Dendreon has all the ingredients of a Hollywood thriller: Life and death on the line. Millions of dollars at stake. Fast money in the stock market. Cutting-edge technology that aspires to achieve the impossible.
The Seattle biotech company (NASDAQ: DNDN) has gone through a riveting set of twists and turns over the past two years, and the story may reach its climax within weeks. One day this month, Dendreon plans to rip off the blind from a clinical trial that it hopes will offer convincing proof that its experimental drug helps men with terminal forms of prostate cancer live longer, with minimal side effects.
If this trial of 500 men is successful, Dendreon will dash off to the FDA for permission to start selling this product, called Provenge, in the U.S., possibly by the end of this year. Analysts will rhapsodize about a new drug with $1 billion annual sales potential. Scientists will talk about a new paradigm of cancer treatment that stimulates the immune system to fight cancer cells like a virus. Patient advocates will cheer, as about 30,000 men in the U.S. who die of prostate cancer each year will have a new kind of treatment option. Dendreon stock will rocket from its current plateau of a little more than $4 to more than $20 a share, says Seattle-based biotech analyst David Miller.
If the trial fails, though, things will get ugly. Layoffs will likely follow, and the company’s promising immune-therapy technology will probably go on the back burner. Dendreon will likely fall back on a more conventional small-molecule pill for cancer that’s just entering clinical trials and has years to go before proving its worth. People will be inclined to write off the whole field, given that Dendreon would join a growing list of companies that failed to live up to the promise of cancer vaccines, including Cell Genesys, Genitope, and Favrille.
If there are shades of gray in the Dendreon data, all bets are off.
“We are going to see fireworks,” Miller says.
Like any good story, Dendreon’s tale has a beginning, a middle, and an end (which we haven’t quite gotten to yet). The company was founded in 1992, formed out of technology from Stanford University. From the start, it had a powerful pull on the imagination of scientists, doctors, patients, investors, and journalists. I first started following Dendreon in 2001 while at The Seattle Times.
Dendreon has worked all those years, and burned through more than $563 million of investor money, to develop its active immunotherapy, or cancer vaccine, technology. It doesn’t work like a traditional chemotherapy or even a targeted antibody drug that’s supposed to seek out cancer cells and spare healthy ones. Instead, Provenge is designed to trigger the body’s natural immune defenses to recognize cancer cells as foreign invaders, like a virus, and kill them.
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 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 in front of a bull. These 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. That’s the idea, anyway.
By 1999, Dendreon thought it had seen enough promising anti-tumor activity to take Provenge into the third and final stage of clinical trials, the kind of study that could pave the way for FDA approval to sell this product in the U.S. The gold standard measurement of effectiveness then, and now, for all cancer drugs would be to run a clinical trial that randomly assigns people to either the experimental drug or a placebo. Researchers would then follow patients for years to see if those on the drug live longer, with acceptable side effects in the eyes of the FDA.
Dendreon, like many biotech companies, couldn’t afford to wait around for the years it would take to show a survival benefit for patients with slow-growing tumors like those of the prostate. It might take years to enroll all the patients, and with their late-stage forms of prostate cancer, they still have a life expectancy of 18 to 20 months, so that would be a lot of waiting. So the company came up with a primary goal that would provide a quicker answer. They looked at how long patients on the drug are able to keep their tumors from spreading—a goal that’s long been thought to be a reasonably accurate predictor of improved survival time.
That first trial, of 127 men, failed to show the required statistical confidence that Provenge could slow down the spread of tumors, and for many biostatisticians, that is really where the story ends. It failed on its primary goal. Investors left the company for dead in 2002, driving the stock below $2. But Dendreon, again, like many other biotech companies in that kind of desperate situation, fished around in the data for something positive to hang onto. For a while, it tried to show a benefit for patients with slower-growing forms of tumors, without providing a benefit in the most aggressive cases.
That kept investors interested for a while, but Dendreon had another ace in the hole. From the beginning of that trial, the FDA required the company to keep track of whether these patients were alive or dead for a full three years.
It took time for this data to roll in, but the final analysis in 2005 showed that patients on Provenge ended up living a median time of 4.5 months longer than men in the control group, who got a placebo. About one-third of the men on Provenge were alive after three years of follow-up, about triple the three-year survival rate of men in the control group. The side effects were minimal—fever and chills that went away after a couple days.
