UNITED STATES PATENT AND TRADEMARK OFFICE
`
`BEFORE THE PATENT TRIAL AND APPEAL BOARD
`
`WOCKHARDT BIO AG
`Petitioner
`
`v.
`
`JANSSEN ONCOLOGY, INC.
`Patent Owner
`
`Case IPR2016-01582
`U.S. Patent No. 8,822,438
`
`SUPPLEMENTAL DECLARATION OF ROBERT D. STONER, Ph.D.
`
`WCK1130
`Wockhardt Bio AG v. Janssen Oncology, Inc.
`IPR2016-01582
`
`

`

`I, Robert D. Stoner, hereby declare as follows.
`
`1.
`
`I am over the age of eighteen and otherwise competent to make this
`
`declaration.
`
`2.
`
`I am the same Robert D. Stoner who submitted a declaration on
`
`August 10, 2016 in the inter partes review proceeding IPR2016-01582. My initial
`
`declaration was marked as W ockhardt Exhibit 1077.
`
`3.
`
`I understand from counsel that Patent Owner Janssen Oncology, Inc.
`
`filed a paper on February 2, 2017, which, in part, objected to certain Exhibits cited
`
`to and filed with my initial declaration.
`
`4.
`
`I understand from counsel that Janssen objected to Exhibits 1048-
`
`1050, 1053, 1054, 1057, 1060-1063, 1065-1074, 1076, 1080, and to Attachments
`
`B-1 and B-2 ofExhibit 1077 cited in my initial declaration. I understand that
`
`Janssen asserted that the Petition and my Declaration did not establish the origin of
`
`those documents or that the documents were a true and correct copy of what they
`
`purport to be. I disagree with Janssen's assertions and submit this supplemental
`
`declaration in response.
`
`5.
`
`Exhibits 1048-1050 and 1054 are copies ofbackground information
`
`on prostate cancer from the Mayo Clinic, American Cancer Society (ACS), and
`
`American Society of Clinical Oncology (ASCO) websites. Experts in finance and
`
`product valuation routinely rely on materials such as Exhibits 1048-1050 and 1054
`
`2
`
`WCK1130
`Wockhardt Bio AG v. Janssen Oncology, Inc.
`IPR2016-01582
`
`

`

`when analyzing a product's use and market, such as in the opinion set forth in my
`
`initial declaration. Exhibit 1049 is a true and correct copy of the ACS web page as
`
`published on the ACS's website, www.cancer.org, accessed on August 8, 2016.
`
`Exhibit 1050 is a true and correct copy of the ASCO web page as published on
`
`ASCO's website, www.cancer.net, accessed on August 9, 2016. Exhibit 1054 is a
`
`true and correct copy of the Mayo Clinic web page as published on the Mayo
`
`Clinic's website, www.mayoclinic.org, accessed on August 8, 2016. Exhibit 1048
`
`was submitted in IPR2016-00286 as Amerigen Exhibit 1051 by Dr. DeForest
`
`McDuff. In IPR20 16-00286, Dr. McDuff attested to the authenticity of Amerigen
`
`Exhibit 1051 in ,-r1 0 of Amerigen Exhibit 1068.
`
`6.
`
`Exhibits 1053 and 1062 are copies of marketing and informational
`
`materials from Janssen. Experts in finance and product valuation routinely rely on
`
`materials such as Exhibits 1053 and 1062 when analyzing a product's use and
`
`characteristics, such as in the opinions set forth in my initial declaration. Exhibit
`
`1053 is a true and correct copy of the Zytiga web page as published on Janssen's
`
`Zytiga website, www.zytiga.com, accessed on August 8, 2016. Exhibit 1062 is a
`
`true and correct copy of the Zytiga web page as published on Janssen's Zytiga
`
`website, www.zytigahcp.com, accessed on August 8, 2016.
`
`7.
