Seattle-based Dendreon Corp. (NASDAQ: DNDN) said today it has named John Johnson to the position of president and CEO, succeeding longtime CEO Mitchell Gold. Johnson was previously the CEO of East Brunswick, NJ-based Savient Pharmaceuticals (NASDAQ: SVNT).

The appointment comes after a difficult run for Dendreon. In 2010, the company won approval for sipuleucel-T (Provenge), the first in a new class of immune-boosting therapies for prostate cancer. But the product has been slow to take off, causing the company to fall short of Wall Street expectations. On January 5, Dendreon surprised investors by announcing that it sold $228 million of the drug in 2011—better-than-expected results—but it hasn’t been enough to sway shareholder sentiment.

Today’s news was welcome on Wall Street. “I am very pleased to hear this morning about Dendreon’s succession plan for its CEO and Chairman,” wrote shareholder activist Brad Loncar in a statement.” In August, Loncar sent a letter to Dendreon chairman Richard Brewer expressing concerns about poor management at the company. “After joining together and asking for this change, this is a big win for Dendreon’s shareholders and for corporate governance in general.”

Dendreon’s shares rose 6 percent to $14.40 in pre-market trading.

Comments (1) | Reprints | Share:          

[Update: 6:58 am PT] Dendreon greatly disappointed investors in 2011, but it ended up closing the year out on a stronger note than expected.

The Seattle-based biotech company (NASDAQ: DNDN) said today it generated $82 million in fourth quarter gross product revenues for sipuleucel-T (Provenge), its immune-boosting therapy for prostate cancer. The company hasn’t yet disclosed its net revenue, which subtracts rebates and chargebacks, although that number has been close to gross revenue in past quarters. Today’s announcement isn’t a fully audited financial statement, but Dendreon said it ended up generating $228 million in gross product sales for Provenge during 2011.

That performance surprised investors, who were only told to expect “modest quarter over quarter” growth from Dendreon, which reported $65.8 million in gross revenues in the third quarter. Shares of the company shot up $1.98, or 26 percent, to $9.58 shortly after trading opened this morning.

[Updated comment] Analyst David Miller of Biotech Stock Research, a longtime Dendreon bull, said on Twitter that he was only expecting $75 million in fourth-quarter sales from the company.

Still, the overall year is one that most Dendreon followers would like to forget. The $228 million in product revenue is far short of the $350 million to $400 million sales forecast that Dendreon put in front of investors at this time a year ago, and which helped drive its market valuation beyond $5 billion during the spring and summer of 2011. The company lost most of that value, more than 60 percent in one day, when it said in August that it would fall short of its forecast, citing concerns among physicians about whether they’d get full and prompt reimbursement for a drug that costs $93,000 per patient. The stumble caused Dendreon to lay off 500 workers in September.

Dendreon didn’t offer any specific guidance to investors in today’s statement about what to expect for 2012, other than commentary about how things are improving.

“Given our results for the past two quarters, physician and patient interest in Provenge clearly continues to grow. We believe that the improved reimbursement landscape, along with our improved sales execution and physician education initiatives, are contributing to the increased use of Provenge in the community urology and oncology settings,” said Mitch Gold, Dendreon’s CEO, in a statement. “We had a strong fourth quarter that exceeded our expectations. As we look to 2012, we expect modest quarter-over-quarter growth while we focus on bringing additional clinics on board and converting them into steady prescribers.”

Comments | Reprints | Share:          

Dendreon has never lifted a finger to develop any new drugs for hepatitis C, but now the Seattle cancer drug developer is getting $125 million in cash for its stake in the emerging market for the chronic liver infection.

The company (NASDAQ: DNDN) said today it made the money by selling off the rights to its royalty stream related to boceprevir (Victrelis), a new hepatitis C drug. Dendreon sold the royalty rights to CPP Investment Board.

While Dendreon has always invested its time and money in developing cancer drugs, it obtained the hepatitis C intellectual property through its 2003 acquisition of San Diego-based Corvas International. Corvas had licensed its IP to Schering-Plough, which used it in part to develop boceprevir, a protease inhibitor for hepatitis C. Schering-Plough is now owned by Merck, and Merck started generating revenue from the intellectual property in May when it won FDA approval of the new drug. Dendreon didn’t disclose what percentage it gets from worldwide sales of Victrelis, but the company said it collected $2.9 million in royalties from Merck in the three-month period that ended Sep. 30, according to its most recent quarterly report.

“The sale of the Victrelis royalty interest allows the company to strengthen our cash position, and enables us to further invest in our core business initiatives,” said Greg Schiffman, Dendreon’s chief financial officer, in a statement.

Dendreon certainly has found itself in a position where it needs to scrape together cash any way it can. The company is on track to fall way short of the $350 million to $400 million sales forecast it had this year for its lone marketed product, sipuleucel-T (Provenge) for prostate cancer. The sales shortfall prompted Dendreon to lose more than 60 percent of its market valuation, and prompted Dendreon to cut 500 jobs back in September. Despite the cost cuts, the company still burned through $106 million of cash in the most recent quarter. It had $568 million in cash and investments left in the bank at the end of September.

Comments | Reprints | Share:          

[Updated: 7:10 am PT] San Francisco-based Medivation has some big news to report today with a prostate cancer drug candidate that has been shown to prolong lives.

Medivation (NASDAQ: MDVN) and its partner, Japan-based Astellas Pharma, said today that their experimental drug MDV3100 was able to prolong lives of men with advanced prostate cancer by a median time of 4.8 months compared with a placebo. The results were from a study called Affirm that looked at 1,199 men, and the results were taken from an interim analysis after 520 of the patients had died. Men on the new Medivation/Astellas drug lived a median time of 18.4 months compared with 13.6 for those on placebo, which prompted an independent data monitoring committee to recommend the trial be halted early for ethical reasons, so all patients could start getting the new drug.

Full analysis of the data, including the product’s safety profile, will be released at a future medical meeting. Shares of Medivation skyrocketed after the opening bell, rising $20.52 to reach $37.05 a share.