Dendreon hypothesized that the vaccine just took a while to kick in, a so-called “delayed effect” that might explain why tumors would spread shortly after treatment, but the treatment would end up helping patients live longer after all.
Patient advocacy groups cheered on Dendreon from the sidelines, saying they needed alternatives to the existing treatments—chemotherapy and male hormone-deprivation—that have nasty side effects. Many scientists considered the data intriguing, but the sort of thing that would need to be verified in another, larger trial.
While all of this was going on, Dendreon had another trial ongoing called Impact, but that wasn’t really mature enough to produce a definite answer on survival. In consultation with the FDA, Dendreon agreed in November 2005 to expand the Impact trial to enroll 500 men. After all of these meetings with the FDA to talk about next steps, and before the results from Impact were ready, Dendreon decided to go for it. It completed an application to the FDA in November 2006, asking it to approve the drug primarily on the basis of the survival benefit shown in the earlier study of 127 men.
This gambit was controversial in the scientific and medical community, which wanted to see Dendreon hit the primary goal of a clinical trial designed to show improvement in survival time. Many investors were skeptical that Dendreon could win approval on its thinner set of existing data. Short-sellers, who intend to profit on a falling stock price, placed huge bets with millions of shares that said Dendreon was bound to fail.
By March 2007, the FDA, as it often does with new drugs, sought the advice from an expert panel of cancer physicians, statisticians, and immunologists on whether to approve the drug.
This hearing—which I saw firsthand in a hotel conference room in Gaithersburg, MD—was filled with drama. After panelists debated the effectiveness of the drug for an afternoon, while analysts furiously thumb-typed observations on their Blackberries to their trading desks in New York, the panel voted 13-4 in Dendreon’s favor that Provenge demonstrated “substantial evidence of effectiveness” and 17-0 that it was safe. One panelist from the National Cancer Institute told me after the meeting that he voted in favor, partly because he was hopeful this would spark a new day in immune therapy research.
Since the FDA almost always follows the advice of its expert panels, investors wagered that Dendreon had actually achieved the impossible. Its stock boomed from $5.22 before the panel to close at $12.93 the day after this vote, as 92 million shares changed hands that day. This little company from Seattle, without a product on the market yet, was the most active stock in the entire NASDAQ that day, with even more activity than Microsoft or Cisco Systems.
But there were even more plot twists to come. The four members of the advisory committee who voted no apparently felt strongly that the panel had made a mistake that could set a dangerous precedent for the FDA, essentially lowering the required standards for approval. Letters from two of these panelists, Maha Hussain of the University of Michigan and Howard Scher of Memorial Sloan-Kettering Cancer Center in New York, were eventually made public in The Cancer Letter, an influential trade publication.
The market essentially blew this off as a minor academic dust-up for a while, as Dendreon shares reached a peak of more than $24 a share, making it briefly worth more than $1 billion in market value. Some of the hedge funds that were shorting the stock were essentially run out of business by the losses, Miller says. During this extraordinary run-up, many people chose to sell their shares at a high point—including a few Dendreon board members and CEO Mitchell Gold. (The Dendreon CEO sold 202,090 shares on April 2, 2007, at $13.46 apiece, for gross proceeds of $2.7 million, according to this filing with the SEC.)
Nobody seemed to mind much if Gold or the Dendreon directors made some money. After all, so were a lot of other people. I heard stories of low-wage nurses in Seattle—not the usual biotech investor—buzzing to all their friends about how they made a bundle on Dendreon shares.
Then Dendreon dropped a bombshell.
Before markets opened on May 9, 2007, Dendreon announced the FDA had shot down its application. Regulators demanded the company produce more evidence from the ongoing clinical trial of 500 men, designed from the outset to answer the question of whether it can prolong lives. This meant Dendreon would have to wait another two years, at least, to achieve its dream of winning FDA approval for Provenge. Dendreon’s release made it sound like it was stunned, as the company needed to seek “clarification” from the FDA about what it really meant.
In a heartbeat, all that stock wealth was wiped out when the market opened. Dendreon stock collapsed from $17.74 the previous day to close at $6.33. Trading volume skyrocketed, again making Dendreon the world’s most active stock that day. Patient advocates were outraged. Investors were shell-shocked by the roller coaster. The inevitable shareholder suits arrived.
