Dendreon CEO Mitch Gold envisions his company becoming the next anchor tenant for the biotechnology industry in Seattle—the first big success story since Immunex in the late 1990s and early 2000s.
For those in need of a refresher, Dendreon (NASDAQ: DNDN) has been riding a wave of enthusiasm the past couple months, since a clinical trial showed its first-of-a-kind immune-boosting treatment for prostate cancer helped men live longer with minimal side effects. This company with a controversial history, has suddenly produced a 10-fold return for shareholders who bought shares as recently as February, has raised $221 million in fresh capital, and is working feverishly to get its first product on the market by early 2010.
This, as you might imagine, created the happiest vibe I’ve felt in years of attending Dendreon annual meetings. About 100 people showed up this morning at the event today at company headquarters in Seattle. Shareholders I talked to at the meeting were all smiles. Gloria Johnson, of Cincinnati, OH and Ft. Myers, FL, a retired psychiatric nurse, told me her happy story of how she and her husband Ron bought 20,000 shares at $4.21 apiece earlier this year before the positive Provenge data sent the stock soaring. “It’s been life-changing,” she says.
Like Johnson, many of these shareholders flew in from around the country to ask probing questions of Gold after the formalities were completed. He answered them all, plus a few afterwards from me. The burning question was whether Gold is looking to sell Dendreon to a large pharmaceutical company—the kind of deal that would generate even bigger windfall returns for shareholders. He said all the right things you’d expect a CEO to say, about how he’s not building the company to sell it (which could just be posturing to help him drive a harder bargain with an aggressive suitor). Then he added the usual caveat that if someone made him a serious offer, the board has a fiduciary responsibility to consider it (which could help him avoid being sued by ticked off shareholders if something goes wrong.)
I’ve known Gold since 2002, shortly after he joined the company and was named CEO. At 42, he’s still the young, super-confident dealmaker I remember, just with more polish and a few more battle scars. If Hollywood made this company’s saga into a movie, it would have to cast Tom Cruise as Gold in the lead role. I take Gold seriously when he says he wants to build Dendreon into a regional anchor, because it’s something he has repeated to me virtually since the day he got the top job.
The “sell it, or build it” question matters for shareholders who want to fatten up their portfolios, but it’s also of great importance to Seattle biotech, which has a number of intriguing biotech companies developing products, but nobody with the kind of commercial mass that comes from having a product with $1 billion annual sales potential like Dendreon. If Gold sells the company, that will have consequences for the community as it tries to regain its biotech mojo. So I asked him about how big of an impact his company can really have on the local landscape, and whether it might someday grow into a regional anchor like Boston has with Biogen Idec and Genzyme. Dendreon only has about 200 employees now.
“We’re going to have a big impact,” Gold says. “We haven’t really had a major commercial success in Seattle biotech since Immunex, and I think you’ll see us bring a lot of the things they did.”
That means he’s going to import a lot of talented employees from around the country who want to work on a treatment with potential to transform prostate cancer (it had 88 job openings at last count), and it will serve as a magnet for institutional investors, getting them to travel from New York to Seattle, a trip they otherwise wouldn’t make.
“When the investors come out here to see us, they can stop to see some of the other companies here, so they all can benefit,” Gold says.
What about becoming the training ground for people to cut their teeth at, before they launch their own entrepreneurial ventures, a role performed in Boston by Biogen, Genzyme and others? It has already happened on a small scale with a couple of former Dendreon executives: Martin Simonetti, now the CEO of Seattle-based VLST, and Rob Hershberg, the co-founder of Seattle and San Diego-based VentiRx. “We already have a history of people leaving here and keeping Seattle a vibrant place for biotech,” Gold says. “I think that will continue. It’s a hallmark of a successful company.”
Of course, Dendreon still has a to-do list that’s a mile long before it can really call itself an established commercial success. It has no products on the market yet. Importantly, it needs to fill two large gaps on its management team—a head of sales and marketing, and a manufacturing leader—to get ready for commercialization, Gold says.
Chairman Richard Brewer acknowledged all the hard work ahead, essentially saying the positive clinical trial was just a start. The company still needs to complete all the voluminous paperwork for its amended application for FDA approval. It needs to make sure physicians and patients know how to use it. It needs to manufacture enough of this drug to meet demand, which analysts predict will exceed $1 billion in annual sales a couple years after approval. It needs a partner to help it commercialize the drug overseas. (He didn’t mention pricing, but the company will need to carefully set a high price to recoup years of R&D spending, but not set it so high that insurers balk at paying it.)
One advantage Dendreon has heading into the commercial rollout of sipuleucel-T (Provenge) is enormous public awareness. Heading into its fateful FDA advisory committee hearing in March 2007, when a panel of experts debated the safety and effectiveness of the drug, only about 30 percent of physicians that Dendreon polled were aware of the product, Gold said today. That figure climbed to more than 50 percent in the controversial aftermath, when the FDA ignored the recommendation of its panel, and forced the company to wait until it could produce more evidence that its drug works.
Now that Dendreon appears to have cleared that second bar, and its story got continued airtime on almost every major business and financial media outlet, the company has done another poll of physician awareness. An amazing 93 percent of physicians that Dendreon polled are aware of the drug now—which is hard to compare with anything I’ve ever heard for a drug that’s not even on the market yet.
The company is also in the unusual position of owning 100 percent of the U.S. commercial rights to a cancer drug that is poised for FDA approval, instead of going the usual route of selling half or more of the action to a large drugmaker with the money to take it forward in development. This has forced Dendreon to raise more investment capital through its history—more than $500 million and counting—but it also means Dendreon will be able to keep the value to itself when sales start coming in.
“There’s a giant myth in our industry that if you’re a small company, you somehow need the imprimatur of a large company stamped on your forehead which says you can actually do this, because we say you can,” Brewer said during the meeting. “I’m here to tell you that’s not true. This company can take this product all the way to the commercial stage and beyond. I’m totally convinced. I’ve done it myself before with others who were just as talented as these guys are, and this is a talented group.”
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