The Medivation drug, an oral pill, is designed to target prostate cancer cells that become resistant to standard hormone-deprivation therapies, which are supposed to cut off the fuel that testosterone provides tumors to grow. The drug is supposed to hit three different molecular targets which the company hopes will give it an advantage over recently FDA-approved prostate cancer drugs like Johnson & Johnson’s abiraterone (Zytiga), Sanofi’s cabazitaxel (Jevtana), and Dendreon’s sipuleucel-T (Provenge). About 30,000 men in the U.S. die each year from prostate cancer, and the numbers are expected to increase as baby boomers get this common disease of aging.

“MDV3100 was rationally designed to target androgen receptor signaling, a key driver of prostate cancer growth, and the overall survival benefit the compound demonstrated in the AFFIRM interim analysis is significant,” said Howard Scher, a prostate cancer specialist at Memorial-Sloan Kettering Cancer Center, and the co-principal investigator of the Affirm study, in a statement. “If approved, MDV3100 will be a welcome option for men with prostate cancers that have progressed on hormones and initial chemotherapy.”

[Updated comment from analyst] JP Morgan Geoff Meacham that Wall Street was expecting the Medivation drug to extend survival by a median of about three months, according to Reuters. The data that arrived today stacks up favorably with Johnson & Johnson’s abiraterone (Zytiga), Meacham said.

“MDV3100 does look better than Zytiga from an efficacy perspective,” Meacham said in a note to clients.

Comments (1) | Reprints | Share:          

This was a week of volatile ups and downs in Seattle biotech. Yeah, I know, what’s new?

—Seattle-based Dendreon (NASDAQ: DNDN), the cancer drug developer that so many people love to hate, gave its critics some more ammunition in its quarterly financial report. The company reported $64.3 million in third quarter sales, which slightly edged Wall Street expectations. But the company still only projects “modest” quarter-over-quarter sales growth for its prostate cancer drug—which isn’t what investors expected earlier this year when they gave Dendreon a market valuation of more than $5 billion. And the company is burning capital like a Ferrari goes through fuel. Dendreon vaporized $106 million of cash in the third quarter, and had $568 million left on the books at the end of September. Dendreon stock fell 20 percent in after-hours trading.

—Bellevue, WA-based Cardiac Insight is the latest University of Washington spinoff to leave the nest, with a technology license and $700,000 in a Series A financing. We had the inside scoop this week on how this company, led by CEO Tom Clement, seeks to detect a common cause of stroke with a low-cost, disposable adhesive device.

—Did you know that Al Gore came this close to being a VIP scientist for a day at Immunex? That was one of the fun bits of trivia I discovered as Immunoids have been coming forward with bits of memorabilia to display at our next big Xconomy event in Seattle on Dec. 1. If you’ve got some piece of Immunex swag, photos, papers, etc. that you think would be fun to share with the wider biotech community, please let me know at ltimmerman@xconomy.com. And please, tell me the backstory, which is always more fun than just looking at an old lab coat.

—Seattle Children’s Hospital had some big news: a $50 million anonymous donation to support its research efforts. The hospital also got another $15 million donation from Jean Reid to support nursing education and clinical care.

—PATH CEO Chris Elias, the guy who led the global health nonprofit to prominence over the past decade, is moving on to a new challenge. Elias said this week he’s resigning from his job at PATH to become the new president of the Bill & Melinda Gates Foundation’s anti-poverty efforts. Elias starts the new job in February. PATH is now looking for a successor.

—”The Cancer Drug Dark Ages are Coming to an End.” That was the optimistic headline I slapped on this week’s BioBeat column, which talked about big leaps forward in personalized cancer medicine that all came in succession back in August. I think there’s strong evidence to support being optimistic, but for those of you out there who think I’m missing the boat, please post a comment at the end and let me know.

—Emerald Biostructures, which I think is the first and only company from Bainbridge Island, WA to get covered in these pages, had some good news to report. Emerald got a three-year contract extension from UCB, its largest customer, to deliver 3-D structures of biological targets that UCB wants to develop drugs against.

—Last but not least, we had a guest post from Stewart Lyman about how “Biopharma Industry Meetings Could Use Some Fresh Voices.” Lyman points that if the pharma industry is in crisis, it’s odd that everybody still looks to the same old folks from Merck, Pfizer, Novartis et al. for answers on how to get out of the mess.

Comments (1) | Reprints | Share:          

[Update: 2:55 pm PT] Seattle-based Dendreon deeply disappointed investors with its last quarterly financial report, but today it reported sales of its prostate cancer drug continued to grow in the third quarter, slightly exceeding Wall Street forecasts. Shares fell about 20 percent in after-hours trading, though, as the company said it expects to see “modest” quarterly sales growth in the foreseeable future.

Dendreon (NASDAQ: DNDN) said today it generated $64.3 million in net product sales in the quarter that ended Sept. 30, which beat the $59.5 million average estimate from analysts, according to Bloomberg. The company still reported a net loss of $147.1 million in the third quarter as it continued to spend big bucks on the sales push for sipuleucel-T (Provenge), its lone marketed product.

“We have made important progress this quarter with the launch of Provenge that is foundational for the long-term success of Dendreon,” said CEO Mitch Gold, in a statement.

The company lost more than two-thirds of its market valuation back in August when it said second-quarter sales fell short of expectations, and when it withdrew its highly-publicized full-year sales forecast of $350 million to $400 million. Dendreon has been tripped up this year by uncertainty among physicians about whether they will get reimbursed for prescribing the company’s product, which costs $93,000 per patient. After getting blindsided by the reimbursement concern—which many analysts thought had been fully laid to rest by a national policy determination by Medicare—forecasts have generally backed off into the $200 million range for the full year 2011. Dendreon responded by cutting 500 jobs from its payroll, largely in manufacturing, to control costs until it can assure more doctors to start prescribing the product with confidence they will get timely reimbursements.

Through the first nine months of the year, Dendreon said it has generated $139.5 million in net revenues.

