recently and will have to sell some stocks).

I always like to hit the keyboard and type my thoughts, pro and con, before making such a decision and thought that you might like to see the factors that I find would militate in favor of holding all of my Dendreon shares and those that would suggest selling some in the coming months. Please let me know if you see other significant Upside or Downside factors or otherwise have comments. This memo would probably have been more useful if I had been able to work on it solidly for a couple of days and kept it shorter since I started typing it when the stock was in the low 50s.

What Is Not Covered
I have focused on factors that are Dendreon-specific rather than those that affect the market generally or investors individually.

Macro Market Issues Not Covered

In making a decision on whether to sell some Dendreon, an investor might want to consider global issues relating to our economy. A non-exclusive list of things that concern me are the out-of-control entitlement programs and deficit spending generally at the federal level, especially after ObamaCare and its worrisome impact on health care costs, the horrendous budget problems that many states and cities face, the refusal of China to revalue its currency upward against the dollar, the debacle in Europe and the appreciation of the dollar against the euro (which could hurt our exports), the huge rise in the price of gold even as the dollar appreciates against the euro, our dependence on foreign oil, the effects on the economy of the tax increases that are scheduled to go into effect on January 1, 2011 and January 1, 2013 etc.

Individual Circumstances

Everyone’s circumstances are different and obviously one needs to take into account highly personal issues, such as the need to pay down debt, cash for college education of children, medical costs, risk tolerance, taxes, etc.

On the tax front, there are a couple of points that deserve brief mention:

• The federal capital gain tax rate is 15% this year but is scheduled to rise to 20% next year.

• State taxes need to be factored into the equation too. California has no special capital gains tax rate and the rate is 9.55% this year if I recall correctly.

• If you are subject to the federal alternative minimum tax, then your combined federal and California tax rate could be about 25% in 2010 and about 30% in 2011.

The scheduled increase in the capital gain rate for 2011 could cause a lot of tax selling in the rest of 2010 of stocks which have had good gains, including Dendreon.

Upside

Good Launch and Timely Completion and Approval of Additional Manufacturing Capacity
This upside is the reverse of one of the major downside risks. I suspect that there may be a great deal of skepticism among analysts and in the investment community as to Dendreon’s ability to launch Provenge without manufacturing or logistical problems and about the much-needed new capacity coming on-line in a timely fashion. The stock could receive a boost in the short term if Dendreon executes well on these issues.

In an excellent article, titled “Finding the Next Dendreon,” David Miller says that he was initially attracted to Dendreon because of its manufacturing capabilities.

“The manufacturing success rate for Provenge is above 95%. If there is a manufacturing failure, it takes a few days to fix. This is one of two key advantages of Provenge compared to other active immunotherapies, and one almost nobody talks about.

One company I analyzed a few years back had a 70% success rate. Since the FDA won't allow you to exclude these people from analysis in a pivotal trial, it means 30% of patients in the drug arm of the trial are guaranteed to do no better than the control arm because they never got your drug. Few, if any, drugs can survive those poor odds. Excluding this 30% of patients is often why early, non-pivotal studies appear so promising yet are unable to be replicated in the pivotal studies.

Such poor manufacturing rates are characteristic of approaches that need a piece of the patient’s tumor to work. I've never seen reliable, peer-reviewed data of any process using a patient’s tumor that had a manufacturing success rate over 80%. (That doesn’t mean it’s not out there, I just haven’t come across it yet in the companies we’ve looked at.)”
http://tinyurl.com/29rlezd

Use in Earlier Stage Disease

The FDA label for Provenge calls for its use in men with late-stage prostate cancer. This is a very small percentage of the men who have PC. The sales for Provenge could be huge if Dendreon is able to obtain a label expansion so that it is used in men with earlier stage disease or if doctors on their own decide to use Provenge “off-label” in such men, especially if insurance companies agree to reimburse for such early treatment. My recollection is that Dendreon cannot promote off-label use of Provenge but it sales reps are permitted to provide doctors with medical papers dealing with use of Provenge in earlier stage disease. For example, if there is a medical paper prepared regarding the next data from the P-11 trial, the sales rep could provide that paper to the doctor.

Last January, ocyan dealt with the question as to why Provenge extends survival without reducing the prostate tumors and spoke of Circulating Tumor Cells (“CTC”) and Approval of Provenge in early stage disease (318966):
http://tinyurl.com/2d3lbsq

“The answer lies in how Provenge works. It trains the immune system to first hunt for stray tumor cells on a long term basis so that they cannot spread to other parts of the body and second to attack any existing tumors. The long-term hunt for stray tumor cells is what makes Provenge different from drugs such as Taxotere and Avastin that aim mostly at destroying established tumors on a short-term basis.

The key in the Provenge trials was that enrolled patients must be free of any sign of metastasis to vital organs. The long-term hunt for stray tumor cells prevented the disease from spreading to places that could kill. That's what improved the chance for survival of treated patients over placebo ones.

The same protective mechanism could make Provenge a potentially good treatment to use in the early phase of the disease before it gets out too far from the prostate. Circulating Tumor Cells counting * * * is gaining some acceptance as a predictor for survival and could be accepted as a surrogate endpoint for prostate cancer trials. IMO, it would be easy to test the effectiveness of Provenge in reducing CTCs.

As I posted earlier, perhaps a new trial of Provenge in the Androgen-Dependent PC stage could be started to test for CTCs. That could go fairly quickly and could even be timed to finish at the same time as the P-11 trial for its Time-To-Metastasis endpoint. Then, if P-11 succeeds, a label extension to ADPC can be attempted with the additional data in a few years - perhaps even 2012.”

In a private message commenting on an earlier draft of this memo, ocyan noted:

“The arrival time of the Time-To-Metastasis that I gave for P-11 was based on a calculation that assumed a trigger at 60% of patients reaching the endpoint. That was consistent with IMPACT but it was also possible for that percentage to go up to 70% per common trial design. In that case, the timing will be off by about 2 years.”

Use of Provenge in men with earlier stage prostate cancer and healthier immune systems should be more effective as David Miller writes in the just-cited Minyanville article:

“I believe prostate cancer is the only place where an active immunotherapy is likely to be effective in later stages of the disease when used as a monotherapy. Prostate cancer is unique in its slow growth, though it can get out of hand quickly once metastatic and causing symptoms. Everyone believes the place to use active immunotherapies is in the earliest-stage patients you can afford.

“You can afford?” Odd statement, I know. Small companies have limited cash and are always burning it. We know the only proper clinical trial measure for active immunotherapies is survival. Earlier-stage patients live a long time. That means it takes a long time to get results from a clinical trial in earlier-staged patients. Long time equals more money.”

I doubt that a label expansion is in the cards any time in the next few years. DNDN has a couple of trials ongoing that involve men with earlier stage disease—the P-11 trial and the NeoACT trial. But neither of these trials would be sufficient for a label expansion absent a major change in policy by the FDA. And the results from the P-11 trial will not be available soon. The always reliable, ocyan, posted an interesting personal reflection after Approval and also indicated that the next major data for the P-11 trial would come in late 2011 or early 2012.
http://tinyurl.com/2ab2w3c

To do a clinical trial in men with earlier stage disease and with survival as the endpoint would take many years. In the Chat, Miller seemed to say it would take two years for a survival trial to commence, 2 to 3 years to enroll patients and probably 10 years to follow the enrolled patients. I doubt such a trial would happen unless Dendreon comes up with a Provenge #2 that would have a longer patent life.