The recriminations in the wake of the FDA rejection got ugly at times. Some infuriated individuals went so far as to threaten Hussain and Scher, before they appeared in public at the American Society of Clinical Oncology (ASCO) meeting the following month, forcing officials there to tighten up security. The Provenge advocates continued their fight, urging members of Congress to hold hearings and investigate the FDA’s decision. No hearings were held.
Dendreon, once a highly visible and promotional company, had little to say at that year’s ASCO meeting and not a lot of news the rest of the year. It sought to pick up the pieces and find a new way forward. After yet another meeting with the FDA, the two sides agreed on a compromise of sorts that could get the agency the proof it needed to be confident Provenge works in the study of 500 men, while offering Dendreon a shot to get to the market more quickly.
The agency agreed to allow Dendreon to take an early peek at the survival data, known as an “interim analysis.” This meant that even before several years of data was in, if Dendreon could clearly demonstrate Provenge lowered the risk of death for patients, it could file a new application immediately on that still-evolving set of data. This type of analysis would make it possible for Dendreon to get an answer as quickly as the fall of 2008.
Otherwise it would likely have to wait until sometime in 2009 to get the result. This sounded like an agonizing wait, since the pressure was on all parties to get this answer quickly. Prostate cancer patient advocates made plain they consider this to be a life-saving therapy being held up by some kind of bureaucratic politics they didn’t really understand.
Dendreon got that interim result last October, delivered by an independent panel of trial monitors. The news was not what the company had hoped for. Provenge showed a 20 percent reduction in the risk of death at the time of the analysis, falling short of the minimum 22 percent improvement it needed to satisfy the FDA’s conditions to ship off an urgent application. Yet since history from the previous trial showed that Provenge patients tend to do better over time, and the data was within hailing distance of the goal at the final analysis, Dendreon was hopeful that the trial was still on track.
Still, this early peek came with a price. Because an interim look at the data of an ongoing trial has the potential to introduce bias, Dendreon now needs to clear a higher statistical bar in the final analysis to show that the end result truly isn’t a fluke. Exactly how high the bar has been raised, the company won’t say. (Last month, Forbes quoted some statisticians who say this tainted the integrity of the trial.)
By January of this year, the company was sounding upbeat about Provenge’s prospects again. Dendreon’s CEO, Mitchell Gold, told a crowd of investors in San Francisco that 304 men had died in the ongoing study, meaning enough deaths had occurred for the company to do the final survival analysis on whether Provenge patients did any better than those in the control group. The final data would be available by April 2009, Gold said.
“This is a very exciting time for us, and for patients,” Gold said at the JP Morgan Healthcare Conference. He later used a football analogy to describe the company’s situation. “We’re on the 10-yard line, we’re in the red zone, and we’ve got to punch it into the end zone now.”
Which brings us to today. This drug, and this company, remain so controversial that three expert oncologists I requested for interviews declined to speak on the record until after the results are in. The situation remains “too emotionally charged,” one doctor said.
Dendreon stock, meanwhile, is trading again in the range of $4. About 17 million shares were held in a short position in mid-March, out of a total of 98 million shares outstanding, according to NASDAQ data. That means plenty of people think Dendreon is bound to fall short of FDA approval once again. If the trial is positive, these people with short positions will need to rush into the market to buy shares to close out their positions and stem their losses. That process could unleash enormous buying pressure on the stock once again, driving it higher, Miller says.
Still, passions have cooled somewhat this year in the midst of a recession, and now that hedge funds aren’t able to use as much leverage as they did two years ago before the Dendreon panel vote, Miller says. Many investors will watch what the company says about the final data analysis, and then jump in to buy if it’s positive. “People are not as rabid as they were before. A lot of people are waiting to see about the data,” Miller says.
If Dendreon can somehow beat the odds, and break through with the first FDA approved therapy, it will be a watershed for the field of immune therapies for cancer, and possibly inject some life into the rest of the biotech sector. Dendreon has another immune-boosting program in its pipeline for breast cancer that has shown promising results, but has been stuck on the back burner until the company gets more resources to push it ahead.
But few people in the industry seem to be holding their breath for this kind of positive chain reaction. The whole thing could end with an anticlimactic thud. Bob Kirkman, the CEO of Seattle-based Oncothyreon (NASDAQ: ONTY), another developer of immune therapies for cancer put it this way:
“A positive result would be a major boost to the field, and I think everyone with a stake in cancer vaccines wishes them every success,” Kirkman says. “A negative result may not have a broad impact, since it would just confirm the conventional wisdom of the moment.”
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