Dendreon’s product is a first-of-its-kind treatment that stimulates a patient’s own immune system to fight cancer cells as if they were an invading virus. The product was first cleared for sale in the U.S. by the FDA in April 2010.

[Update 2:55 pm PT] Dendreon shares initially climbed in after-hours trading after the press release, but then fell about 20 percent following the company’s conference call with analysts. Gold said analysts should continue to expect “modest” quarter-over-quarter sales growth, and cautioned that there could be dips in sales for the infusion-based medicine around the upcoming holidays.

Dendreon also said it burned through $106 million of cash in the most recent quarter, and that it had $568 million in cash and investments left in the bank at the end of September.

Comments | Reprints | Share:          

Christopher Henney, the immunologist who co-founded three of Seattle’s most successful biotech companies from the past 30 years, has made it into the industry’s Hall of Fame.

Henney, 70, was given the Hall of Fame award for outstanding individual contributions to biotech at the annual Biotech CEO Meeting in Laguna Beach, CA. He’s currently the chairman and interim CEO of Seattle-based Oncothyreon (NASDAQ: ONTY), the chairman of Hayward, CA-based Anthera Pharmaceuticals (NASDAQ: ANTH) and the vice chairman of Berkeley Heights, NJ-based Cyclacel Pharmaceuticals (NASDAQ: CYCC).

Henney, one of the speakers at “The Immunex Impact” event Xconomy is organizing on Dec. 1, co-founded Immunex in 1981 before moving on to help start Icos in 1989 and Dendreon in 1995. He stepped down as CEO of Dendreon at the beginning of 2003. Those companies are best-known for developing drugs for autoimmune diseases (Immunex’s Enbrel); erectile dysfunction (Icos and Eli Lilly’s Cialis); and prostate cancer (Dendreon’s Provenge). While Henney played a key role in building all three companies, the FDA approvals of all those products came years after he left.

Comments | Reprints | Share:          

Employees at Seattle-based Dendreon (NASDAQ: DNDN) have been on pins and needles for five weeks since they heard layoffs were in the works, and when the bad news came today, few parts of the company were spared.

Today’s layoffs of 500 employees, about one-fourth of the workforce, were spread among all functions within the company, except for those who generate demand for its prostate cancer drug (i.e., the sales and marketing team). About 80 percent of the job cuts are being concentrated at its manufacturing plants—in New Jersey, Atlanta, and Los Angeles—with the rest coming at its Seattle headquarters. Dendreon made the cost cuts after it said there was no way it could live up to its forecast of $350 million to $400 million in sales for 2011.

“It’s incredibly difficult,” CEO Mitch Gold said in an interview today. “It’s always hard to let good people go.”

He added that the manufacturing group performed exceptionally well in keeping supplies of sipuleucel-T (Provenge) flowing to doctors and patients, even during Hurricane Irene. All three factories were approved by the FDA on schedule.

Dendreon, as reported here earlier today, said it ended August with about $600 million in cash left on the books. By making these cuts, which are supposed to save about $120 million a year, Dendreon said it should be in position to reach break-even once it ramps up Provenge sales to $500 million a year. The company didn’t say how long that might take. But so far, here’s what’s known for sure: The drug has generated almost exactly $100 million in sales this year through August 31, with $22 million of that coming in the month of August.

Shares of Dendreon climbed 47 cents, or about 4.3 percent, to $11.35 in after-hours trading after the cuts were announced.

Dendreon CEO Mitch Gold

As part of the job cuts, Dendreon provided investors with other updates on how its commercial rollout is going. Here are some of the highlights from today’s conference call, and from a follow-up interview I did later with Gold:

—The company has reorganized its sales and marketing team to put more emphasis on “community” oncology and urology medical practices, as opposed to the big-time academic medical centers that are more familiar with the product. Through additional market research, Dendreon has identified 1,000 target accounts, which it says are responsible for 80 percent of the prescriptions written for prostate cancer drugs, Gold said. The sales team has now come up with tailored marketing messages for both cancer physicians (oncologists) and urologists who aren’t as familiar with prescribing infusion-based medicines like sipuleucel-T (Provenge.)

—Chief operating officer Hans Bishop is leaving the company, effective Sept. 30. Dendreon isn’t saying whether he was terminated or resigned. But Gold did say that Dendreon is now looking for a new COO, and in the meantime, the senior vice president in charge of commercialization, Rob Rosen, will report directly to the CEO. Gold didn’t say much in the follow-up interview about the circumstances around Bishop’s departure, other than, “I’m really respectful of Hans. He accomplished a lot in his two years at Dendreon. I wish him the very best.”

—Some signs are emerging, Gold says, that the reimbursement climate is improving. Dendreon sales reps are now communicating to physicians how the FDA-approved prescribing information for Provenge is now much more in sync with the reimbursement protocol that was approved by Medicare in June. On average, physicians are now getting reimbursed for the $93,000 product in about 30 days, Gold said. Still, many physicians won’t believe it until they see it, Gold said, so it will take time before docs get really comfortable, he says.

—When asked if there was one thing he wishes he could do over about the Provenge launch, Gold said he wished he hadn’t given Wall Street the sales forecast of $350 million to $400 million for 2011. “If there’s anything we’d change, it would be not giving guidance so early on, when we needed to better understand the launch dynamics,” Gold says. But since Dendreon put out that bullish sales forecast, investors were deeply disappointed when the company fell so far short. Gold stressed that despite the shortfall, the drug still has all the potential that got investors excited over the past couple years. He pointed out that the average analyst estimate is that Dendreon will reach about $219 million in sales this year, Gold said. If that happens, Provenge will still end up being one of the top five cancer drug introductions of all-time, Gold said.

Comments (3) | Reprints | Share:          

[Updated: 1:15 pm PT] People at Seattle-based Dendreon (NASDAQ: DNDN) have been waiting for five weeks to find out how many employees would lose their jobs, after the company said it was falling short of its sales forecast for 2011.

Now the other shoe has dropped.

