Dendreon’s Provenge Launch Story Enters Second Chapter, With Today’s Earnings Call
Luke Timmerman11/3/10Follow @ldtimmerman
Dendreon, the Seattle-based cancer drug developer that people either love or love to hate, is going to provide a lot more grist for debate later today.
The company is preparing to release its third quarter financial report today at the close of markets, and will host a webcast conference call at 4:30 pm Eastern/1:30 pm Pacific to discuss the performance with investors. This report is a big deal to followers of Dendreon (NASDAQ: DNDN) because it will say a lot about how well the company is doing at selling its first-of-a-kind immune boosting treatment for prostate cancer, and how it is managing potentially serious future obstacles like Medicare reimbursement and a manufacturing shortage.
Expectations have been riding high ever since Dendreon won FDA approval in April to market sipuleucel-T (Provenge), as the first treatment to actively stimulate the immune system to fight cancer cells like a foreign virus. Lots of analysts started talking about billion-dollar projections, and Dendreon’s market valuation has soared to more than $5 billion. The company, however, sought to put a limit on those sky-high hopes earlier this year because it only has enough manufacturing capacity to serve about 2,000 patients in the first year. The drug generated $2.8 million in sales in the quarter that ended June 30, although Dendreon has shown there’s strong demand for the product, as indicated by $5.2 million in sales in July alone. Wall Street analysts are now expecting just under $24 million in sales for the quarter that ended September 30, according to this report from TheStreet.com’s Adam Feuerstein.
Once people get past the Provenge sales number, and possibly the month-by-month sales trajectory, Dendreon’s management will surely be asked to talk about two key elements of the business for the future—Medicare and manufacturing.
Dendreon has set the price of Provenge at $93,000 per patient for a complete course of therapy, which certainly doesn’t sit well with critics of high drug prices. Now the company is getting ready to justify that cost to the most important purchaser of drugs for U.S. men over 65—the Centers for Medicare and Medicaid Services. The agency is holding a public hearing on November 17 to discuss the strength of the evidence to support use of Provenge, and to raise sticky questions about how the drug may be used for patients beyond the strict group of people outlined in the FDA-approved prescribing information.
The drug is approved for patients who have prostate cancer that has spread, and no longer responds to standard hormone-blocking therapies. Many researchers, even though this hasn’t been proven and it’s extremely difficult to prove in a clinical trial, believe an immunotherapy approach like Dendreon’s is likely to be even more effective in patients with earlier stages of disease. That could get expensive in a hurry at $93,000 a patient, but it’s a disease that kills about 30,000 men in the U.S., and is diagnosed in many more. About 217,000 patients are diagnosed with prostate cancer every year, according to the American Cancer Society.
David Miller, the president of Biotech Stock Research in Seattle and a longtime Dendreon bull, has said it’s unlikely that Medicare will crack down too hard on reimbursement. Essentially, while it’s politically difficult for an agency to shell out billions of tax dollars for a single drug made by one company, it’s even more politically controversial to deny dying constituents access to a potentially life-saving therapy in the name of saving some money.
While there’s much fretting on the Internet about what Medicare will do, fewer people realize that Dendreon said back in August that nine of the 15 regional Medicare units had published reimbursement guidelines, and five more had given e-mail or verbal assurance to doctors in their regions that it was coming soon. Dendreon disclosed that rate of progress in its last quarterly earnings call.
“Our sense is there is an 80 percent chance nothing will come of the whole [Medicare coverage analysis] except coverage of Provenge on label, and a higher hurdle (clinical trials instead of compendia listings) for off-label reimbursement,” Miller wrote in a note to clients Oct. 8.
Manufacturing may be an even bigger deal. Dendreon has said it plans to spend $460 million of its cash and investments this year on the Provenge rollout, including $200 million on capital spending for its new two factories in Georgia and southern California. By the middle of 2011, Dendreon hopes to have those facilities up and running, and to be operating its current facility in New Jersey at full capacity. All three of those plants, operating at full tilt, should be able to provide the U.S. market with between $1.2 billion to $2.5 billion worth of Provenge supplies, the company has said.
Any slippage in the timelines for getting those factories operational would certainly send fearful shivers down the spines of Dendreon lovers, and a shot of excitement for the Dendreon haters. It may still be too early for the company to say much with clarity about how the factory preparations are going. But it will be an absolute key over the next couple quarters if Dendreon is going to deliver on the high hopes that so many people have for it.