David Miller has held out hope that one of the competing prostate cancer trials, Abiraterone discussed infra, would validate Circulating Tumor Cell technology as a surrogate that the FDA would accept in lieu of survival data; that would shorten the necessary trial periods substantially.

I am very optimistic that, with all of the publicity that Provenge has received recently and over the last three years, many patients will be pushing their doctors for early use. I also would not be surprised to see many wealthy PROSTATE CANCER patients in the Rest of the World fly here for the one-month Provenge treatment if Provenge will not be available in their home country for quite some time (see 350219).
http://tinyurl.com/22mea7f

Dr. Charles Drake, who works on prostate cancer at Johns Hopkins University, was recently quoted about earlier use of Provenge in the Voice of America News:

"I think we'll start to have the kind of clinical benefits that you alluded to, you know, more than four months. We want long-term survival, frankly. Maybe a cure," said Dr. Drake. (Emphasis added).
http://tinyurl.com/27osuzr

Dr. Corman of Virginia Mason is quoted in the Seattle Times article referenced earlier with these great quotes from the article:

"Patients and their families have been asking about the drug and tracking its roller-coaster ride through the regulatory process for years," Corman said. "I must talk about this with 10 patients a day.’"

"Though Provenge was approved specifically for advanced prostate cancer, it may prove even more powerful in men with earlier stages of the disease whose immune systems haven't been hammered by radiation and chemotherapy," said Corman, who is involved in studies to answer that question.

Doctors are allowed to prescribe drugs ‘off-label,’ and Corman said he's already getting requests from recently diagnosed men.

It's not clear yet whether insurance companies will restrict coverage to only patients with advanced cancer.

David Miller lost his father to prostate cancer and has a family history of PC. In post 34809, he says that, if he were diagnosed with PROSTATE CANCER and chose a prostatectomy, he would “mortgage the house to take Provenge as soon as I am healed after the surgery.”

In the Chat, Miller doubted that there would be much off-label use until late 2011 or 2012 when the backlog of late-stage PROSTATE CANCER patients with the conditions in the label has been satisfied. However, Dendreon itself has said that it will leave it up to the doctors at the 50 trial centers to choose the patients who will receive Provenge in this initial supply-constrained period. Possibly some doctors would choose to treat earlier stage patients in order to see how it works. However, Dendreon may well be limiting the number of treatments at each center—Dr. Higano said that each of the 50 sites around the country would have slots for only two patients per month. Since that would only add up to 1,200 in the first 12 months, not the 2,000 the company has mentioned, presumably the 2-per-site figure is for the initial phase and would be increased when the rest of the New Jersey facility is completed early in 2011. Doctors will probably find themselves in the difficult position of choosing which patients receive Provenge out of a much larger group of men that want Provenge.

In curious timing, the FDA on May 3rd issued a New Release warning about the side effects of Lupron and other hormone drugs that suppress testosterone due to concerns about “a small increased risk for diabetes, heart attack, stroke, and sudden death.”
http://tinyurl.com/24lw4mj

The late-stage PROSTATE CANCER patients eligible to take Provenge per the label have become resistant to the effects of these hormone drugs. If doctors become worried about the side effects of the hormone drugs, they may push patients to take Provenge off-label at an earlier stage and skip the hormones. In fact, many men will be pushing their doctors to do Provenge and skip the hormones entirely due to the side effects of hormone therapy, the main ones of which include:

• Constipation or diarrhea
• Nausea
• Loss of or decrease in appetite
• Dizziness or headache
• Swelling of or tenderness in the breasts
• Trouble sleeping
• Impotence or decrease in sex drive
• A bloated feeling accompanied by gas or indigestion
• Confusion
• Drowsiness
• Dryness of mouth
• Flu-like symptoms
http://tinyurl.com/27q4sne

David Miller in commenting on an earlier version of this memorandum said that he thought it unlikely that doctors would abandon hormones. He also said that the FDA’s warning is about 4 years late: all urologists are aware of the side effects of hormones and almost all do not keep their patients on constant hormone therapy.

I note that there is always the risk of the unknown when something new is tried. Could Provenge possibly trigger too much immune response in men with strong immune systems so that the immune system started attacking healthy tissue or did something else that was unexpected and bad? The fact that no such strong adverse reactions has occurred in the smaller earlier stage disease trials that Dendreon has done is encouraging on this point (see ocyan’s 349995).
http://tinyurl.com/255yryv

Takeover Candidate
Roth Capital Partners thinks that an “acquisition becomes an even more likely scenario for Dendreon. Provenge represents an unencumbered FDA approved asset that could provide a revenue stream to an acquiring company starting this year.”

Roth sees three likely candidates to acquire Dendreon. These companies have both an expertise in oncology and “explicit interests in immunotherapy.”

• Bristol-Myers. BMY is testing Ipilimumab in melanoma vaccine and for prostate cancer (see infra). BMY’s dividend yield is 5.6%.

• Sanofi-Aventis. This has been on my short list of possible acquirors since it has a long history with PROSTATE CANCER oncologists through its sales of the chemo drug, Taxotere, the sales of which are likely to be slowed by Provenge. SNY’s dividend yield is 4.1%.

• GlaxoSmithKline. GSK is testing a lung cancer vaccine. GSK’s dividend yield is 5.5%.

David Miller in an extension of the Chat discusses briefly his candidates for takeover of Dendreon:

“Merck and GSK are the two big pharma companies most aggressively developing active immunotherapies. They are the favorites. I would add Bayer, Abbott, and Roche to the list.”
http://tinyurl.com/265bl2p

Dendreon management has given every indication that it wants to go it alone and become a major Seattle-based biotech. A few years ago one of my old corporate securities law partners had a one word answer when I asked what would happen if a cash offer were made to one of my other biotech companies at a premium of 30% or so to the trading price—“SOLD.” I think the same thing would happen here even if management were determined to remain independent. According to the recent proxy, all executive officers and directors as a group own less that 1.1 million shares (not counting options which, of course, don’t vote). That number has changed in the last month since many officers had restricted stock grants which vested upon Provenge Approval and many officers have exercised options; I think the total is larger despite the stock sales by insiders but is still a very small percentage of the outstanding shares.

Note that a poison pill is not likely to stop an all-cash takeover. The Dendreon board has a fiduciary duty to the shareholders and it is very difficult for a board to turn down an all-cash offer at a substantial premium to the trading price. With a hedge fund owning 7.5% of the stock and Fidelity mutual funds owning nearly 15% and officers and directors owning such a small percentage of the stock, I do not see the type of long-term holders that might resist a takeover. The best that could be hoped for is that a bidding war would erupt with two or more Big Pharma and/or Big Biotech companies vying to own Dendreon. Presumably a number of these companies carefully inspected the data regarding Provenge when they were considering a ROW partnership with Dendreon and are already quite knowledgeable about Dendreon and its pipeline.

SaulK has been keeping tabs on the Dendreon shares held by those who follow the Investor Village board. Per post 349581, his latest tabulation was about 13 million shares, including his own substantial 500,000 position (it does not include the substantial holdings of my StockList folks.