Dendreon said today it has cut the jobs of 500 employees, or about 25 percent of the workforce it had at the end of June, as it seeks to conserve cash while it builds up the market for its immune-boosting drug for prostate cancer. Chief operating officer Hans Bishop is among those heading for the door. The company had about $674 million in cash and investments on hand at the end of June, and burned through about $106 million of its cash reserves in the most recent quarter ended June 30 as it continued investing in a national network of unique factories.

While the cash has been diminishing, the company’s headcount has been rising. Dendreon rapidly built up its staff to 1,915 employees at the end of June, from just 200 as recently as April 2009. The company has been on that hiring binge in order to build up sales, marketing, and manufacturing capacity to capitalize on what many analysts projected would be a multi-billion dollar drug.

Dendreon’s forecast for this year was that it would sell $350 million to $400 million in sales, but it only sold $77.6 million of the drug in the first six months of the year. It now projects just “modest” quarter-over-quarter sales growth in the foreseeable future as it seeks to iron out concerns among physicians about how to properly use this first-of-its-kind, infusion-based medicine, and whether they will get reimbursed for a product that costs $93,000 per patient. Medicare, the government agency that covers most of the elderly men who are candidates for Provenge, recently agreed to a new national reimbursement protocol after it concluded a yearlong review of the product’s safety and effectiveness.

Getting spending under control has been a pretty obvious imperative since Dendreon announced its troubles with sales and reimbursement. The announcement of the missed sales forecast greatly damaged the company’s credibility on Wall Street, which erased more than $3.5 billion worth of the company’s valuation. That, in turn, makes it much more difficult for Dendreon to raise more cash at favorable terms—hence the need for cost cuts.

It will be interesting to see how Wall Street reviews this latest round of cuts and restructuring at Dendreon, in terms of whether it can restore some faith. Many observers were skeptical heading into today’s announcement. “It’s not good enough for management to just tell investors that they think that can do X, Y or Z,” Eric Schmidt, a veteran biotech analyst at Cowen and Co, told Reuters in a story posted earlier today. “If Dendreon wants to convince us they can improve their margins to levels more in line with the industry, they are going to have to make actual progress before many of us buy in.”

[Updated info on August financials.] Dendreon said it generated about $22 million in sales of its prostate cancer drug in August. It had $600 million of cash left in the bank at the end of August, which it says should be enough to reach cash-flow break even once its drug reaches about $500 million a year in sales.

“While the last month has been difficult for our employees, these cost reductions are necessary to ensure the long-term growth of our company,” Dendreon CEO Mitch Gold said in a statement.

Dendreon management plans to discuss the restructuring in more detail on a webcast conference call at 4:30 pm Eastern/1:30 pm Pacific. I’ll have more to add in real-time during the call on Twitter at @ldtimmerman and more follow-up here later today on Xconomy.

Comments (1) | Reprints | Share:          

This being a short week, I’m reaching back for two weeks’ worth of headlines, especially since a lot of readers are just getting back from vacation.

—Seattle’s Theraclone Sciences picked up some national recognition this week by being named one of the Fierce 15 emerging life sciences companies by FierceBiotech. Acting CEO Steve Gillis told the newsletter that the company is looking to raise another $10 million, and then add a permanent CEO.

—Bothell, WA-based Marina Biotech (NASDAQ: MRNA) came back from the holiday weekend to announce some serious shuffling in its management team. Marina has seen its RNA interference technology fall out of favor among prospective Big Pharma partners over the past year, while its cash balance has run low.

—Vancouver, BC-based Zymeworks, the developer of “bi-specific” antibodies that can specifically hit more than one target on cells, struck a partnership with pharmaceutical giant Merck that could be worth $187 million over time. Zymeworks CEO Ali Tehrani talked about how the company has shifted its focus from making industrial enzymes in its early days to its new bet on pharmaceuticals.

—Seattle-based Amnis, the maker of high-speed cell imaging instruments for researchers, said it agreed to be acquired by EMD Millipore, the Billerica, MA-based unit of Germany’s Merck KGaA. Financial terms weren’t disclosed, but Amnis said in a statement it generated $14 million in sales in 2010, and has maintained an 80 percent compound annual growth rate since 2005. Amnis said the deal will enable it to accelerate its growth.

—This being the opening week of the NFL season, I thought it would be fun to apply some fantasy football analysis to the latest installment of BioBeat. If you know of some sleeper picks, or various overrated or underrated players in biotech, I’d love to hear your thoughts.

—I announced the full lineup of speakers who will be part of the “Computing in the Age of the $1,000 Genome” event Xconomy is planning for Oct. 24 in San Francisco. This event is modeled after a similar conference we did in Seattle in February, and the agenda includes a few prominent Seattleites, including EMC/Isilon’s Sujal Patel, PerkinElmer’s Rob Arnold, Life Technologies’ Tim Hunkapiller, Ingenuity Systems’ Doug Bassett, and Microsoft’s Jim Karkanias.

—Seattle-based Qliance Medical Management, the provider of primary care clinics that operate on monthly fees instead of health insurance, said it is opening two new clinics in Tacoma, WA and Mill Creek, WA.

—Dendreon (NASDAQ: DNDN) has had a rough few weeks, but it did have one piece of good news when it said the FDA approved the third and final manufacturing facility for sipuleucel-T (Provenge). Now if Dendreon can iron out its problems with reimbursement, it should be able to dial up production at its factories. But today at 1:30 pm Pacific, another shoe will drop. Dendreon said yesterday it plans to announce details on the restructuring and layoff plan that it hinted at last month when it said it will miss its 2011 sales forecast.

—Last week’s BioBeat column revisited a Fortune expose about Pfizer, and raised the question of ‘how big is too big?‘ when it comes to innovation in life sciences. I know a lot of people wish we had more of a Big Pharma presence here in Seattle, but maybe this is one of those cases where we should be thankful we have small companies instead.

—Lastly, we had another sharp guest post from Stewart Lyman on how drug discovery is even harder than rocket science. If you are someone who finds it hard to explain biotech basics to your Mom and Dad, this is not a bad place to start.