`
`Exhibits 1057, 1060, 1061, and 1065-1074 are copies of investment
`
`reports from Wells Fargo, Cowen & Company, William Blair, Nasdaq,
`
`3
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`IPR2016-01582
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`Medivation, UBS Research, Wedbush Securities, Inc., and RBC Capital Markets.
`
`Experts in finance and product valuation routinely rely on investment reports such
`
`as Exhibits 1057, 1060, 1061, 1065-1074 when evaluating third-party views of a
`
`company's product, such as in the opinions set forth in my initial declaration.
`
`8.
`
`Exhibits 1057, 1060, 1061, and 1066-1073 were submitted in
`
`IPR2016-00286 as Amerigen Exhibits 1061, 1043, 1062, 1052, 1059, 1060, 1056,
`
`1042, 1044, 1058, and 1063, respectively, by Dr. McDuff. In IPR2016-00286, Dr.
`
`McDuff attested to the authenticity of Amerigen Exhibits 1061, 1043, 1062, 1052,
`
`1059, 1060,1056,1042,1044,1058, and 1063 in ,-r,-r5-7, 11, 15, and 17-22 of
`
`Amerigen Exhibit 1068. I have also supplied a replacement ofExhibit 1070 in this
`
`proceeding as an attachment to this declaration. In IPR20 16-00286, Dr. McDuff
`
`attested to the authenticity ofExhibit 1070 in ,-r5 of Amerigen Exhibit 1068.
`
`9.
`
`Exhibit 1065 is a true and correct copy of the Nasdaq web page as
`
`published on Nasdaq's website, www.nasdaq.com, accessed on August 8, 2016.
`
`Exhibit 1074 is a true and correct copy ofthe Bloomberg web page as published on
`
`Bloomberg's website, www.bloomberg.com, accessed on August 9, 2016.
`
`10. Exhibit 1063 is a copy ofthe dosing and administration information
`
`for Jevanta® from the Jevanta® website. Exhibit 1063 is a true and correct copy of
`
`the Jevanta® web page as published on the Jevanta® website, www.jevanta.com.
`
`Experts routinely rely on web pages such as Exhibit 1063 in evaluating a product's
`
`4
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`WCK1130
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`IPR2016-01582
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`

`relevant market, such as in the opinions set forth in my initial declaration. Exhibit
`
`1063 was submitted in IPR20 16-00286 as Amerigen Exhibit 1049 by Dr. McDuff.
`
`In IPR20 16-00286, Dr. McDuff attested to the authenticity of Amerigen Exhibit
`
`1049 in ,-r9 of Amerigen Exhibit 1068.
`
`11. Exhibit 1076 is a definition of the term "hurdle rate" from the Investor
`
`Words website. Exhibit 1076 is a true and correct copy of the Investor Words web
`
`page as published on the Investor Words website, www.investorwords.com,
`
`accessed on August 8, 2016. Experts routinely rely on web pages such as Exhibit
`
`1076 when defining terms commonly used in the field of economics.
`
`12. Exhibit 1080 is a compilation of data provided by IMS Institute for
`
`Healthcare Informatics ("IMS"). Data from IMS are routinely relied on by experts
`
`in the field to determine drug sales, prescriptions, and promotional expenditures for
`
`a given product, such as in the opinions set forth in my initial declaration. Exhibit
`
`1080 was submitted in IPR20 16-00286 as Amerigen Exhibit 1067 by Dr. McDuff.
`
`In IPR2016-00286, Jayesh Bindra, Director of Business Development for
`
`Amerigen Pharmaceuticals, attested to the authenticity of Amerigen Exhibit 1067
`
`in Amerigen Exhibit 1070.
`
`13. Exhibit 1077 includes exhibits, B-1 and B-2. Regarding B-1, I
`
`compiled B-1 from the publicly available records of the prosecution history at the
`
`United States Patent and Trademark Office ("USPTO") for U.S. Patent No.