Although such a large position would command lots of attention if all the IV shareholders worked in unison, the recent selling by many IV posters suggests that united action is far from clear. I do share SaulK’s hope that Dendreon becomes “the next Amgen” but suspect that only has a 10% chance of happening—but 50% I hope. Check out the 1985-2000 price appreciation for Amgen (but one should have sold AMGN in 2000).
http://tinyurl.com/2acnrwu

Replicating Genentech’s performance when Avastin data were revealed at ASCO in 2003 would be nice too (332764).
http://tinyurl.com/27axc54

SaulK’s post about Amgen’s history with Epogen and Neupogen and Dendreon’s potential to be the next Amgen still reads well a year later in this ugly market (275444).
http://tinyurl.com/24ddfpw

I note that even the great Amgen made some mistakes which Gold has not made. In our meeting in January 2001, I was still upset about one of my favorite biotechs having been taken over by Genzyme for a price that I thought was way too cheap and asked the then CEO, Dr. Henney, for assurances that Dendreon would not do the same. Henney was quite reassuring. He said that Amgen had had success with Epogen and Neupogen in the United States but made a strategic mistake early on when it was told by experienced advisers that a it needed to license the rights for Europe. Amgen gave those rights away for $25 million and a 10% royalty!

Analyst Upgrades
Although these recent upgrades should already be reflected in the stock price, possibly these upgrades may cause some new investors to take a close look at DNDN.

• Mark Monane of Needham & Company has been following DNDN longer than any other analyst. He usually is allowed to ask the first question on conference calls and his company raised their price target from $38 to $62.

• JPMorgan Chase raised its target from $46 to $62.

• Wells Fargo raised its valuation range from $47-$52 to $63-$70 (Post #343902). Wells estimated 2014 revenues of $1.7 billion, multiplying revenues by 9-10x and discounting the result at 15% to arrive at a 2010 valuation range for the company of $8.9-$9.9 billion. It reached the revenue number by estimating 17,977 patients in the U.S. at $93,000 each and 253 in Europe at $72,000 each. I like the Wells approach since it is consistent with my 1999 biotech study when I examined the price/sales results for some of the early companies that had successful biotech drugs and platforms, such as Amgen, Genentech and Biogen; my research occurred in a good stock market environment. All bets are off, of course, if the market tanks because of all the government spending etc.

• On the other hand, a small Seattle-based brokerage that has followed DNDN for quite a while, McAdams Wright Ragen, found that Dendreon was “fully valued” at $53.92 and rated it Hold, noting:

“At present, the stock is trading at 3.4x our 2014 sales estimate of $2.0 billion. By comparison, many late-stage mature biotech companies are trading at 3 – 5x current year sales.”

I note that Celgene (CELG) trades at 10.5 times its current revenues of $2.69 billion. http://finance.yahoo.com/q/ks?s=CELG+Key+Statistics

But Amgen, Genzyme and Biogen Idec trade closer to 4 times current revenues.

• Even our old Dendreon nemesis, Jonathan Aschoff of Brean Murray Carret & Co., has raised his target to $65 based upon the higher price of Provenge per patient and his lowering of the discount rate from 20% to 15%. He sees a maximum market potential of $2.8 billion in the U.S. alone and expressly says that he is not factoring in any ex-U.S. sales or off-label sales. Aschoff’s target price is reached by applying a price earnings multiple of 40 to his 2013 estimate of $2.38 per share and discounting that value back at 15%.

Publicity
The Provenge Approval has received wide press and TV coverage and Dendreon has received a lot of free publicity. Presumably there will not be many men with PROSTATE CANCER who will not have heard about Provenge in the next few weeks; they will be asking their doctors about it. The Cancer Research Institute’s issued a press release on the Approval and quoted its executive director as follows (#344461):
http://tinyurl.com/2amdbvf

“The approval of a vaccine to treat cancer is a victory in the history of cancer therapy, and signals the beginning of a new era in cancer medicine.”

Word of Mouth
One would hope that the doctors involved in IMPACT will continue to see good results from their patients who were in the trial and will become convinced that Provenge is the way to go and they and their patients will pass the word to other doctors and patients.

The alternative to Provenge, the chemo Taxotere, involves the patient in chemo and related side effects for many months. The whole Provenge course takes one month and the minor side effects comprise only 6 to 9 days of that month. In the Presentation, Gold pointed out in Slide 16: “Survival is more than surviving.” Men want to extend their lives, of course, but they want to enjoy their remaining time on earth.

News Flow
Provenge could be the star at the American Urological Association meeting in San Francisco at the end of May/beginning of June and at the ASCO meeting in Chicago on June 4-8. There are three poster sessions on Provenge on June 7th at ASCO. Dendreon’s May 20th press release summarizes the three poster sessions at ASCO:

The exploratory analyzes include data from three Phase 3 trials in patients with metastatic castrate resistant prostate cancer (Studies D9901, D9902A, and IMPACT) that were integrated to examine the treatment effect in a larger group of patients, the use of docetaxel before and after randomization, and relationships between certain product parameters and clinical outcome. These include:

* A poster presentation by Dr. Celestia Higano, professor of oncology and urology at the University of Washington, titled, "Predictors of outcome and subgroup results from the integrated analysis of sipuleucel-T trials in metastatic castration resistant prostate cancer (abstract #4550)."

* A poster presentation by Dr. Petrylak titled, "Immunotherapy survival effect persists independent of post-randomization docetaxel use in Phase 3 studies of sipuleucel-T (abstract #4551)."

* A poster presentation by Dr. Frances P. Stewart, senior biostatician at Dendreon, titled, "Correlation between product parameters and overall survival in 3 trials of sipuleucel-T, an autologous active cellular immunotherapy for the treatment of prostate cancer (abstract #4552)."
http://tinyurl.com/2b3ezm2

Ocyan summarized these abstracts as follows (351374):
http://tinyurl.com/23wz6lm

“They showed clearly that (1) the extended survival benefit was seen consistently in various subgroup analysis, (2) Provenge's potency was eminently characterizable via CD54 upreg, cell counts, etc., and (3) * * * the strong survival benefit was NOT due to subsequent Taxotere usage.

This is why Provenge is now accepted by physicians as the front-line treatment for HRPC patients whose disease has not spread to their vital organs. Along with its great safety aspect, Provenge is now the treatment of choice for these patients.”

Possibly even more detail about the IMPACT clinical trial will be released over the next months or year. For example, I would love to see more data about the unexpected B-Cell stimulation caused by Provenge (rather than T Cell only). In his Minyanville article, David Miller says, “the recent revelation that Provenge stimulates B-cell activity against PAP is a little mind-boggling (in a good way)” in reference to the fact that Provenge causes the immune system to continue to seek out and destroy wayward cancer cells long after the Provenge infusions (see ocyan’s point elsewhere in this memo). More detail about the extent to which Frovenge pushed upward the median survival of the control group would also be important.

Announcements of one or more combination trials with Big Pharma drugs could be viewed positively by the market. If Dendreon does a combination trial with Ipilimumab, as David Miller said in the Chat that Bristol-Myers “badly wants to do,” the message boards will be alive with all manner of rumors and speculations that a takeover by Bristol-Myers is in the cards. In the Chat, Miller and Dr. Higano had several other candidates for combination trials too.

The market will be anxious to hear good news about manufacturing—in particular, how many patients the New Jersey plan is able to handle in a week or month. It surprises me that we apparently do not even know what the maximum theoretical capacity of one workstation is if it would operated at full throttle with no problems.