Comments | Reprints | Share:          

Developing new medicines is an amazingly difficult undertaking. The research portion alone is daunting, and for those of us who have actually attempted it, humbling. A recent article reminded me just how little many people understand about the drug discovery process. The basic premise of “Pharma Needs an Innovation Intervention” was that pharma should change its focus from “finding druggable targets” to “deliver a consumer-focused product and service and a business model that goes beyond the product itself.”

Unfortunately, the article doesn’t address two critical issues; one grounded in the past, the other the future. First off, why has Big Pharma, after being one of the most profitable industries for decades, suddenly become so remarkably unproductive in coming up with new medicines? Second, if Big Pharma walked away from the difficult task of “finding druggable targets,” then who would take over the job of creating new medicines? From a business point of view, one can see a clear need to alter a revenue model that may not be working for Big Pharma any longer. However, from a practical and societal perspective, there needs to be some way of innovating new medicines, not just new business models.

I wish I could provide a definitive reason why Big Pharma, as a group, has become so unproductive in recent years. These companies are not monolithic and have distinct styles for running their businesses. To paraphrase Tolstoy’s Anna Karenina “Productive drug companies are all alike; every unproductive drug company is unproductive in its own way.” It’s easy to congregate a lineup of the usual non-productivity suspects: excessive layers of bureaucracy, fear of making the wrong (or any) decisions, entrenched industrial group-thinking, failure to recognize and support an innovative culture, and new regulatory uncertainties. I suspect that all of these concerns contribute to the productivity problem, but it’s difficult to quantitate exactly how important each of these factors really is.

I think Big Pharma is still hung over after a difficult transition from a decades-long focus on screening chemical libraries to more of a recombinant DNA/genomic biology mindset. It may very well be that after a century or so of effort, all of the “low hanging fruit” really has been picked off of the medicinal tree. Finally, consider that Big Pharma’s recent attention was focused on developing blockbuster drugs that would bring in sufficient revenues to feed their bloated organizations. Genzyme’s marked success in treating rare diseases (along with its recent acquisition by Sanofi) illustrates how that thinking has changed.

So why is coming up with new drugs so difficult? The answer is actually pretty straightforward: because biology is amazingly complex. It’s not rocket science; it’s much harder. With all due respect to the people that design and build our space vehicles, uncovering the functional role of thousands of unique biological molecules is a significantly more complicated undertaking. Twelve years is about the average length of time it takes for a single drug to be discovered, developed, tested, and approved by the FDA. Twelve years also defines the time period between the start of the space age (the launch of Sputnik 1 in 1957) and humans landing on the moon in 1969.

Even more difficult than figuring out the function of biological molecules is coming up with a way to alter, in an appropriate way, the divergent activities of selected subsets of these molecules to treat various diseases. People can be afflicted with literally thousands of different ailments. As living organisms, we reflect eons of genetic diversification and are vulnerable to rogue viruses, bacteria, fungi, and environmental pollutants. No two of us are alike, not even identical twins. People also suffer from pain, are susceptible to psychological disorders including addictions, and are at risk of unintentional side effects brought on by numerous medications. The biological and rocket sciences do share one primary characteristic: they are both very expensive, high cost-of-entry businesses. … Next Page »

Comments (7) | Reprints | Share:          

Seattle-based Dendreon has stumbled in early sales and marketing of its new prostate cancer drug, but the company has gone 3-for-3 in its effort to build a national network of manufacturing centers for the novel product.

Dendreon (NASDAQ: DNDN) said today it has received FDA clearance to start producing sipuleucel-T (Provenge) from a new factory in Atlanta. The new facility completes Dendreon’s national network of manufacturing plants, providing regional balance in addition to factories in New Jersey and Los Angeles. The company said it plans to scale up the new Atlanta operation “in a staged approach.”

Winning FDA clearance for all three factories has been critical to Dendreon’s growth plan all along. Dendreon won FDA approval for its new drug in April 2010, and has been working feverishly ever since to hire hundreds of people and invest hundreds of millions of dollars in a network of factories to carry out Dendreon’s unique process. Manufacturing has been especially important to Dendreon, because its drug works unlike any other on the market today, by using a genetically engineered drug to “teach” a patient’s white blood cells to recognize and fight prostate cancer.

While manufacturing has been limited in scale until now, putting a limit on Dendreon’s sales in the first year, investors only recently learned that manufacturing isn’t the only limitation holding back the company’s sales trajectory.

Earlier this month, Dendreon disclosed that physicians are reporting concerns about whether they will get reimbursed by Medicare after they prescribe a product that costs $93,000 per patient. Those concerns prompted Dendreon to withdraw its 2011 sales forecast of $350 million to $400 million, and announce plans to lay off some workers. More than $3 billion of the company’s market value was lost after the announcement.

Dendreon stock closed at $11.86 a share today, up 7 cents.

Comments (1) | Reprints | Share:          

Seattle-based Dendreon (NASDAQ: DNDN) said today it has named John H. Johnson, the CEO of East Brunswick, NJ-based Savient Pharmaceuticals (NASDAQ: SVNT). Johnson was previously the head of Eli Lilly’s oncology business unit, and the CEO of ImClone Systems, the cancer drug developer, when it was acquired by Lilly for more than $6.5 billion in 2008.

Comments | Reprints | Share:          

Dendreon has made its share of mistakes before. But last week, the Seattle cancer drug developer achieved the biotech equivalent of fumbling the ball on the 1-yard line with time running out on the clock. The failure was so painful, so shocking, it erased two-thirds of the company’s stock value—about $3 billion. It even started a “Dendreon flu” that dragged down biotech stock indexes.

There are plenty of reasons for investors to be nervous, with Uncle Sam’s credit rating in question and unemployment running high. Times of anxiety in the market tend to be bad for high-risk sectors like biotech. And sure enough, many biotech investors have run for the exits, worried that Dendreon’s flop is a sign that other high-profile biotechs are doomed to fail. But that would be an overreaction. Investors would be wise to write off the Dendreon story as a case of a fine mess at one company, and not really any great cause for industry-wide concern.