`
`5
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`IPR2016-01582
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`8,822,438 ("the '438 patent") as a summary of said prosecution history. The
`
`prosecution history of the '43 8 patent is publicly available including from the
`
`USPTO's Public Patent Application Information Retrieval ("Public PAIR")
`
`website, available at http://portal.uspto.gov/pair/PublicPair. With respect to B-2, I
`
`compiled the sales data listed in Exhibit 1080, described above at ~12.
`
`14.
`
`I understand from counsel that Janssen objected to Exhibit 1075 cited
`
`in my initial declaration for allegedly being incomplete. I have supplied a
`
`replacement of Exhibit 1075 in this proceeding as an attachment to this declaration.
`
`15.
`
`I hereby declare that all statements made herein of my own
`
`knowledge are true and that all statements made on information and belief are
`
`believed to be true, and further that these statements were made with the
`
`knowledge that willful false statements and the like so made are punishable by fine
`
`or imprisonment, or both, under Section 1001 of Title 18 ofthe United States
`
`Code.
`
`5071721
`
`Respectfully submitted,
`
`Robert D. Stoner, Ph.D.
`
`6
`
`WCK1130
`Wockhardt Bio AG v. Janssen Oncology, Inc.
`IPR2016-01582
`
`

`

`
`
`
`
`Biotechnology Quarterly
`
`Industry Outlook
`
`
`
`Going On Vacation? Don't Forget To Pack Your
`Stocks
`Conclusion:
`
`
`
`
`
`July 2012
`
`Analysts
`Phil Nadeau, Ph.D.
`(646) 562-1336
`phil.nadeau@cowen.com
`
`Eric Schmidt, Ph.D.
`(646) 562-1345
`eric.schmidt@cowen.com
`
`Edward Nash
`(646) 562-1385
`edward.nash@cowen.com
`
`Simos Simeonidis, Ph.D.
`(646) 562-1386
`simos.simeonidis
`@cowen.com
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`Please see addendum
`of this report for
`important disclosures.
`
`www.cowen.com
`
`<T>1,24<END1>1<END2>14<END3>(577,-14)<E4>22</E4>0<E5>1<E6>18<E7>11<E8>6/28/2016 12:00:00 AM17:48:50.2718764<E9></T>
`
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` Biotechnology
`
`Table Of Contents
`
`Industry Fundamentals And Core Research Universe
`
`Page
`
`Going On Vacation? Don’t Forget To Pack Your Stocks ...............................................................................5
`
`Biotech Price Performance .........................................................................................................................10
`
`Investment Opinion Summaries.................................................................................................................11
`
`News Recap And Upcoming Events ............................................................................................................23
`
`Cowen Biotechnology Valuation Analysis...................................................................................................28
`
`Cowen Valuation Perspectives Sorted By Market Cap. ................................................................................29
`
`Select Biotechnology Products Approved In The U.S. .................................................................................32
`
`Quarterly Updates On Our Coverage Universe ...........................................................................................39
`
`AcelRx Pharmaceuticals ............................. 39
`Achillion .................................................... 55
`Acorda ....................................................... 67
`Alexion ...................................................... 89
`Alimera .................................................... 125
`Amgen ..................................................... 139
`Amicus Therapeutics................................ 191
`Amylin ..................................................... 205
`Anacor ..................................................... 243
`Antares Pharma........................................ 265
`Ariad Pharmaceuticals.............................. 287
`Auxilium .................................................. 313
`Biogen Idec .............................................. 335
`BioMarin Pharmaceutical .......................... 387
`Bionovo.................................................... 419
`Cadence Pharmaceuticals......................... 433
`Catalyst Pharmaceutical Partners ............. 445
`Celgene.................................................... 459
`Cempra .................................................... 517
`ChemoCentryx ......................................... 537