Boosters
There has been lots of talk about giving men a booster of Provenge a couple of years after the initial Provenge treatment. It would make sense for Dendreon to do a small trial involving boosters, maybe as part of a combination trial involving one of the new hormone drugs. In the Chat, Dr. Higano said that boosters were being studied now but I have not seen any specific trials in that area. Gold in the Presentation did mention some older booster data from the P-11 trail in earlier stage prostate cancer. In P-11, when a man’s PSA rose above 3, which on average was about 2 years after initial treatment, there was still a persistent immune response from the initial treatment. At that point, the patient was given one Provenge treatment as a booster and they saw a massive amplification of that persistent immune response. In his comments on an earlier draft of this memo, David Miller noted that the P-11 trial is the only booster trial of which he was aware although other booster data came from the Neuvenge Phase II trials.

Note that these additional clinical trials in Provenge apparently would not subtract from Provenge sales. In the Chat, David Miller said that additional trials could be run out of the Seattle facility. Dendreon is moving its headquarters and that operation will be affected too. Miller said that the new Seattle facility would have to be inspected by the FDA; I trust that Dendreon will keep the old facility operating until the new one clears inspection but have not heard anyone say that.

Pipeline Developments
Neuvenge is now Called DN24-01.

In the Presentation, Gold said DN24-01 is the old Neuvenge and it targets HER2/neu which is expressed in 20-30% of breast, 40-50% of bladder (70,980 cases per year), 18% to 43% of ovarian and in low 20s in gastric, colorectal, NSCLC and prostate cancers. Gold said that bladder cancer is immune responsive and there is a large unmet medical need here. Dendreon plans to initiate a clinical trial in bladder cancer later this year or in early 2011. Slide 20 in the Presentation discussed survival in bladder cancer:

• Survival is about 1.5 years when it is metastatic after first-line chemo and
• Survival is about 3 years after surgery in high risk patients—DN24-01 would be used as adjuvant.
One poster notes that addressing bladder cancer would allow Dendreon to leverage its sales force with urologists (348939).
http://tinyurl.com/2fclsk6

If Provenge is successful, those urologists should be anxious to try a sister product with their bladder cancer patients.

David Miller expects that the Phase 2 in Neuvenge will be randomized and that Dendreon might use that trial and one Phase 3 pivotal trial in seeking FDA Approval, assuming both trials are successful (349706).
http://tinyurl.com/285wdgs

I assume that this would take a few years.

In a private message commenting on an earlier draft of this memo, ocyan noted:

“A point to note about Neuvenge is that the two phase-1 trials were run with patients having solid tumors expressing Her2-neu, not just Breast Cancer. I think that if the randomized phase-2 trial in Bladder succeeds, it will be possible to run several phase-3 trials (subject to available of funds!) for Bladder, Breast and Ovarian and garner approval for each indication if successful.”

Recognizing ocyan’s point that 2012 might be too soon, imagine the excitement if the P-11 data were available then and soon thereafter Dendreon announced its intention to commence Phase 3 trials in bladder, breast and ovarian cancers!

In his article, “Finding the Next Dendreon,” David Miller concludes:

“Dendreon will place its second active immunotherapy drug, Neuvenge, into a randomized Phase II study in bladder and ovarian cancer later in 2010. Ironically, the next Dendreon could literally be the next Dendreon if that trial is successful.”

CA9 in renal cancer
In the Presentation, Gold said that CA9 is expressed in 90% of kidney cancers. Dendreon plans to file an application with the FDA in 2011 for a Phase 1-2 trial in metastatic renal cell carcinomas. The method of action of the Dendreon therapy is different from currently approved agents.

Downside Risks
With no product revenues and no profits, the market nevertheless has been valuing Dendreon at around $6 billion. Warren Buffett would not buy DNDN. What happened to InterMune recently highlights in red letters the high risk in biotechs when there is a major disappointment. ITMN closed at $45.44 on May 4th and at $11.38 the next day, a 75% drop. As with Dendreon three years ago, InterMune had a positive Advisory Committee meeting and then on the afternoon of May 4th the FDA said that additional clinical trials would be needed for its lung cancer therapy.
Ouch!

Stock Sales by Major Shareholders, Officers and Directors
According to the recent proxy statement, FMR (Fidelity) is the largest shareholder with 19.6 million shares or 14.62% of the stock. Presumably this holding is spread among many of their mutual funds. I doubt that FMR would make major sales that would disrupt the market in the near future. I feel far less confident in the second largest shareholder, S.A.C. Capital Advisors, a hedge fund run by Stephen A. Cohen. SAC does not smell like a buy-and-hold investor but I suspect its game plan might be to push for a takeover by a Big Pharma or a Big Biotech. Dendreon was one of SAC’s largest equity investments at the end of March (350157) http://tinyurl.com/2fhbsuy

Dendreon insiders unloaded shares after FDA Approval. Gold, the CEO, after exercising options, sold 554,887shares at an average price of a bit more than $52 a share. Ian Clark, a new Board member, sold all 8,744 of his shares, garnering a nice price of $54.61. For a list of the sellers, see 348019.
http://tinyurl.com/25japhq

Gold must have had a lot on his mind when he held a conference call while trading was halted on the morning of April 29th. He had a lot to do after the call to arrange in less than hour the sale of 400,000 shares when DNDN resumed trading for 30 minutes or so after the trading halt that day and before the market closed. However, he probably had already put in motion his sale plan and I suppose could exercise the options for the shares sold after the market closed since he would not have to deliver them for three days. But why was he so anxious to cram his sales into that short trading session? He could not have been in possession of material inside information since that would have prevented him from selling.

In my mind, Gold displayed a tremendous lack of leadership and confidence in the future of the Company. SaulK sees Dendreon as the “next Amgen;” Gold does not and is not the “gutsy CEO” that SaulK saw in the early Amgen.

I have been a shareholder of some great companies in their early days and do not remember the likes of Bob Noyce, Gordon Moore or Arthur Rock of Intel, Irwin Jacobs of Qualcomm or John Chambers of Cisco selling stock in the early days of their companies.[4] Warren Buffett is noted for few if any sales of Berkshire Hathaway stock. I did not follow the early Amgen but doubt if its gutsy CEO was unloading shares when Epogen was approved and Neupogen was starting Phase 1-2 trials (see SaulK’s 275444). [4]
http://tinyurl.com/24ddfpw

Mitch Gold has done many great things for Dendreon, especially preserving 100% of the rights to Provenge for the company and its shareholders, but his selling of shares is a glaring exception. Gold has not studied the great companies which create great wealth for their principals and long term shareholders.

In the Chat, Miller was asked about these sales and responded that “if the guy who knows most in the world about what is going on is taking some off the table, perhaps you should talk with your financial advisor about doing the same.”

Gold had previously sold over 202,000 shares at $13.46 on April 2, 2007, between the favorable Advisory Committee vote and the unexpected complete response letter from the FDA. After the IMPACT results were announced, Gold sold 600,000 shares on April 29, 2009 for an average price of $24.92. All of these shares, if held, would now be worth much more than the price Gold received on these sales. Gold knocked a lot of value off his table!!

Some insider sales were understandable due to tax issues. In prior years, Dendreon made restricted stock awards to its executives and to non-executives. At the end of March, the restricted stock awards which had not vested were nearly 2.7 million shares, most of which were granted at a weighted average grant date value of $7.71, with the more recent ones granted at $29.39. On page 25 of the proxy in the next to last column under Stock Awards, footnotes 6 and 8 indicated that these awards vest upon Approval; all of the other shares seem to have vesting over 5 years (with the exception of a couple of smaller awards for Hamm). Thus, Gold had 180,000 shares of restricted stock that vested upon Approval, Schiffman had 33,750, Hamm and Urdal each had 54,000 and Frohlich had 36,000. What does this mean?

