Dendreon May Not Survive Its Success: Q&A with Founder Chris Henney, Part 1
Luke Timmerman7/27/09Follow @ldtimmerman
Christopher Henney’s career in biotechnology looks like a three-act drama over three decades. He’s a classically-trained immunologist who went on to be the co-founder of Seattle’s three most successful biotech companies when ranked by stock market value—Immunex, Icos, and Dendreon.
Henney, now 68, pushed Dendreon on its odyssey when he joined as CEO in 1995. He developed its technology, drove it into late-stage clinical trials, took it public, and then handed over the company to his young protégé Mitchell Gold at the beginning of 2003. Henney left the company as chairman of the board a year later. He doesn’t make a whole lot of public appearances around town anymore, although he still lives in Seattle and serves on the boards of five different biotech companies around the world.
I caught up with Henney at the Starbucks in the Madison Park neighborhood, mainly to find out what he had to say about Dendreon (NASDAQ: DNDN). The company has become one of biotech’s biggest success stories of the year, since April, when it said a 500-patient clinical trial of its first-of-a-kind treatment for prostate cancer, sipuleucel-T (Provenge), was able to extend lives of men with terminal prostate cancer by a median of about four months, with minimal side effects like fever and chills.
Henney provided some interesting added history to the Dendreon saga. The company had actually started in 1992, and spun out of Stanford University under the name Activated Cell Therapy. It had a technique for sifting out a powerful type of white blood cell known as a dendritic cell from a blood sample, but didn’t really have a business model other than selling some commodity parts, Henney says. He recruited chief scientific officer David Urdal, then at Immunex, to join him on a mission to build what became Dendreon—a company that separates out the dendritic cells from a patient’s blood sample, and incubates them in such a way as to “teach” the immune system to fight cancer cells like a virus. If the FDA clears this treatment for sale early next year, as analysts generally consider a fait acompli, then this will be the first drug ever made commercially available in the U.S. to actively stimulate the immune system to fight any form of cancer.
If that happens, it would be a coup for prostate cancer patients, and a vindication for a long-snakebit field of science. Even though Gold has said he hopes to build an anchor company for Seattle, like Biogen and Genzyme are for Boston, Henney says he doesn’t necessarily see that happening. Here are edited highlights of the conversation, which we’re running today and tomorrow:
Xconomy: Do you stay in touch with (CEO) Mitch Gold, and the Board?
Chris Henney: Absolutely. Not so much with the board, but with individual members of the board. At social levels. Mitch and I are very cordial.
X: Does he seek your advice from time to time?
CH: I wouldn’t say that, and I don’t proffer it. We talk to each other in a general sense.
X: What went through your mind when the results came out in late April?
CH: We had seen the data come out two years ago. Clearly, the FDA’s expert committee had certainly endorsed not only the concept behind the product, but the data they had seen at the time. There were a small minority who wanted more data, but that’s pretty common. Academics always like more data. So repeating it was less surprising. Obviously if the thing works, it should be able to repeat it. I wasn’t surprised. It’s a nice endorsement. Because with the first trial, the numbers were small. When the numbers got larger, the statistical analysis became easier and more convincing.
X: For a very long time, the company was all about a debate over whether the data was convincing or not for Provenge.
CH: Yeah, because the numbers were fairly small. But even from the early days, everything internally was consistent. The patients who did better were the ones with a more pronounced immune response. Everything always held together. It’s just that to make the argument strongly to a skeptical audience, it required the numbers be larger.
X: Now that the numbers are larger, that debate seems to have moved into the past.
CH: That’s right. People are now willing to concede that it works. But if you put it into context, it’s the only cancer vaccine approach that has worked. Cell Genesys and a whole variety of people have tried different approaches for the same issue. This, to date, is the only one that worked. I think that has to speak to the efficiency of the procedure. That is to say that while cumbersome, the process of removing cells, incubating them, and then re-infusing them gives you the best loading with dendritic cells that we’ve been able to achieve.
X: Now that the clinical and development phase for Provenge has passed, what are the top priorities for making this a commercial success?
CH: No. 1 has to be manufacturing, the scale of manufacturing. I don’t doubt that these guys can market it. And in Dave Urdal, they’ve probably got the most experienced manufacturing guy in the entire biotech industry. Dave’s been doing this for 30 years. If there’s anybody I would have faith in for manufacturing, it would be Dave.