`Corcept Therapeutics ............................... 555
`Curis ........................................................ 569
`CytRx Corp. ............................................. 591
`Dendreon................................................. 605
`Dyax ........................................................ 623
`Dynavax Technologies ............................. 641
`Emergent Biosolutions ............................ 667
`Endocyte .................................................. 681
`Exelixis .................................................... 695
`Furiex Pharmaceuticals ............................ 715
`Gilead Sciences ........................................ 735
`
`3
`
`GTx..........................................................791
`Horizon Pharma ....................................... 799
`Human Genome Sciences ......................... 813
`Immunocellular Therapeutics ...................841
`Immunomedics ........................................857
`Incyte .......................................................873
`Inovio Pharmaceuticals.............................909
`Ironwood Pharmaceuticals .......................925
`Isis Pharmaceuticals .................................941
`Lexicon Pharmaceuticals ..........................965
`MannKind.................................................985
`Medivation ............................................. 1001
`Merrimack Pharmaceuticals....................1019
`Momenta Pharmaceuticals......................1047
`Neurocrine Biosciences ..........................1061
`Onyx Pharmaceuticals ............................1075
`PDL Biopharma.......................................1115
`Raptor Pharmaceutical Corp ...................1125
`Regeneron .............................................1139
`Savient Pharmaceuticals .........................1185
`Sunesis Pharmaceuticals ........................1199
`Synageva Biopharma ..............................1211
`Threshold Pharmaceuticals ....................1233
`Transcept Pharmaceutical ......................1259
`United Therapeutics ...............................1281
`Vertex Pharmaceuticals ..........................1301
`Vical.......................................................1339
`ViroPharma ............................................ 1353
`Vivus......................................................1377
`Xenoport ................................................1397
`XOMA..................................................... 1409
`
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`IPR2016-01582
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` Biotechnology
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`This page left blank intentionally.
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`4
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` CytRx Corp.
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`This page left blank intentionally.
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`604
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`

` Dendreon
`
`Dendreon
`
`Neutral (2)
`
`Provenge Seeks Redemption
`
`
`
`Investment Thesis
`
`Provenge, a personalized immunotherapy for prostate cancer, was approved by
`the FDA in April 2010. Provenge has demonstrated the ability to prolong
`survival by 4+ months with very good tolerability in men with minimally
`symptomatic metastatic castrate-resistant prostate cancer (CRPC). Provenge
`was launched into a capacity-constrained environment, and hopes were high
`for a major inflection in sales following the addition of new capacity in mid-
`2011. However, demand has not materialized as expected, and a number of
`potential factors may be to blame (reimbursement, physician skepticism,
`logistical barriers, patient identification). Our research suggests Provenge
`might eventually reach 25% of the 30-35K patients diagnosed with metastatic
`prostate cancer each year, supporting peak U.S. sales of $800-900MM. However,
`even at these sales levels, Provenge’s profitability may be modest owing to
`high COGS. Dendreon filed for EMA approval of Provenge in January 2012. We
`model a similar sized opportunity for Provenge outside the U.S., but start-up
`costs associated with E.U. commercialization are expected to be substantial.
`Based on an NPV-based SOTP valuation for DNDN that ascribes significant
`success and terminal value to Provenge, we think DNDN shares are modestly
`undervalued.
`
`
`
`
`
`
`
`Analysts
`Eric Schmidt, Ph.D.
`(646) 562-1345
`eric.schmidt@cowen.com
`
`Imran Babar, Ph.D.