Although I practiced tax law for 30 years, that experience is now 13 years old; but I am not aware of any change in the law on this issue. The value of the restricted stock on Approval Date probably all became ordinary income to the executives pursuant to section 83(a) of the Internal Revenue Code. I doubt that any of the executives made an earlier section 83(b) election to have the value of the stock taxed at the time of the restricted stock award.

Thus, Gold, Schiffman, Urdal, Frohlich and Hamm would likely all have substantial taxes due on the vesting of these shares upon Provenge Approval. The conservative approach would be to sell immediately enough DNDN to pay at least a large chunk of the taxes. Note that selling the restricted stock in late 2010 at a loss (if DNDN were at a price lower than the April 29th tax value) would produce a short term capital loss but that loss could not be used to offset the ordinary income under section 83(a).

The foregoing analysis applies only to the restricted stock, not to the non-qualified options. Taxes on those options could have been deferred by delaying the exercise.

But all of the sales, especially those by Gold and Hamm, were far in excess of what they would need to sell to pay taxes on the restricted stock. Washington does not have a state income tax so Gold presumably is facing a 35% federal income tax on his restricted stock awards. Gold could have covered his taxes on the restricted shares by selling about 65,000 shares, not over 550,000.

In trying to figure out what motivated Gold to unload so much stock, I found myself speculating that maybe he is planning to turn the CEO position over to Hans Bishop. If Dendreon is projected to sell nearly $2 billion of Provenge in a couple of years, there is nothing in Gold’s background to suggest that he has the experience in building and running such a large company. A variation on this would be to speculate that, when Gold, as a 35-year old urologist, was made CEO, there was a general but vague understanding that an experienced executive would be brought in at the time of commercial launch. With all his cash, Gold would be in a position to start a new biotech.

Another speculation on my part would be to suggest that he might have a highly influential investment adviser who chants the “diversify, diversify” mantra. Gold probably wants to remain as CEO to see Neuvenge make inroads in breast cancer in a tribute to the memory of his mother.

In a private message commenting on an earlier draft of this memo, ocyan takes a contrary position:

“People made too much of the insider sales. Contrary to popular belief, stock and option "grants" are not freebies. Companies always calculate their cost and factor that into the compensation equation appropriately. That is, every year, a portion of the compensation of an employee is deliberately taken out and put at risk to motivate the employee to work harder for future reward. People sell stocks for different reasons but it is also good investment management for everyone to reduce that risk, knowing that more compensation will be put at risk again in the same way (I personally always sell all of my company stocks every year when they vest.) About Dr. Gold, it is likely a sign that he will get a very large grant of options and restricted stocks again next. One way to guess the size of it [is] to look at what they have granted the new VPs. The CEO will get something higher than that. With the company value having grown as it did, he deserves it!”

See also ocyan’s recent posts 350851 and 350901.
http://tinyurl.com/265nz4e
http://tinyurl.com/2aqxg5d

I make a great distinction between sales by Gold and sales by some of the other officers, such as Hamm, the General Counsel, who unloaded a slug of shares. Gold is the head of the company and should know its prospects better than anyone else. Both Gold and the Board of Director know that the market reacts negatively to large sales of shares by top executives. Indeed, I would think that an active Board would frown on a CEO selling such a slug of stock. The Board should have a strong interest in the price of DNDN since future stock offerings may have to be made; the price of the stock is also important to employees. Gold’s sales cannot build confidence in the company among existing shareholders and employees and potential investors and employees. I talked to a couple of corporate lawyers, long time buddies of mine, who have over 60 years of corporate law experience between them and who have worked with smaller public companies as well as large. Neither of them had ever heard of a CEO selling such a huge number of shares.

Safety Issues Arise
The press release says that 601 PROSTATE CANCER patients in four trials were used in evaluating the safety of Provenge. Most of the side effects were mild and none of the more serious Grade 4 or 5 reactions were reported in the Provenge treated men. In these trials, cerebrovascular events were observed in 3.5% of patients in the Provenge arm compared with 2.6% in the control arm. The press release says that Dendreon will track 1,500 patients to fulfill a post-marketing requirement in the Approval to further evaluate cerebrovascular events. Adverse developments from this post-marketing study could be a huge downside for the stock.

Other safety issues could arise as Provenge becomes available to a wider population.

Resistance to Price—Reimbursement Issues
The announced price of $93,000 for the normal three infusions of Provenge makes Provenge one of the costliest drugs around for top line price (but not for per-month-survival). Medicare is expected to cover Provenge because it covers all FDA-approved drugs but the amount of the reimbursement is yet to be announced. Although one sees various reports that insurance companies will likely follow suit, one would not be surprised to see insurance companies demanding that the patient fail less expensive treatments before receiving Provenge. In a very helpful recent development, the National Comprehensive Cancer Network in an interim meeting on May 19th voted 19-1 to add Provenge as a treatment option in its important Prostate Cancer Guidelines.
http://tinyurl.com/2bwhcs2

Also, one would not be surprised to see future attacks on such high-priced drugs which provide relatively short survival times. However, the 4.1 months for Provenge is merely the median—half of the men lived longer and some lived several years beyond the median for several. For an excellent explanation of the benefits of 4.1 months median survival versus 4.1 months average survival, see ocyan’s recent post 349995.
http://tinyurl.com/255yryv

Moreover, the 4.1 months advantage was compared to a control group where the men were allowed to take a frozen version of Provenge after their cancer progressed. Although the frozen version is not thought to be as effective as the fresh, in a sense Provenge was competing against itself as Miller stated in his Chat extension remarks:

“I would also emphasize Provenge competed against a version of itself in all three of the Phase III clinical trials. Guys who were randomized to the control arm could receive a frozen version of Provenge nicknamed “Frovenge”. 75% of men chose this option. So the actual survival benefit of Provenge in the trial is much larger than the headline data suggest.”

In addition, in the 9901 study three times as many men in the Provenge arm were alive at the end of three years than in the control arm; in IMPACT, 32% of men in the Provenge arm were alive compared to 23% in the control (+ Frovenge) arm.

In commenting on an earlier version of this memo, David Miller noted:

“Cancer drugs are increasingly priced according to Quality Adjusted Life Year (QALY) or cost per month of median survival. The former is primarily a creation of the UK’s NICE and you can read more about it there. The latter is an easier shorthand. If you cost Taxotere at the drug cost plus the required premedications plus the cost of treating the side effects, Dendreon is actually cheaper on a cost-per-month-survival basis.”

Breakdown in Logistics
Provenge is not a pill that one picks up at the local pharmacy. Luke Timmerman in an article discussing the Approval summarized the Provenge process:

“Dendreon’s approach requires blood to be drawn from a patient, and some white blood cells vital to the immune system, called dendritic cells, to be separated in a lab. The cells are shipped to the company’s factory in New Jersey, and incubated with a genetically engineered protein found on prostate cancer cells, called PAP. This process is supposed to “teach” the immune system to recognize cells with this marker as foreign and fight them, and is sort of like waving a red flag to get the attention of a bull. The newly revved-up white blood cells are shipped back in cold storage from the Dendreon factory to the clinic, and re-infused into the patient, giving them new ability to fight off the cancer. The patient gets three of these infusions at the clinic over a one-month period, and then he’s done.”
http://tinyurl.com/34bu79x

The FDA Summary Document describes the risk and Dendreon’s procedures:

“The greatest risks associated with the manufacturing of this autologous product are 1) the risk of product mix-ups and 2) the risk of product contamination. Due to these risks there is a need to maintain strict chain of identity throughout the manufacturing and distribution process as well as the need to adhere to strict aseptic process techniques because the product cannot be sterilized.