I’ve been covering Dendreon (NASDAQ: DNDN) for 10 years, and have seen some incredible ups and downs. Very little about this story surprises me anymore. But while writing over the weekend, three days after disaster struck, I’m still slack-jawed about this colossal choke. Heading into last week’s second-quarter conference call, the company had forecasted it would generate $350 million to $400 million in sales this year of its immune-booster for prostate cancer, sipuleucel-T (Provenge). But the company recorded $49.6 million in sales in the quarter ended June 30, plus another $19 million in the month of July, which was “substantially” lower than its internal projections, according to CEO Mitch Gold on the call. So Dendreon withdrew its sales forecast and didn’t provide any other financial guidance, other than to say it expects “modest quarter-over-quarter” growth.

If you assume “modest” translates into 5 percent quarter-over-quarter growth the rest of this year, then Dendreon could generate about $185 million in sales this year. That’s a long way from $350 million to $400 million. And the problems leading to the shortfall, Gold said, are expected to last into 2012. It’s anybody’s guess how long it might take to fix Dendreon’s situation, if it ever happens.

Mitch Gold

It’s truly a stunning fall from grace. Dendreon is now planning to cut costs, and make layoffs, in weeks to come. Analysts, who had drawn up models that had Dendreon eclipsing $1 billion in sales, suddenly had to go back to the drawing board. Cory Kasimov of JP Morgan, a Dendreon bull, slashed his 2012 sales forecast from $841 million all the way down to $388 million. “This was obviously a crushing blow to our overweight thesis and one that we certainly did not see coming. We don’t think anyone did,” Kasimov wrote in an Aug. 4 note to clients.

The official explanation for what went wrong makes you slap your forehead in disbelief. Essentially, Dendreon said most of its physician customers are afraid they won’t get reimbursed by Medicare, or they won’t get a timely reimbursement, meaning they’ll be stuck holding the bag on a drug that costs $93,000 per patient.

It is shocking to hear Dendreon say this in August 2011, given how much time it had to methodically block and tackle on this fundamental question. From the minute that Dendreon won FDA approval of this new product in April 2010, it had two mission-critical tasks in front of it—manufacturing and marketing. The first challenge was about proving it could manufacture enough of its first-of-a-kind treatment—which stimulates a patient’s own immune cells—to meet the demand from thousands of prostate cancer patients around the U.S. Dendreon had time to work on building up manufacturing capacity, because the market recognized it would have been irresponsible to spend hundreds of millions on that prior to FDA approval. The second challenge, sales and marketing, was mainly about persuading legions of urologists and oncologists to prescribe the groundbreaking new therapy. Processes needed to be established to ensure the company would get paid in an efficient and timely way, doctors would get reimbursed from insurers, and patients would have easy access even when they couldn’t afford the co-pays.

The sales and marketing effort ran into trouble right away, when Dendreon overreached and set the price for its product too high—at $93,000 per patient. Analysts at the time of approval were only expecting a price of about $62,000, so Dendreon didn’t need to go that high. The company argued, … Next Page »

Comments (15) | Reprints | Share:          

[Editor's Note: This letter was sent today to Dendreon chairman Richard Brewer.]

Dear Mr. Brewer:

Just over five months ago I wrote to you expressing serious concerns about the composition of the board of directors and its oversight of Dendreon’s management. I appreciated the opportunity to discuss these views in person with management at company headquarters in May, and to briefly speak with you at the June annual shareholder meeting. In the meantime, Dendreon has experienced one of the most sudden and significant erosions of shareholder value in recent memory.

However, the consequences of this misfortune extend well beyond shareholder interests. Employees have been abruptly laid off, press reports are tarnishing Dendreon’s brand reputation with each passing day, and many experts have even speculated that this might diminish investor appetite for our nation’s biotech industry as a whole. It is hard to believe that the company that produces one of the most innovative and groundbreaking treatments on the market could have triggered such a debacle. All of Dendreon’s stakeholders deserve much better.

I hope you will see why it is so critical for Dendreon to quickly act and put this innovative company back on the path to success that it deserves. While there is no quick answer to all of the questions facing the company, an immediate boost of confidence is greatly needed. The clearest way to accomplish that is a change in personnel. Therefore, I renew the call for Dendreon to nominate one or two new board members who come from the ranks of outside shareholders and are outside of the biotech industry.

After Wednesday’s stunning events, I urge you to finally see the light on this issue and send a clear message to the market that Dendreon respects shareholder interests and intends to bounce back stronger than ever. This issue has clearly taken on a new sense of urgency and I believe decisive action is necessary. I have the upmost confidence in Dendreon’s long-term success, but to get there the company first needs to instill much more confidence in the short-term.

In my February report, and during our discussions, I laid out five key issues that were testing investor patience with the company. These are serious and have painted a puzzling picture … Next Page »

Comments (4) | Reprints | Share:          

Dendreon failed to live up to expectations for its new prostate cancer drug, and now it is facing some brutal consequences. The Seattle-based biotech company (NASDAQ: DNDN) saw its stock plummet about 60 percent in after-hours trading today after it issued a surprisingly bad second-quarter financial report.

The loss, if it holds up in tomorrow’s trading, would erase more than $2.5 billion of the company’s market valuation.

All that turmoil roiled the market after Dendreon said it has to withdraw its forecast of $350 million to $400 million in full-year sales for sipuleucel-T (Provenge), and that it was unable to offer any revised projection in its place. The company generated $49.6 million in sales in the quarter ended June 30, plus another $19 million in the month of July, which was “substantially” lower than its internal forecasts, CEO Mitch Gold told investors on a conference call. As for guidance, the company only said it expects “modest quarter-over-quarter” growth. The shortfall means that Dendreon is now planning to cut costs, including make some staff layoffs, this quarter.