`(646) 562-1331
`imran.babar@cowen.com
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`DNDN (06/27)
`Mkt cap
`Dil shares out
`Avg daily vol
`52-wk range
`Dividend
`Dividend yield
`BV/sh
`Net cash/sh
`Debt/cap
`ROE (LTM)
`5-yr fwd EPS
`growth (Norm)
`
`
`
`
`S&P 500
`
`
`
`
`
`$7.42
` Revenue $MM
`$1.1B
`FY
`2011
`146.4MM Dec
`Actual
`2,580.7K
`Q1
`27.0
`$5.7-42.0
`Q2
`48.2
`Nil
`Q3
`64.3
`Nil
`Q4
`202.1
`341.6
`$2.06 Year
`$0.26 EV/S
`—
`30.0%
`
`
`NA
`
`NA EPS $
`FY
`
` Dec
`
`Q1
`
`Q2
`
`Q3
`1331.9
`Q4
`Year
`P/E
`
`
`
`2011
`Actual
`(0.78)
`(0.79)
`(1.00)
`0.26
`(2.31)
`—
`
`
`
`
`
`
`2012E
`Prior
`—
`—
`—
`—
`—
`—
`
`
`Current
`82.1A
`87.0
`95.0
`105.0
`369.0
`3.2x
`
`
`
`2012E
`Prior
`—
`—
`—
`—
`—
`—
`
`
`Current
`(0.70)A
`(0.55)
`(0.48)
`(0.40)
`(2.14)
`—
`
`
`605
`
`2013E
`Prior
`—
`—
`—
`—
`—
`—
`
`
`Current
`—
`—
`—
`—
`560.0
`2.1x
`
`
`2013E
`Prior
`—
`—
`—
`—
`—
`—
`
`
`Current
`—
`—
`—
`—
`(1.75)
`—
`
`
`2014E
`Current
`—
`—
`—
`—
`775.0
`1.5x
`
`
`2014E
`Current
`—
`—
`—
`—
`(0.80)
`—
`
`
`2015E
`Current
`—
`—
`—
`—
`975.0
`1.2x
`
`
`2015E
`Current
`—
`—
`—
`—
`0.00
`—
`
`
`WCK1130
`Wockhardt Bio AG v. Janssen Oncology, Inc.
`IPR2016-01582
`
`

`

` Dendreon
`
`Provenge Falls (Way) Short Of Expectations
`
`Provenge is a personalized immunotherapy for late-stage prostate cancer. Following
`a relatively tortuous development and regulatory path, the FDA approved Provenge
`in April 2010 for the treatment of minimally symptomatic, metastatic prostate
`cancer. Approval was based upon the Phase III IMPACT study, which demonstrated a
`4-month improvement in median survival in patients treated with Provenge relative
`to placebo (p=0.032). Provenge was launched in the U.S. with a price tag of $93K for a
`full course of therapy.
`
`The drug was initially made available to 50 of the clinical sites that were involved in
`Provenge’s Phase III studies, with production constrained to 12 hoods at Dendreon’s
`NJ manufacturing facility. However, Dendreon management had guided to 2011
`sales of $350-400MM, with a major inflection occurring in H2 following the addition
`of new manufacturing capacity. Dendreon succeeded in gaining FDA licensure for
`the remaining 75% capacity at its NJ facility (36 of 48 hoods), as well as new facilities
`in LA and Atlanta (36 hoods each). However, demand did not materialize at the
`expected rate, causing the company to withdraw its 2011 revenue guidance. Full
`year net sales were around $214MM (gross product revenue of $228MM). Sales in
`2012 do not appear to be trending much better. Management has guided to low
`single digit Q/Q growth in the near term, and suggested that sales growth is unlikely
`to improve until at least Q4.
`
`Dendreon has blamed disappointing adoption on lingering reimbursement concerns,
`and specifically the "cost density" of unpaid claims at urology practices. In our view,
`the drug's poor commercial performance likely also reflects lower than expected
`demand. Dendreon has also referred to challenges in identifying suitable patients,
`and unique supply chain issues with a personalized therapy. In addition, there are
`lingering questions regarding Provenge’s efficacy and cost. A vocal subgroup of
`physicians has always been skeptical of Provenge’s mechanism, and the drug’s
`clinical profile, including a lack of correlation between surrogate markers of disease
`(PSA, progression) and survival, and the lack of symptomatic benefit to the patient.
