Dendreon Rakes in $540M to Seize Opportunity for Provenge in U.S., Europe

1/14/11Follow @xconomy

Seattle-based Dendreon (NASDAQ: DNDN) said today it has pulled in $540 million in new capital, through a debt offering that can be converted into stock. Dendreon, the maker of an immune-boosting therapy for prostate cancer, will have to pay back the debt, plus about 2.9 percent interest, by January 2016, although the debt can be converted into stock at prices of $51.24 a share or higher.

Dendreon expects net proceeds from the deal of about $529 million, which it wants to plow into more clinical trials, a European factory to make its drug, and increasing investment in its U.S. manufacturing plants. The offering—which ended up bigger than Dendreon anticipated in an announcement yesterday—is being led by JP Morgan Securities. It comes on the heels of the JP Morgan Healthcare Conference, the big annual biotech investment gathering.

Last Friday, on the eve of the JP Morgan soiree, Dendreon held a conference call to discuss its plans to go it alone in Europe—retaining 100 percent of the commercial rights for itself instead of seeking a partner. The company said it had met with European regulators and was confident in its ability to win regulatory approval for sipuleucel-T (Provenge) based on the same essential body of evidence that won over the U.S. Food and Drug Administration. In going it alone, Dendreon said it planned to build its own factory in Germany—which would certainly take more capital than it raised a year ago, when it was thinking mainly about the U.S.

JP Morgan analyst Cory Kasimov, in a note to clients last Friday, called Dendreon’s European strategy a “tasty pre-conference appetizer.” He added that the drug has an 85 percent chance of winning approval for sale in Europe, and could reach $2.25 billion in sales there by its peak year of 2018—even more than its $2 billion peak annual sales potential in the U.S. In his view, that means the Provenge European prospects are worth about another $17 a share, and the stock could climb to $66 a share by December, Kasimov said.

Of course, lots of things could go wrong, which weren’t highlighted so much in that JP Morgan report. European regulators might ask for more data, and already tricky manufacturing logistics could be further complicated by different languages and cultures across Europe. Dendreon has also said it expects to price the drug comparably to its $93,000 per patient price in the U.S., which could prompt government health authorities to push back hard. Dendreon has faced similar pressure in the U.S., and hasn’t backed off one bit, arguing its drug is worth the money because it extends life a median of about four months, with minimal side effects—a rarity for a cancer drug.

Investors like the bold move Dendreon has made by going it alone and raising a big chunk of its own money. Dendreon stock climbed 1.3 percent today to $37.10 at noon Eastern today.

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