X: Is there anything unique about how this company is structured? Is it really rare for them to have made it all the way through Phase III clinical trials without having to sell away half the baby to a Big Pharma company? To have 100 percent ownership worldwide—does this represent some kind of unique commercial opportunity?
CH: No. In fairness, it’s because of the nature of the product, it’s just not in the sweet spot of Big Pharma. The very nature of the manufacturing, and the complication of it, it’s hard for them. Big Pharma is about small molecules. Then reluctantly, they added biotechnology products to their armamentarium, which are large molecules. But this is going a step further. This is cell therapy, another version of cell therapy. The likelihood that Big Pharma would have wanted it, in the company’s early, unproven days, was not high. Now that it’s a proven product, maybe someone would be willing or interested in making that move. It might be more likely to be a large biotech company instead of classic Big Pharma. Or maybe a Japanese company.
X: Do the pharmas not get it?
CH: It’s not that they don’t get it, it’s that it’s complicated for them. It represents too many manufacturing issues and headaches. Culturally, Europe and Japan are more ready to accept a cell-based therapy than the U.S. You’ve seen the problems we’ve had in this country with endorsing the stem cell approach to therapy. It’s going to happen. But it’s being endorsed slowly.
X: Do you mean the pharma companies are more receptive in Europe and Japan, or do you mean the patient and medical communities there are more receptive to a cell therapy product than in the U.S?
CH: The patient and medical communities, yes, are more receptive. The pharma companies will reflect that.
X: So do you think the market could be better for Provenge overseas?
CH: I think it will be accepted well in this country. We’re talking about business partners, and I think Japan and Europe might be more likely business partners. Especially since the company seems to want to keep the U.S. to itself anyways. We’ll see whether they have that opportunity. I saw Reuters wrote the story (July 23) about Dendreon looking for a partner in Europe. It might end up that when you start looking for a partner in Europe, it could be that you end up getting taken out.
X: You think it’s a possibility that they’ll get acquired, and that they might partner in the U.S.?
CH: I don’t think it’s likely they’ll partner in the U.S. I think it’s more likely that they’ll get taken out in the U.S. If there was a U.S. partner, it would be more likely through an acquisition. With Japan or Europe, you might end up with a partnership.
X: I’m curious what kind of difference you think this product can make for Seattle biotech? It’s been beaten down for a few years, with the best companies, Immunex and Icos and others, getting acquired and not having the same presence as before.
CH: When you get to a certain size, with a $1 billion market cap, it’s hard to sustain it. When you’re a multi-billion dollar market cap, that’s really hard to sustain. It’s like saying if you want 10 percent and you’re a $3 billion company, you need to do an extra $300 million a year of revenue. That’s hard to do, especially if you’re a one-product company.
X: But Dendreon’s not there yet. Do you think it could be the next anchor tenant for Seattle biotech, like Immunex was?
CH: For a while. Yes, absolutely. They are already the biggest company by market cap by far. There’s no one close.
X: Right, but they only have a couple hundred employees. Can they get to the point of being fully integrated here?
CH: Immunex for a time had a market cap bigger than Boeing, when we only had 1,000 people. Immunex was the second-biggest company in the Northwest by market cap, behind Microsoft. Bigger than Boeing by market cap, which had 100,000 employees. You can’t go by numbers of people, because it will never get there.
X: Yes, but I’m talking about it being a regional anchor for your biotech cluster, like Biogen and Genzyme are for Boston, and Genentech has been for the San Francisco Bay Area.
CH: Yes, Biogen, Genzyme, Genentech, and Amgen are the original companies. They are the ones who have survived from the first round of companies from back in the early 1980s. Not many of them survive. You saw Medarex, which is a second or third-generation company, just got bought out yesterday (July 23) by Bristol-Myers Squibb. You can organically grow to $2 or $3 billion, but you need a slew of products (to continue). This is why Amgen bought Immunex, There aren’t too many billion dollar products in the biotech industry. Immunex, with Enbrel, had one. That’s why it got bought. It’s easier to have the market cap of a ZymoGenetics ($367 million) and stay around in town. But to stay as an independent company, with a several billion dollar market cap, would be very unusual.
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