Dendreon’s CEO obviously had a lot of explaining to do on this call to a group of surprised and frustrated analysts. The company’s sales trajectory has been limited since FDA approval in April 2010, largely because of manufacturing constraints. But those supply limitations are easing now, and Dendreon said it is still unable to quickly ramp up sales because many doctors are cautious about whether they will get reimbursed, and whether they will get reimbursed in a timely manner, when they prescribe the new drug for $93,000 per patient. Even though Medicare said on June 30 that it has agreed to fully reimburse doctors, and it established a special code to speed up the process, many doctors in community treatment centers are still unaware that the process has been streamlined, and they are taking a wait-and-see approach one patient at a time before they get comfortable with the new reimbursement methods, Dendreon said.

Gold, who is well known for bold, even brash statements about the company’s ability to change the lives of patients with this new drug, sounded almost contrite in his conference with analysts. Still, he insisted that it is only a matter of time before Dendreon fixes this situation, and fulfills its potential.

Dendreon CEO Mitch Gold

“Many of you have followed Dendreon for a long time,” Gold said. “You’ve seen us overcome challenges many other companies have never had to face. We will overcome these challenges as well.” He added: “We appreciate your support in the past, the present and the future.”

After the company was done explaining itself in a 90-minute conference call, Dendreon stock fell $22.48, or about 63 percent, in after-hours trading to $13.36 at 6:47 pm Eastern time.

The problem, Dendreon said, is primarily happening with small community-based physicians, not the usual top academic centers that have been familiar with the product for years in clinical trials. The product, prescribed by both urologists and oncologists, essentially requires the physician to adopt a new process with an infusion given three times in one month, and that works unlike any other prostate cancer drug on the market. It requires physicians to get more aggressive about treating patients who previously haven’t gotten much therapy, Gold said.

“In many ways, we are building an entirely new market,” Gold said.

There was also an unusual amount of reimbursement uncertainty. Doctors in the first year were required to go through a lot of red tape, recording diagnostic markers like … Next Page »

Comments (16) | Reprints | Share:          

Dendreon is now more than a year into the product launch of its new prostate cancer drug, and it fell short of investors’ expectations today in a pretty big way. The company is now backing away from its 2011 sales forecast, and says it plans to cut expenses and make layoffs to cope with the slower-than-expected ramp up of sales.

The Seattle-based biotech company (NASDAQ: DNDN) said today it generated $49.6 million in revenues in the quarter that ended June 30. That’s quite a bit short of Wall Street expectations. Analysts were expecting a minimum of $55 million in sales during the quarter, said analyst David Miller of Biotech Stock Research. Miller said he was forecasting $52.7 million in sales for the quarter.

Dendreon won approval from the FDA to start selling sipuleucel-T (Provenge) in April 2010, as the first-of-its-kind treatment that stimulates a patient’s own immune system cells to fight prostate cancer like a virus. The company has been limited in its ability to sell the product by manufacturing constraints, although it has been adding new capacity. Dendreon has also been hemmed in by some uncertainty about insurance reimbursement, which was only resolved at the end of June, when Medicare determined it would fully reimburse doctors who prescribe the $93,000 product. The company has said previously it still expected to generate $350 million to $400 million in sales this calendar year, with most of the growth coming in the fourth quarter, but now it has backed away from that forecast. It didn’t offer a new forecast in today’s earnings report.

Now that Medicare has cleared up some of the uncertainty around reimbursement, Dendreon said it believes demand for the product will surge, but “we believe this will take time, and for the remainder of 2011, the launch trajectory will reflect a more gradual adoption of Provenge as physicians gain confidence in this positive reimbursement landscape,” said Mitch Gold, Dendreon’s CEO, in a statement. “With the number of infusion sites increasing substantially, our principal objective continues to be ensuring all eligible patients have access to Provenge.”

Dendreon plans to discuss the past quarter, and its outlook, on a conference call with analysts at 4:30 pm ET/1:30 pm PT today.

Comments (2) | Reprints | Share:          

Given what investment bankers did to the financial system just a couple years ago, it surprises me how many people still accept what they have to say at face value. But quite a few people in biotech are still lapping up all sorts of short-sighted, destructive advice from the financial powers that be.

The latest bit of wisdom passed down from Wall Street came in a Reuters story this past week. It speculated about 11 publicly traded biotech companies that various investment pros consider to be takeover candidates. These companies have the kind of novel drugs that Big Pharma needs to replenish its empty pipelines. If you’re a shareholder in one of these little companies, this sounds exciting. Just hold onto your shares a little while longer, or buy some now while you can, and wait a couple quarters for a suitor to pay a 30, 40, or 50 percent premium. Instant returns! That will make everybody happy, right?

What stories like this usually fail to mention is who really stands to gain, and who loses, in these deals. Investment bankers, C-level executives, lawyers, accountants, certain consultants—they all pocket big money. Bench scientists, lower-level management, and entire regional economies can get whacked as hundreds or thousands of people lose their jobs.

The so-called winners in these deals often end up with a pyrrhic victory. While the quarterly and annual financial reports of the acquiring company might look good for a while, they often are left with an organization that is too bloated to really do the innovative work of developing new drugs. What happens a year later? These same fee-seeking investment bankers start whispering in the ears of executives, and reporters, about the next crop of biotechs that need to be harvested to fill up Big Pharma’s empty hopper.

Don’t get me wrong, some acquisitions can work out well for everybody involved. This tends to be true with small, private, venture-backed biotech companies that are essentially built to create a single drug, or maybe two, with a small team that can be easily integrated. Recent examples that made sense were Daiichi Sankyo’s purchase of Berkeley, CA-based Plexxikon; Gilead Sciences’s buy of Seattle-based Calistoga Pharmaceuticals; and Amgen’s takeover of Woburn, MA-based Biovex. These were cases of little companies that needed the resources of a bigger enterprise to make the most of their drug candidates. They also were able to provide healthy returns to their venture backers. And because the little company didn’t have many employees, the acquirer had fewer integration headaches and didn’t need to make mass layoffs.

