Dendreon Wounds Are Self-Inflicted, Not the Start of a Biotech Industry Virus

8/8/11Follow @xconomy

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like around $65,000 to $70,000, the company could have still made plenty of money. There would have been much less grumbling among patients, and doctors. I’m willing to wager that Medicare never would have bothered to open up that messy yearlong reimbursement review.

But even if you assume Medicare had Dendreon in its crosshairs no matter what, the reimbursement problem could have been better managed. Dendreon’s sales team had precious months this spring in which it could have explained to doctors that specific changes were coming down the pike. They certainly could have spread the word, with specific instructions, since the official decision came in writing on June 30.

Dendreon has some bright and capable people on its management team, but this series of blunders makes you wonder who’s minding the store. Even though this was one of the most anticipated cancer drug debuts in recent years, the company didn’t hire a senior vice president of sales and marketing until three weeks before the FDA approval arrived in April 2010. Many companies have a person like that on board, along with key lieutenants, at least a year before a product introduction.

The senior vice president of sales and marketing who was hired late in the game, Varun Nanda, looked like he had the perfect resume for this job, having worked on cancer drug sales and marketing at Roche’s Genentech unit. But seven months later, Nanda was gone. No official explanation was given for the departure of this executive in a critical position. Then the position—which ought to be one of the plum marketing jobs in all of biotech—remained vacant for six months. Now Dendreon said it has a new SVP of commercial on board, Robert Rosen, who Gold said has experience marketing major cancer drugs like trastuzumab (Herceptin) and sorafenib (Nexavar).

Rosen has his work cut out. Even if he and his team do a great job of explaining to doctors what the deal is with Medicare, those doctors are not taking Dendreon’s word for it, Gold said. They will want first-hand evidence, on a patient-by-patient basis, to prove that they will get reimbursed, before they get comfortable prescribing multiple patients in a row, he said.

Gold, who’s trained as a urologist, should have been able to see some of these concerns coming a mile away. When Dendreon says it didn’t really foresee how skittish urologists might be about reimbursement, it rings hollow. Equally galling, the company kept referring to how it didn’t see this coming because it only recently started moving beyond the top academic centers and pitching its drug to smaller, community-based urologists and oncologists. The billion-dollar sales projections always depended on wide adoption by community physicians. It’s hard to believe Dendreon could have been so far out of touch with the needs of their practices.

There were lots of moving parts to the Provenge launch, and Dendreon appears to have executed well on important aspects like manufacturing and supply chain logistics. But when you’re touting a company into something worth $5 billion, and hiring a staff of 2,000 people around the country, there are no excuses for major stumbles like this.

Given all the mistakes Dendreon has made, and the unique profile of its infusion-based medicine, I don’t think it means other companies are doomed to follow its lead. Just this year, Bristol-Myers Squibb successfully rolled out ipilimumab (Yervoy) and Vertex Pharmaceuticals nailed its launch with telaprevir (Incivek).

Since this is biotech, and it’s a risky business, there will always be companies like Dendreon who let big opportunities slip through their fingers. But there are also companies out there proving they can hang onto the ball, and drag a couple of tacklers into the end zone at crunch time. Let’s all hope investors can still see the difference.

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  • SteveB

    Thanks again Luke. I was in shock when they priced it at 93k. Gold is so arrogant.

  • Duke

    Interviewed at Dendreon 2 yrs ago. People I spoke to were even skeptical about its prospects and couple of new VPs were arrogant. What bothered me was the hocus pocus science backed by likely group of ardent quixotic “paid” wackos parading as patients. Well Gold certainly did 1 thing right to rile up these buffoons. Uh, I didn’t get the job and it was blessing in disguise as I found a better job with top notch sought after biotech firm with blockbuster oncology drug in San Francisco with full relo pkg.

  • David

    Excellent explanation of the original problem.

    Throw in the perfect storm created by Congress last week, the Italian Job, The U.S. Credit Downgrade, & last but not least:
    HIGH FREQUENCY TRADING and you have the DNDN nightmare.

    Had all of these things not combined at the same time the sell off would have been far less damaging.

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  • Tony

    DNDN is way oversold.
    They will still make 50% of forecast sales.

    To drop 2/3 is way too much, even with the current market.

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  • Carl

    Very well constructed article Mr Timmerman. I’ve worked in biotech for 24 years — an arena that employs some very smart people. It takes a special talent to get to the facts and more importantly, present them in such a way so that the message is clearly understood.

  • Dave

    Good article. While this was a blunder, let’s hope they learn from their mistakes. This technological platform will spawn many drugs for DNDN and the potential to flourish in future years.

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  • Mary

    Interesting with the lack of sales and marketing intelligence…similar to another Seattle biotech in the recent past.

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  • http://YAHOO JOE NESTORY

    WHERE DO WE GO FROM HERE? IS THERE ANY HOPE

    FOR DENDREON/OR PROVENGE. I HOLD THOUSANDS

    OF SHARES WHAT DO I DO NOW?

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  • Leb

    Don’t worry Luke, as you can see lately, dndn’s fall from grace (&short attack where short interest went from 14M to 18M during that Aug 1-15 period) on Aug 3rd was planned by wallstreet; comfortably after the June 2011 shareholder meeting. I promise you that JPM and the rest will convert their notes to shares sometime by Jan 2016 when the note is due. JPM will get their 42million shares: http://www.streetinsider.com/holdings.php?q=DNDN

    Provenge enjoys 12 years market exclusivity under Obamacare and the 1st 3 years (2010-2012) were ramping years altho yoy sales were pretty impressive:

    2010; $49M

    2011: $216

    2012: $322

    Wallstreets “restructuring of shareholders” strategy is nearly complete as short interest moved from 14M (Aug2011) to 47M (Nov2012). Current short interest is still > 30%

    Guess what years 4-6 (out of 12) will bring with Carl Icahns former CEO pick for Imclone? :-D

  • Leb

    In your future articles, please tell everyone to BUY DNDN Luke if you care about the 99% and not the 1% that drove the stock price downward during 2012 via massive shorting ($17- $3.69) to shake out retail.

    DnDn is only treating 3465 patients yearly (2012)…out of the 30,000 men that are “newly diagnosed throughout a year” with mCRPC. When they reach and treat 4,304 annual patient rate (or $400M), that is still only a fraction of the treatable market…
    And we’re not including the 60,000 still living w/mCRPC as these men typically live 2 years after being diagnosed with the terminal condition.
    Do the right thing Luke and tell EVERYONE via your future articles!
    Dont fall for wallstreet touting restructuring fears (successful companies restructure all the time & plan to close old plants years in advance) or layoff fears (CEO JJ is building HIS OWN TEAM and finished offering them & his fellow officers & himself lots of stock & options during the last 2 quarters when the pps was attractively low :-) or competion fears (ethical urologist/oncologists has patient interest at heart and will sequence the various therapies to prolong the dying patients life to the MAX!) stop you from writing the TRUTH ABOUT THE RESURGENCE OF THE NEXT BIG BIOTECH!!
    Tia
    Leb

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