`
`Moreover, according to specialists, the excitement over Provenge is waning in favor
`of newer drugs like JNJ’s Zytiga and MDVN/Astellas’s enzalutamide. Based upon
`numbers supplied by Dendreon, it is clear that the number of patients treated per
`center has been in steady decline over time, even in advance of the newer drugs
`being approved in the pre-chemotherapy setting. Our model assumes 30-35K new
`metastatic CRPC patients per year in the U.S., 85% of whom present with minimally
`symptomatic disease. We assume Provenge achieves 20% penetration into metastatic
`CRPC patients within 3-4 years of launch, and more gradual share gains beyond
`2014. Our estimate of $750MM in 2016 U.S. sales assumes roughly 7-8K patients per
`year are treated with Provenge.
`
`Estimated U.S. Provenge Revenue Build-Up ($MM)
`
`Incidence of metastatic CRPC
`% eligible for Provenge (asymptomatic or minimally symptomatic)
`# eligible patients
`% penetration into metastatic CRPC
`# new patients receiving Provenge
`
`Provenge price per patient (000's)
`U.S. Provenge sales in CRPC ($MM)
`
`Source: Cowen and Company
`
`606
`
`2011
`32.8
`85%
`27.9
`9%
`2,397
`
`2012
`33.2
`85%
`28.2
`15%
`4,100
`
`2013
`33.5
`85%
`28.5
`20%
`5,719
`
`2014
`33.8
`85%
`28.7
`23%
`6,675
`
`2015
`34.2
`85%
`29.0
`25%
`7,329
`
`$90
`$216
`
`$90
`$369
`
`$92
`$525
`
`$94
`$625
`
`$96
`$700
`
`2016
`34.5
`85%
`29.3
`26%
`7,699
`
`$97
`$750
`
`WCK1130
`Wockhardt Bio AG v. Janssen Oncology, Inc.
`IPR2016-01582
`
`

`

` Dendreon
`
`Provenge’s Profitability Also Falls Short
`
`A second notable disappointment for Dendreon has been the poor margins
`associated with Provenge. GMs were just 27% in Q1:12, yet management continues to
`guide to peak gross margins in the 70-80% range. Given a track record of
`disappointing guidance,
`it
`is difficult to have confidence
`in the margin
`improvements that underlie this guidance. However, management has said that it
`plans to focus on automation as a means to decrease COGS. In particular, Dendreon
`plans to (1) transition from manual to electronic record keeping, implementation
`expected in 2012; (2) automate the testing of Provenge, implementation expected in
`2013; and (3) automate the manufacturing of Provenge, implementation expected in
`2014.
`
`In September 2011, Dendreon announced a 500-person workforce reduction (mostly
`manufacturing, corporate overhead) aimed at allowing the company to achieve cash
`flow break even status in the U.S. at an approximate $500MM Provenge sales run
`rate. Yet even this expectation assumes GMs in the range of 50%, substantially higher
`than current levels. Recently investors have been anticipating a decision from
`Dendreon on whether or not it will shut down one of its manufacturing plants to
`further decrease COGS, but a decision has not yet been announced. Provenge’s asset
`value is highly dependent on DNDN’s ability to improve GMs toward a level more in
`sync with other pharmaceuticals.
`
`Our sum-of-the-parts valuation credits Provenge for its long patent life, and the
`likelihood that generics might never materialize. It also takes into account the
`discounted value of the company’s NOL tax credits, the company’s balance sheet,
`and Dendreon’s immunotherapy pipeline and platform. Our conclusions are
`summarized below. Assuming Provenge achieves peak WW sales in the $1.7B range
`and using discount rates of 10% (U.S.) and 13% (ex-U.S.), we believe shares are
`modestly undervalued.
`
`607
`
`WCK1130
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`IPR2016-01582
`
`

`

` Dendreon
`
`Sum-Of-The-Parts Value Per Share Summary
`
`U.S. Provenge NPV
`
`Ex-U.S. Provenge NPV
`
`NOL's NPV
`
`Net Cash
`
`Sum-Of-The-Parts Value
`
`
`
`Source: Cowen and Company
`
`$6.48
`
`$1.36
`
`$1.43
`
`$0.30
`
`$9.56
`
`
`
`A Review Of Provenge’s Clinical Program
`
`Dendreon originally filed a BLA for Provenge in 2006 based on data from two
`similarly designed, randomized, double-blind, placebo-controlled Phase III studies in
`men with asymptomatic metastatic castrate-resistant prostate cancer (CRPC).