What’s more problematic is when the bankers aren’t satisfied with the puny fees they get from those $500 million to $1 billion acquisitions. So they start beating the drum for multi-billion dollar mega-mergers. These are the kind of deals that can generate monster fees, like the potential takeovers listed in the Reuters report. The target list includes Biogen Idec (NASDAQ: BIIB), Vertex Pharmaceuticals (NASDAQ: VRTX), Dendreon (NASDAQ: DNDN), Seattle Genetics (NASDAQ: SGEN), Exelixis (NASDAQ: EXEL), and Intermune (NASDAQ: ITMN), along with some smaller players.

Most in the financial crowd sees these companies as nothing more than any other liquid security, like a pork belly or a securitized mortgage. They don’t care … Next Page »

Comments (6) | Reprints | Share:          

Dendreon is no stranger to controversy, but the story today is about minimizing the debate about when taxpayers ought to pay for its high-priced prostate cancer drug.

The Centers for Medicare and Medicaid Services said today it has made a final decision to reimburse healthcare providers in the U.S. who prescribe sipuleucel-T (Provenge). The Medicare agency made its decision after a year-long inquiry. The reimbursement questions came after Dendreon had set the price at $93,000 for a course of therapy with this first-of-its-kind drug which stimulates the immune system to fight prostate cancer cells like an invading virus.

The decision by Medicare is no surprise, but it does conclude a period of uncertainty about insurance reimbursement for its lone marketed product. Dendreon was able to persuade a Medicare advisory panel last November that clinical trials show the drug extends the lives of men with prostate cancer. The agency followed that recommendation in March with a draft memo that stated “the evidence is adequate” and that the Dendreon drug “improves health outcomes for Medicare beneficiaries.” The FDA approved the drug in April 2010, following years of debate about the strength of its clinical trials. A study of more than 500 men showed the treatment helped them live a median time of four extra months, when compared to a placebo.

Medicare, the federal agency that covers health costs for people over 65, normally defers to the FDA’s scientific reviewers and pays for products that have been the agency approves. But this second review stirred uncertainty in the markets. Some speculated Medicare was trying to find a stealthy way to control drug prices by making Dendreon clear another regulatory hurdle after it set the price at $93,000. Winning over Medicare is obviously critical for a company like Dendreon, because its target patient population is mostly men over 65, but also because Medicare’s decisions are highly influential for private insurers as well.

The Medicare ruling hasn’t had a real effect on Dendreon’s business in its first 14 months on the U.S. market. The company was limited by manufacturing constraints, which it is working to eliminate by building out a network of three regional factories in New Jersey, Atlanta, and Los Angeles. While Medicare was mulling its national policy on reimbursement for the product, the agency’s15 regional bureaus all agreed to pay doctors who prescribe Provenge in the interim period.

Investors have expected Dendreon to pass this test for months now, but the Medicare decision should provide some extra comfort for physicians, says David Miller, the CEO of Seattle-based Biotech Stock Research, who follows Dendreon.

“If you look at most drugs, like Avastin, that costs $8,000 a month, and you find out in a month that your patient is not covered, the doctor is on the hook for $8,000,” Miller says. “But if you prescribe Provenge, and you find out you aren’t covered, you’re on the hook for $93,000. What doctors really want is to try it out, have no problems being reimbursed, try another one out, and get reimbursed. As they get more comfortable, they’ll come in.”

There is one more important technical detail to watch for from Medicare. The agency is expected to issue a temporary reimbursement code tomorrow, Miller says. That’s important, because doctors are currently filing for reimbursement under a miscellaneous code, which takes between 30 and 90 days to process for healthcare providers, he says. By getting a dedicated code, those claims should be processed in less than 30 days, providing doctors greater comfort, Miller says.

Dendreon previously projected it will sell about $350 million to $400 million worth of the new drug this year, as it works its way through its supply limitations, and reimbursement issues. The drug could generate billions in annual sales in the U.S. and Europe as time goes on, analysts say.

Comments (5) | Reprints | Share:          

This week we had some global health news, some politics, and some personnel moves to keep things humming here on the local biotech desk as head into summer.

—Bill Gates is spending most of his fortune on tackling the health woes of the world’s poorest people, but every once in a while he invests in a for-profit biotech company. This week, he joined a $24 million Series A round in Cambridge, MA-based Nimbus Discovery, which is developing drugs against a couple of new biological targets discovered through computerized screening.

—Tachi Yamada, who formerly ran the Gates Foundation’s global health programs, has found a new job as a venture capitalist with Seattle-based Frazier Healthcare Ventures. It will be interesting to see if Yamada will help bring more of a global health flavor to Frazier’s portfolio through, say, investing in vaccines and diagnostics.

—Seattle-based Dendreon (NASDAQ: DNDN), as expected, won FDA clearance for its new Los Angeles factory to produce more sipuleucel-T (Provenge). The company now has factories in New Jersey, and LA, and a third one still under regulatory review in Atlanta, GA. As I noted in a quick post last night, getting all those factories running on time is key to Dendreon’s plan to meet its sales forecast of $350 million to $400 million in 2011.

—This week’s BioBeat was about the latest political gambit to watch for from the Biotechnology Industry Organization. BIO is looking to push a raft of pro-industry proposals through Congress that take square aim at the regulatory agency so many biotechies love to hate—the FDA. I picked up a positive vibe from biotech executives while I was attending BIO in Washington D.C., but I’m still skeptical the industry will get its way.

—Before I shuttled off to the BIO meeting, I sat down with the head of Merck’s vaccine division, Julie Gerberding, while she was in Seattle for the Pacific Health Summit. Gerberding, the former CDC director, talked about the company’s priorities in delivering the vaccines it already has to people around the world, and in developing new ones to keep growing revenues to offset some of the losses from drugs that are losing patent protection.

—Lastly, we reported on a couple of financings of small local companies. Seattle-based Atossa Genetics, the developer of a diagnostic test for breast cancer, raised $6.6 million in a private financing, after floating the idea of a $15 million IPO over the past year. And Seattle-based Impel Neuropharma, a University of Washington spinoff seeking to better deliver drugs to the brain, said it had raked in $750,000 through a grant from the U.S. Department of Defense.

Comments | Reprints | Share: