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Provenge Gains EU Entrance; Now What?

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By Marie Powers
Staff Writer

Shares of Dendreon Corp. (NASDAQ:DNDN) inched up after the European Commission granted marketing authorization in the European Union (EU) for Provenge (sipuleucel-T) in asymptomatic or minimally symptomatic metastatic castrate-resistant prostate cancer (mCRPC) in men for whom chemotherapy is not yet indicated.

The decision was expected following positive opinions earlier this summer from the European Medicines Agency Committee for Advanced Therapy and Committee for Medicinal Products for Human Use.

The marketing authorization paves the way for Seattle-based Dendreon to commercialize Provenge for mCRPC in the 28 EU countries as well as Norway, Iceland and Liechtenstein. How that plan will play out remains an open question.

“As we have previously disclosed, we are in discussions with potential partners and prioritizing our plans for launch in Europe,” Dendreon spokeswoman Lindsay Rocco told BioWorld Today.

In addition, the company is working with Health Technology Assessment committees in the EU to provide requisite information to support reimbursement in Europe. “Beyond that, we will not be commenting on our European pricing strategy at this time,” she said.

Dendreon continues to enroll patients in an EU open-label study and plans to have a presence at the European Cancer Organization and European Society for Medical Oncology conferences. Beyond that, investors were left to fill in the blanks.

Despite the 7 percent uptick in the company’s stock, which gained 22 cents Tuesday to close at $3.20, analysts were underwhelmed about prospects for Provenge in the EU. “Unfortunately, who cares?” Roth Capital Markets analyst Joseph Pantginis asked in a flash note. “We believe the hurdles in Europe will be even higher for Provenge to make its mark, including varying reimbursement landscapes between countries and ongoing concerns regarding manufacturing and costs. We would not own DNDN at these levels.”

Dendreon has been awaiting approval of Provenge in Europe for more than a year, and investors are restive. Shares took a 26 percent hit in mid-August after the company reported $73.3 million in net product revenue in the second quarter of 2013 – 8.4 percent lower than revenue from Provenge in the same period in 2012 and shy of consensus estimates of $75 million.

The company’s net loss for the quarter was $68.8 million, or 45 cents per share, compared to a net loss of $96. 1 million, or 65 cents per share, for the same period in 2012.

Shares hit a 52-week low of $2.69 on Aug. 28, and the company’s market cap has shrunk below $500 million.

Cash flow issues have hobbled additional development efforts, and the company’s pipeline is thin.

Last month, RBC Capital Markets analyst Michael Yee speculated Dendreon might consider not just a partnership but a sale of rights to Provenge, other assets or the entire company following EU approval.

“DNDN is in a very challenging situation of flattening sales growth with low visibility to profitability given ongoing financing/liquidity concerns,” Yee wrote in a research update on Aug. 27. “We think a sale of the company is probably the best and easiest solution.”

In Pantginis’ view, Dendreon’s headwinds include insufficient enrollment trends for Provenge in the U.S. to lift sales to the year-over-year growth predicted by the company. Dendreon also “is finally really admitting” that competition – Zytiga (abiraterone acetate, Johnson & Johnson) and Xtandi (enzalutamide, Medivation Inc./Astellas Pharma Inc.) – has negatively affected sales of Provenge, Pantginis wrote.

Despite cutting 600 jobs a year ago, the company continues to spend more money than it generates and has been mum on additional cost-cutting initiatives. When the company revealed its strategic restructuring in August 2012 – its second in two years – company officials said the move would save $150 million annually, placing the firm in a position to be cash flow-positive when net product revenue reaches about $100 million in a quarter. That hasn’t happened. (See BioWorld Today, Sept. 12, 2011, and Aug. 1, 2012.)

In the meantime, Dendreon must confront some $550 million in convertible debt due in 2016 – a looming deadline for which the company is still “exploring options,” Pantginis said.

Dendreon has a limited war chest for what could be an EU marketing slugfest. The company closed the third quarter with $280 million in cash, equivalents and investments.

With those factors in mind, Yee suggested an asset sale or partnership for EU rights “could be one of few remaining opportunities” for the company, citing the probability of a successful EU partnership at 30 percent, with the stock potentially moving as high as $4. The more likely scenario, he wrote, was that shares generally will remain below $3 or go even lower long term, “in the absence of growth to reach cash-break even,” which he estimated at $400 million annually.

Assuming the EU market is half that of U.S., with lower pricing and utilization – offset by better gross margins from lower fixed costs related to contract manufacturing in Europe – “DNDN might be able to monetize EU rights,” Yee suggested.