`Following progression, patients in the placebo arms were permitted to cross over
`and receive a preserved version of Provenge (prepared from frozen apheresed
`PBMC’s collected at the start of the study for potential crossover use). Patients in
`both arms of the studies were permitted to receive Taxotere chemotherapy after
`progression. Both studies had a primary endpoint of time to progression (defined by
`objective radiographic criteria, clinical progression and pain progression criteria).
`
`D9901 & D9902A Study Design
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`
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`Source: Dendreon Investor Presentation
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`D9901, which enrolled 127 patients (82 received Provenge while 45 received
`placebo), failed to meet its primary endpoint, demonstrating TTP of 11.0 weeks vs.
`9.1 weeks for the Provenge and control arms, respectively (p=0.085). However a 3-
`year survival analysis performed as part of the follow-up, demonstrated a
`statistically significant improvement in median survival (25.9 vs. 21.4 months; HR =
`0.58; p=0.01). Additional details from the FDA’s briefing documents support the
`notion that Provenge is efficacious in this setting.
`
`D9902A was originally designed to be an identical companion study to D9901.
`However the negative TTP findings in D9901 led to this study being terminated
`early. By the time of termination, 98 of a planned 120 patients had been enrolled (65
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`Provenge, 33 placebo), and results demonstrated trends towards improved TTP (10.9
`vs. 9.9 weeks; p=0.72) and overall survival (19.0 months vs. 15.7 months; p=0.331).
`When a pooled analysis of efficacy data from both studies was done, the overall
`survival benefit associated with Provenge was statistically significant.
`
`Pooled Survival Data From D9901 & D9902A
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`
`
`Source: Dendreon Investor Presentation
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`
`
`Relative to other cancer therapies, Provenge appeared to be very well tolerated. In
`the pooled safety data from the two studies, the most common AEs were Grade 1/2
`chills, fatigue, fever, and back pain. SAEs were generally equally balanced between
`the two arms, with the exception of cerebrovascular events (8/147 vs. 0/78 in these
`studies; 3.9% vs. 2.6% when all other Provenge studies are included).
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`Complete Response Letter Caught Investors By Surprise…
`
`Based on data from D9901 and D9902A, Dendreon filed a BLA with the FDA, which
`was reviewed at a March 2007 FDA Cellular, Tissue and Gene Therapies advisory
`panel meeting. The Provenge briefing documents for the meeting concluded that
`“doubts remain about the persuasiveness of the efficacy data” due to the potential
`for type I error. Nonetheless, the FDA went on to acknowledge overall survival as the
`gold standard among cancer endpoints, and did not question the company’s analysis
`of the data.
`
`The advisory panel voted 17 to 0 in favor of the safety of Provenge and 13 to 4 in
`favor of the drug demonstrating substantial evidence of efficacy in this indication.
`However, in May 2007 Dendreon received a Complete Response letter requesting
`additional clinical data in support of the BLA’s efficacy claim, as well as additional
`information regarding the CMC portion of the BLA. With respect to the efficacy
`claim, the FDA informed Dendreon that it would accept either a positive interim
`analysis or final analysis of survival from the then-ongoing Phase III IMPACT
`(D9902B) study.