Chain of identity of all in-process and final product manufacturing steps is maintained through the use of a human-readable barcode scanning system, lot-specific unique identifiers, and multiple patient lot identifiers. Chain of identity of QC samples is also managed through barcode scanning and unique identifiers, including a second level of identifiers used exclusively in the QC lab.”

In the clinical trials, Dendreon seems to have handled quite well the 3-day process of getting the patient’s blood cells, producing patient-specific Provenge and getting the Provenge back to the doctor. Commercial launch involves a much larger scale. Dendreon’s software to track a man’s cells could break down. There could be airline strikes. Bad stuff could happen!

A breakdown in the logistics that resulted in a man receiving an infusion of another man’s cells could be disastrous. Could death result from such a mix-up?

Manufacturing Ramp-up Problems
Going from a research operation to a full-scale manufacturing operation is a huge task. Dendreon had about 200 employees a year ago and now has more than 600 and presumably will have hundreds more in 18 months when the plants are completed, approved and operating. Extensive training will be involved since the manufacturing operations are somewhat unique. Will Dendreon’s management be up to the task?

There could be delays on the completion of the New Jersey facility and the two other facilities. The FDA could find problems or otherwise be slow in inspecting and approving the new facilities.

The manufacturing of Provenge depends upon the supply of the antigen by Diosynth which currently is the sole supplier. Dendreon recently extended its relationship with Diosynth and is also in the process of establishing a second source.

One hopes that Hans Bishop is the key man here. He seems to have the experience. In response to Luke Timmerman’s question in the interview cited earlier as to what he brought to the table, Bishop had this reply:

“Commercialization experience, first and foremost. I’ve spent most of my career launching and growing major pharmaceutical products. Provenge is going to be a major therapeutic vaccine.

I’ve also had a good deal of experience with complex manufacturing environments. We (at Bayer) had an important manufacturing challenge to manage. And thirdly, managing growth. I’ve learned how to build organizations that are fast-growing.”

Years ago a highly respected and successful venture capitalist once had told me that there are plenty of people with good ides but few who can execute. Let’s hope that Hans Bishop can execute.

Poor Sales Rollout
Dendreon is totally untested in selling prescription medications and in setting up and managing a sales force to make sales. However, it did hire Varun Nanda who was the head of oncology at Roche where he was in charge of the launch of Avastin, one of the most successful launches in the history of the drug industry. Avastin was the top selling oncology drug in 2009 with revenues of $5.7 billion (345114).
http://tinyurl.com/286ayxd

Since the hiring of Nanda, rumor has it that Dendreon employees speak in unusually reverent tones of him.

The market will probably be watching like a hawk the early sales reports and sales guidance by the Company, with the stock being punished with any disappointments and soaring with sales higher than expected. Of course, this is a characteristic of almost any stock.

In a private message commenting on an earlier draft of this memo, ocyan noted:

“You are entirely correct that the market will be watching the early sales carefully. That is likely why Dendreon has projected only 2000 patients for the first 12 months. That works out to about 1.4 dose a day per workstation. That is very low even taking into account for the early training of personnel and testing of Intellivenge. I think they will beat that number handily.”

Clinical Trials Needed in Europe
Some of the analysts seem to be assuming without stating that Dendreon will be able to have Provenge approved in the EU based upon the Phase 3 trials that were carried out in the United States. I suspect that management may have the same idea and feels it would be in a much stronger position in dealing with potential Rest of the World partners in the future if it had set the stage for EU approval based upon the data filed with our FDA. If Europe demands European based clinical trials, some of the analysts will undoubtedly update their spreadsheets and push out a lot of the revenue, resulting in a lower target price for DNDN.

I note that Miller in his Chat extension sees EU approval as several years out:

“I would doubt we will see EU approval until the middle of the decade. There will be reimbursement issues in all the EU countries that have central reimbursement negotiations, but most particularly in the UK.”

Near Term Possible Competition
Although the appearance in the market of competitive products for prostate cancer is probably not an immediate risk, positive developments in clinical trials for such products could have a nearer term negative impact on Dendreon.

Zibotentan (ZD4054) from AstraZeneca—Phase 3
This is an oral drug which is not a chemo; it is a selective antagonist that targets Endothelin A receptor which is thought to be involved in the progression of prostate cancer. Endothelin is made by endothelial cells which line blood vessels. Abbott Laboratories failed to gain FDA approval for Xinlay, its Endothelin inhibitor, but apparently there were problems in the way Abbott designed its clinical trials (156703) http://tinyurl.com/28c6xln and Xinlay apparently inhibited both Endothelin A and B receptors and the Bs should not be inhibited.

Zibotentan showed a 7.2 month survival advantage in a phase 2 trial although it did not meet its primary endpoint of time to progression. In one of the current Phase 3 trials, ENTHUSE M1, the estimated study completion date is August 2010 according to the Government website which tracks clinical trials.
http://tinyurl.com/273rvyy

Only Phase 1 data apparently are being presented at ASCO (351393).
http://tinyurl.com/25web62

The AstraZeneca website does not have much information about Zibotentan but does indicate that it expects to file the NDA with the FDA in the first half of 2011. A Google search of the AstraZeneca website did produce a long slide presentation in November 2009 which had two slides on Zibotentan. Slide 99 showed that the Enthuse MO Phase 3 trial has enrolled about 1,500 patients with no metastases and who are asymptomatic or mildly symptomatic for pain.

Ocyan says that the median survival for the placebo in the Zibotentan Phase 2 trial was 17.3 months compared with 21.7 months for the control arm in IMPACT, which he suggests means that the placebo arm did not receive any treatment after progressing, such as Taxotere (in contrast, the control arm in IMPACT was able to receive frozen Provenge). In the Phase 3 trial, both the placebo arm and the treatment arm can receive Taxotere as the standard of care. Ocyan believes that, if Zibotentan is approved, Provenge should still be used first and then followed by Taxotere and Zibotentan to enhance the therapeutic effect (313102). http://tinyurl.com/299dz3z

But one wonders whether the fact that Zibotentan is a pill and probably much less expensive would mean that insurance companies would require that it be used first.

A good poster, bobrmd who is a clinician, does not see Zibotentan as serious competition (283446).
http://tinyurl.com/25k5g7h

He also seems to feel that Zibotentan, if approved, and Provenge might be used in combination or sequentially (283471).
http://tinyurl.com/27jcckx

Note that Zibotentan is such an important potential competitor that David Miller has opined that no Big Pharma would pursue an acquisition of Dendreon until the results of the AstraZeneca’s Phase 3 trials are known (283412 and 283450).
http://tinyurl.com/27ohteb
http://tinyurl.com/2887kqy

More Distant or Less Relevant Competitors
For companies that have not started Phase 3 trials or are not very far alone in recruiting, one should consider whether they will have difficulty recruiting patients after the Approval of Provenge, especially once the supply of Provenge is more in harmony with demand. Many men would not want to take the risk of receiving a placebo rather than the treatment arm drug when Provenge is available (assuming the patient has Medicare or insurance coverage).

Even though some of these drugs may not be on the market for several years, if they are successful, positive clinical trial results might be released much sooner and could cause analysts to mute some of their longer term sales forecasts for Provenge.

