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Dendreon Wounds Are Self-Inflicted, Not the Start of a Biotech Industry Virus

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correctly, that Provenge was priced in line with other cancer drugs that have shown a similar ability to prolong lives. It also reminded people on many occasions that it spent 15 years and $1 billion on this very big roll of the dice. Basically, it was time to recoup that investment.

But there was a major downside to being that aggressive on price. Dendreon had spent years roiled in controversy about how convincing its clinical trial data were. Not even an FDA approval silenced the doubters. The high price further galvanized opponents in academia and their friends on Wall Street, who questioned whether the drug was worth that much for only a median time of another four months of patient survival. Sure enough, three months after FDA approval, the Centers for Medicare and Medicaid Services opened up an unusual process known as a national coverage analysis, in which it sought to review whether it ought to reimburse doctors for this new treatment, and if so, under what circumstances. Coming a few months after President Obama’s healthcare reform law passed, people wondered if this was some kind of stealth price control move by Medicare, and whether Dendreon would become the sacrificial lamb.

Much of that uncertainty was supposedly laid to rest last November, when Dendreon persuaded an expert advisory panel that clinical trial evidence supported the company’s claims about the drug. The Medicare agency followed up on that hearing by issuing a draft opinion in March in favor of Provenge. By the time the official National Coverage Determination (NCD) was etched into federal policy on June 30, reimbursement was considered a fait accompli on Wall Street. Dendreon had prevailed, the question was settled. Time to move on.

Or so we thought. While Dendreon spent much of the past year pooh-poohing the impact of the Medicare agency’s review, saying regional Medicare units were reimbursing docs in the interim, a more worrisome side of the story emerged on last week’s conference call. While regional Medicare units had been reimbursing doctors who prescribed Provenge for the past year, that was apparently happening under very strict criteria for certain patients—not the broad group of people who are actually eligible under the FDA-approved prescribing information. That created a lot of hassles, and confusion among doctors about exactly which patients were eligible for reimbursement. And just as doctors learned the ropes of that arcane process, they are now being told that the patient eligibility rules and financial reimbursement processes are changed again, to make things smoother. Trouble is, only about one-fourth of doctors have gotten the message in the past few weeks, Dendreon said.

Looking back now, the national Medicare review “really did create headwinds for us over the last year. We now need to educate physicians that it’s gone away,” Gold said on the call.

Even if Dendreon does a great job now in getting the word out about smooth sailing at Medicare, doctors aren’t necessarily going to line up and start prescribing Provenge a lot. That’s because even though Dendreon priced its drug like comparable cancer drugs, there’s an unusual “cost-density” with Provenge that puts physicians’ necks on the line. As with many cancer drugs, once a doctor prescribes Provenge, he or she has to buy it, typically using their own private practice checking account. Since Dendreon’s drug is given through three infusions in one month, doctors have to shell out for a full $93,000 bill for giving one month of infusions to one patient. Other costly cancer drugs run up big tabs over many months, or even years, meaning that doctors can spread out the pain of reimbursement uncertainty.

Shockingly, Dendreon said on the call that it wasn’t really aware of how far and wide the reimbursement anxiety extended among small community-based physician practices until very recently. What that essentially means is that the company admitted it didn’t really understand a vitally important segment of its customer base very well, even after it was a full year into a product launch.

Things didn’t have to turn out this way. If Dendreon had priced its product more modestly, … Next Page »

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  • SteveB

    Thanks again Luke. I was in shock when they priced it at 93k. Gold is so arrogant.

  • Duke

    Interviewed at Dendreon 2 yrs ago. People I spoke to were even skeptical about its prospects and couple of new VPs were arrogant. What bothered me was the hocus pocus science backed by likely group of ardent quixotic “paid” wackos parading as patients. Well Gold certainly did 1 thing right to rile up these buffoons. Uh, I didn’t get the job and it was blessing in disguise as I found a better job with top notch sought after biotech firm with blockbuster oncology drug in San Francisco with full relo pkg.

  • David

    Excellent explanation of the original problem.

    Throw in the perfect storm created by Congress last week, the Italian Job, The U.S. Credit Downgrade, & last but not least:
    HIGH FREQUENCY TRADING and you have the DNDN nightmare.

    Had all of these things not combined at the same time the sell off would have been far less damaging.

  • Tony

    DNDN is way oversold.
    They will still make 50% of forecast sales.

    To drop 2/3 is way too much, even with the current market.

  • Carl

    Very well constructed article Mr Timmerman. I’ve worked in biotech for 24 years — an arena that employs some very smart people. It takes a special talent to get to the facts and more importantly, present them in such a way so that the message is clearly understood.

  • Dave

    Good article. While this was a blunder, let’s hope they learn from their mistakes. This technological platform will spawn many drugs for DNDN and the potential to flourish in future years.

  • Mary

    Interesting with the lack of sales and marketing intelligence…similar to another Seattle biotech in the recent past.




  • Leb

    Don’t worry Luke, as you can see lately, dndn’s fall from grace (&short attack where short interest went from 14M to 18M during that Aug 1-15 period) on Aug 3rd was planned by wallstreet; comfortably after the June 2011 shareholder meeting. I promise you that JPM and the rest will convert their notes to shares sometime by Jan 2016 when the note is due. JPM will get their 42million shares: http://www.streetinsider.com/holdings.php?q=DNDN

    Provenge enjoys 12 years market exclusivity under Obamacare and the 1st 3 years (2010-2012) were ramping years altho yoy sales were pretty impressive:

    2010; $49M

    2011: $216

    2012: $322

    Wallstreets “restructuring of shareholders” strategy is nearly complete as short interest moved from 14M (Aug2011) to 47M (Nov2012). Current short interest is still > 30%

    Guess what years 4-6 (out of 12) will bring with Carl Icahns former CEO pick for Imclone? :-D

  • Leb

    In your future articles, please tell everyone to BUY DNDN Luke if you care about the 99% and not the 1% that drove the stock price downward during 2012 via massive shorting ($17- $3.69) to shake out retail.

    DnDn is only treating 3465 patients yearly (2012)…out of the 30,000 men that are “newly diagnosed throughout a year” with mCRPC. When they reach and treat 4,304 annual patient rate (or $400M), that is still only a fraction of the treatable market…
    And we’re not including the 60,000 still living w/mCRPC as these men typically live 2 years after being diagnosed with the terminal condition.
    Do the right thing Luke and tell EVERYONE via your future articles!
    Dont fall for wallstreet touting restructuring fears (successful companies restructure all the time & plan to close old plants years in advance) or layoff fears (CEO JJ is building HIS OWN TEAM and finished offering them & his fellow officers & himself lots of stock & options during the last 2 quarters when the pps was attractively low :-) or competion fears (ethical urologist/oncologists has patient interest at heart and will sequence the various therapies to prolong the dying patients life to the MAX!) stop you from writing the TRUTH ABOUT THE RESURGENCE OF THE NEXT BIG BIOTECH!!