Ipilimumab from Bristol-Myers (BYM)
Ipilimumab is based upon the transgenic mouse technology developed by Medarex which Bristol-Myers acquired in 2009 for $2.4 billion, a 90% premium to the price of Medarex before the announcement. Ipilimumab is a monoclonal antibody that boosts immune responses by targeting a molecule called CTLA-4 which normally acts as a brake on the immune system.

The most advanced trial has been in melanoma; in April 2008, the FDA requested additional overall survival data for this indication. Bristol Myers will present Phase 3 data for Ipilimumab for melanoma at the American Society of Clinical Oncology (ASCO) meeting in early June and filings for approval in both the U.S. and Europe could occur by year-end. Results from a trial of Ipilimumab in prostate cancer apparently will be provided at the same meeting.

BMY has one Phase 3 trial that started a year ago in 800 men who have previously taken Taxotere. The completion study date is December 2012. Since Provenge would be given before Taxotere, this study does not seem terribly relevant.
http://tinyurl.com/263uvs4

BMY has a Phase 3 clinical trial that will start in June and be completed in October 2015 in 600 men with metastatic prostate cancer who are asymptomatic or minimally symptomatic and who are resistant to hormones and have not taken chemo or immunotherapy. I would think that this trial will have difficulty recruiting if a man has to run the risk of being in the placebo group rather than taking an approved immunotherapy—Provenge.
http://tinyurl.com/2co3mds

David Miller in commenting on an earlier draft said that the new ipi monotherapy prostate trial is enrolling only overseas. He personally doubts it will result in U.S. approval unless BMY does a fairly extensive safety study in the U.S. in men who have received Provenge.

In the Chat, Miller said that BYM was anxious to do a combination trial of Provenge and Ipilimumab.

Ipilimumab does not seem to be much of a near-term competitive threat for Provenge.

Abiraterone (CVB-7630) from Johnson & Johnson
Abiraterone was developed by Cougar Biotech which was acquired by J&J for $1 billion in mid-2009, a 16% premium to the stock price the day before the announcement. It is an oral drug and basically seems to offer the potential of being a better drug at shutting down the hormone, testosterone, which is thought to be a major factor in prostate cancer progression.

One prostate cancer website summarized the two Phase 3 trials recently:

“Two randomized, double-blind, multicenter Phase III clinical trials of abiraterone acetate are now ongoing. In the first of these trials, abiraterone + prednisone is being tested against a placebo + prednisone in patients with progressive CRPC after treatment with docetaxel chemotherapy [Taxotere]. This trial is fully enrolled, and we can reasonably expect the primary outcome of this trial by some time in late 2011. In the second Phase III trial, abiraterone + prednisone is being tested against a placebo + prednisone in CRPC patients before they receive chemotherapy. This trial is not yet fully enrolled, and we have heard that it may be taking longer to accrue patients to this trial than it did to the first abiraterone trial. It is hard to project when the results of this trial might be announced.”
http://tinyurl.com/2fk5awk

The latest entry in the Government Clinical Trials website says that the second Phase 3 trial will not be completed until April 2014.
http://tinyurl.com/2ezo4wa

David Miller had a very informative post about abiraterone on February 23, 2010 (327165): http://tinyurl.com/2gyu8ye

“Abiraterone is certainly the one most mentioned by funds as they are very familiar with it from the company's major shareholders pushing it. The initial indications present no threat to Provenge. I also see no data suggesting a huge survival advantage that could take mindshare away from Provenge.

IMO [In my opinion], JNJ bought Cougar primarily because of Scher and the key Phase III he designed. I think I've noted publicly that the lead trial is astoundingly overpowered (enrolls far too many people) to replicate the Phase II data on abiraterone. The reason Scher designed it so large is to prove Veridex's (JNJ subsidiary) CTC (circulating tumor cell) technology is predictive as a surrogate endpoint. What most people are not aware is Scher is a compensated flack for Veridex's CTC tech.

In my view, all Provenge fans should root for a successful outcome to the Veridex portion of this trial. If Veridex's tech does predict overall survival, I'm certain JNJ will ask Pazdur [the doctor at the FDA in charge of oncology drugs who is alleged to have been Provenge’s nemesis three years ago] to convene an ODAC panel to discuss whether CTC can be a predictive surrogate endpoint for prostate cancer. If ODAC/FDA agrees, it will be the first one ever and will SUBSTANTIALLY increase the speed at which all PCa trials can be done -- particularly early-stage trials.

Dendreon could then use this new surrogate endpoint to move Provenge into a label for earlier-stage patients much faster -- 13-15 years faster from trial initiation -- than it otherwise could. As we are all probably aware, that's where the huge money would be for Provenge. (As a reminder and answer to the inevitable question, PROTECT/P-11 will NOT be sufficient for label expansion into earlier-stage patients according to the company and every other expert I've asked the question to.)”

In May 2009, ocyan weighed in on abiraterone (279413):
http://tinyurl.com/2dd5a7m

“As to ‘better mouse trap,’ this is a case where one treatment does not preclude the other. Note that Abiraterone aims at stopping the production of testosterone, a hormone needed by PC to grow. All current hormone ablation therapies eventually fail and reducing testosterone has significant effects on quality of life for men. It isn't clear that Abiraterone will be different. But, Provenge is known to have a survival benefit with little side effects and its working is orthogonal to that of other traditional approaches. So, even if Abiteraterone works well, patients might still prefer Provenge and there will be room for some combination treatment.”

I do not see abiraterone as a serious competitive threat. If it works after other hormone related drugs have stopped working, it may merely delay the use of Provenge in the men who take it. (In commenting on this sentence, David Miller had one word: “exactly”) And it seems to be several years away from the market.

Prostvac
On the same day that Provenge was approved, the FDA gave fast-track status to Prostvac. Investor’s Business Daily gave Prostvac good coverage in an article titled, “Dendreon Got Big OK, But Still Faces Hurdles.” The article said that the 3-year survival figures for Prostvac and Provenge were similar but median survival was 8.5 months for Prostvac compared to 4.1 months for Provenge.
http://tinyurl.com/2dop9xv

In the Chat, David Miller opined that Prostvac will fail. Post 346464 says that the Phase II in Prostvac was poorly balanced, favoring the treatment arm.
http://tinyurl.com/2dejnu3

As with GVAX, discussed below, Prostvac does not have a good history. As ocyan notes in 322488, (http://tinyurl.com/26r82p2) the prior Phase 2 trial was started by Therion which ran out of money when the trial failed to reach its primary endpoint, progression-free survival. However, the Phase 2 Prostvac trial showed a survival benefit. Bavarian-Nordic of Denmark acquired the rights to Prostvac. Ocyan points out that the survival in the control arm seems to be on the low side:

‘The median survival benefit of 8.5 months that they are now claiming for the phase-2 trial must be looked at with some skepticism. The trial enrolled only patients with Gleason score <= 7, yet the median survival times were 24 months treatment arm vs. 16 months control arm. Contrast that with IMPACT which enrolled all Gleason Scores, yet the medians were 25.8 months vs. 21.7 months.” In a Journal of Clinical Oncology article by Dr. Eric Small and Dr. Lawrence Fong of UCSF, cited in post 322506 (http://tinyurl.com/2aj8al2) by ocyan, the authors stress that Prostate Cancer is not one disease. They note that in the Prostvac trial, the predicted survival for the control group was 20.4 months but the actual survival was only 16.5 months and that a group with favorable prognosis favored the Prostvac arm. The authors were also troubled by the fact that there was a 50% crossover to the exact same treatment as the treatment arm received; presumably they expected that the control arm would do much better than predicted if Prostvac was actually effective and half the control arm received it on a delayed basis.

MDV3100 from Medivation
I owned Medivation for a year or so, hoping that its Phase 3 trial in Alzheimer’s Disease would succeed, and sold when it failed. I owned the stock despite the fact that it had MDV3100, the chief investigator of which was Dendreon nemesis, Dr. Howard Scher.

Medivation is in collaboration with Astellas Pharma, Inc. on MDV3100; they reported on the results of an earlier trial and described the current Phase 3 trial which is enrolling patients currently.

“Known as AFFIRM, the randomized, placebo-controlled, double-blind, multi-national trial is evaluating MDV3100 at a dose of 160 mg taken orally once daily in men with metastatic prostate cancer who were previously treated with docetaxel-based chemotherapy.”
http://tinyurl.com/24ks3wf

Although Medivation and Astellas plan to evaluate MDV3100 in men with earlier stage disease, MDV3100 seems to be another hormone therapy, possibly a better one. The Phase 3 trial is not addressing the patient population that Provenge addresses. If it is successful, MDV3100 might be given after Provenge as ocyan noted in a post last October (309216):
http://tinyurl.com/27f4dq5

“I don't know anything about MDV3100 but did listen to a bit of the tail end of the MDVN CC out of curiosity. I was surprised when a question came up on how to think about MDV3100 relative to Provenge. A MDVN management member replied that, in his opinion, the chance of Provenge approval is very high. Further, given what was known from the previous Provenge trials with respect to Taxotere, MDV3100 could be a better follow-up treatment than Taxotere to extenuate the beneficial effect of the vaccine should a patient's PSA rises after taking it.

That answer sounded matter of fact and indicated how practitioners in the field are accepting that Provenge will likely be approved and, because of its excellent safety profile, it will be the front-line treatment for metastatic prostate cancer. Other drugs will then be tested behind Provenge to amplify its effects.”

OGX-011 from OncoGenex
OGX-011 is being tested in combination with Taxotere to try to make Taxotere more effective. Here is a short summary of OncoGeneX’s 2009 stock performance and of the status of OGX-011 (318869):
http://tinyurl.com/26lcpmg

“While not a member of either major biotechnology index, shares of Oncogenex Pharmaceuticals, Inc. (OGXI) started the year around $3.00 and ended above $22 for a 643% return. Oncogenex is developing OGX-011, which is designed to inhibit the production of clusterin, a protein that is associated with cancer treatment resistance, and has completed Phase II clinical trials in prostate, lung and breast cancer. OGX-011 received Fast Track designation from the FDA for the treatment of progressive metastatic prostate cancer in combination with docetaxel. Shares of Oncogenex had traded higher than $42 in August 2.”

Since OncoGeneX is currently targeting OGX-011 in combination Taxotere, it does not pose much of a competitive threat at this point. I would think that the vast majority of men would opt for Provenge long before taking Taxotere unless they are not in Medicare and their insurance covers Taxotere but not Provenge.

GVAX
GVAX was the prostate cancer vaccine developed by Cell Genesis, the stock of which I owned for 3-1/2 years in the early part of this decade. GVAX had an off-the-shelf approach—not patient-specific. Prostate cancer cells were modified and then irradiated before they are injected into the patient on an out-patient basis. The Phase 3 trials for GVAX in prostate cancer were halted in 2008 after there were a disproportionate number of deaths in the treatment arm. CEGE’s stock crashed and it was taken over by BioSante Pharmaceuticals (BPAX), a microcap with a recent market capitalization of a little more than $100 million. On May 3rd, BioSante announced that it was reviving development of GVAX for prostate cancer and seeking FDA approval for a Phase II clinical trial beginning in the fourth quarter of 2010 at Johns Hopkins. The trial is being supported by Michael Milken’s Prostate Cancer Foundation.
http://tinyurl.com/2eu582b

David Miller in his recent Minyanville article discusses why he had always thought that GVAX would not succeed. His article is a great read.

TroVax from Oxford BioMedica
TroVax is an immunotherapy that targets the 5T4 antigen. Oxford BioMedica tested TroVax in a Phase 3 trial in renal cancer but the trial failed to reach its primary survival endpoint. A second Phase 2 trial in prostate cancer is in the planning stage, apparently looking for a partner.
http://tinyurl.com/25k29u4

Further Dilution
Dendreon had $528 million in cash and investment securities at Marching 31, 2010. In the Form 10-Q filed recently for the March 31st Quarter, Dendreon stated:

“We believe that our current cash on hand as of March 31, 2010, is sufficient to meet our anticipated expenditures for at least the next 12 months as we execute on our commercialization plan for Provenge. We expect revenue from Provenge product sales could be a significant source of cash. However, we may need to raise additional funds to meet potential additional long term liquidity needs for uses including:

• the development of marketing, manufacturing, information technology and other infrastructure and activities relating to the commercialization of Provenge,

• working capital needs,

• increased personnel needs,

• continuing and expanding our internal research and development programs, and

• potentially engaging in clinical trials outside of the U.S., commercial infrastructure development and other investment in order to support the commercialization of Provenge in territories outside the United States.”

The possible exercise of purchase options on the Atlanta and Orange County plants could also result in a need for cash (see 350027).
http://tinyurl.com/23dbdyt

If the stock price remains in the $40s or higher and if Dendreon truly expects to go it alone in Europe and the rest of the world, I would anticipate that another offering in the near future is a near certainty. If the financial markets revisit the horrors of two years ago when Dendreon is seeking additional financing, obtaining the necessary financing on reasonable terms may be very difficult.

Intellectual Property Issues
Although I am not aware of any challenges so far, many biotechs have ended up in patent disputes. As the Company points out on page 31 of the current Form 10-K, the absence of patent challenges so far “ may reflect * * * the fact that we have not yet commercialized any products.”

[1] Rereading my January 24, 2001 24-page memorandum which included notes on that meeting is enlightening for all the “misses” in the forecasts by the Company and by me. Two Phase 3 trials had started in early 2000 and Dendreon expected to file the BLA in the first quarter of 2002 with possible approval at the end of 2002—this optimistic assessment was only off by over 8 years!

[2] In a presentation at the Bank of America Merrill Lynch Health Care Conference (“the Presentation”) on May 11, 2010, the Company indicated that Provenge was being produced in New Jersey but there was no mention of Gold seeing the first batch produced—a photo opportunity missed! Dendreon Investor Relations has confirmed that the first patients have received Provenge.

http://tinyurl.com/2c2ukw6

[3] Bishop was interviewed by Luke Timmerman on January 19, 2010, for xconomy. http://tinyurl.com/287akst

[4] I have been a Qualcomm shareholder since 1992, an Intel shareholder since the IPO in 1971 and a Cisco shareholder since the mid-1990s. Qualcomm stock price increased more than 26-fold in 1999. On the old QCOM message board, I chose q1000 as my posting moniker prior to the first of two stock splits in 1999 in the hope that QCOM would hit $1,000. The $100 all-time high on January 3, 2000 was the equivalent of $800 when I chose my name (QCOM split 2 for 1 and then 4 for 1 in less than 8 months in 1999). It also split 2 for 1 in 2004 so that I now have 16 shares for every share at the beginning of 1999—maybe I should change my moniker to q62.50!