`
`…As Did Survival Data From IMPACT
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`IMPACT (IMmunotherapy for Prostate AdenoCarcinoma Treatment study) was a
`randomized (2:1), double-blind, placebo-controlled Phase III that enrolled 512 men
`with metastatic CRPC. The study was very similar in design to the previous Phase III
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`studies, with the exception of its primary endpoint (overall survival). Patients
`enrolled were also stratified for bisphosphonate use, Gleason score, and number of
`bone metastases. Results of an interim analysis, announced in October 2008,
`indicated Provenge was associated with a Hazard Ratio for survival of 0.80 (CI: 0.61-
`1.05), slightly above the threshold needed to hit statistical significance. In April
`2009, Dendreon announced that IMPACT had met its primary endpoint at the final
`data analysis. Full results of the study were presented at the 2009 American
`Urological Association meeting and published in the New England Journal of
`Medicine in July 2010. Data demonstrated a 4.1 month benefit in median survival
`(25.8 months vs. 21.7 months; Hazard Ratio = 0.775) achieving a p-value of 0.032,
`below that pre-specified in the study’s protocol (p<0.043, adjusted for a statistical
`penalty associated with the interim analysis). This was achieved despite 65% of
`patients in the placebo arm electing to cross over following progression. Consistent
`with the two previous Phase III studies, TTP was not statistically superior in the
`Provenge arm (HR=0.95; p=0.63). Safety findings were unremarkable, and consistent
`with the two earlier studies (most common AEs of chills, pyrexia, headache, usually
`lasting 1-2 days post-infusion).
`
`Phase III IMPACT Study: Analysis Of Overall Survival
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`
`
`Source: Dendreon Investor Presentation
`
`
`
`As with the D9901 study, sensitivity analyses demonstrated that the treatment
`effect was consistent across multiple patient subsets, including when adjusting for
`use and timing of docetaxel following Provenge. Based on these data, as well as
`additional CMC work, Dendreon submitted an amended BLA filing to the FDA in
`November 2009.
`
`
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`Provenge Approved In 2010
`
`Based on the data from IMPACT, Provenge was approved by the FDA for the
`treatment of patients with asymptomatic or minimally symptomatic metastatic
`castrate-resistant prostate cancer in April 2010. Provenge’s label includes no
`contraindications or black-box warnings. Provenge is priced at $31K per infusion, or
`$93K for a full course of therapy, and was launched in May 2010. Its availability was
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`initially limited to approximately 50 sites, all of which had prior experience with
`Provenge. Additional manufacturing capacity came online in March 2011 for the New
`Jersey site and in June and August for the LA and Atlanta sites, respectively.
`Dendreon has provided an indication of the potential revenue that each facility will
`be capable of providing when complete. New Jersey (48 workstations at full
`capacity) is capable of providing $500MM-1B in yearly revenues, while LA and
`Atlanta (36 workstations each) should be capable of generating $375-750MM each in
`yearly revenues. In light of Dendreon’s struggle to improve GMs, the company is
`considering whether or not to shut down one of these plants and should come to a
`decision in H2:12.
`
`Mobilizing Patients Has Not Been Easy
`
`Dendreon guided to a “step-wise” launch for Provenge. The therapy was initially
`available at the 50 clinical sites with prior Provenge trial experience. Each of these
`sites was allocated roughly 2 patient slots per month for a total monthly capacity of
`approximately 100 treated patients. However, even under this limited capacity
`scenario, it took several months before Provenge demand exceeded this monthly
`capacity. Initial headwinds related mostly to reimbursement (see below) and
`possibly a few logistical kinks. DNDN has also noted difficulty in identifying suitable
`patients and supply chain issues associated with a personalized therapy, which have
`limited uptake in the initial stages of the launch. Dendreon reported Provenge sales
`of $3MM in Q2:10, $20MM in Q3:10, $25MM in Q4:10, $28MM in Q1:11, $49MM in
`Q2:11, $61MM in Q3:11, $77MM in Q4:11, and approximately $82MM in Q1:12. We
`suspect the company will eventually achieve demand to support annual U.S. sales of
`$700-800MM, and we model 2016 U.S. sales of $750MMM. However, based on
`Dendreon’s inability to meet early sales expectations, increasing competition, and a
`lack of visibility on how to mobilize appropriate patients, we lack conviction in
`Provenge’s peak potential.
`
`Management Previously Pointed The Finger At Reimbursement…
`
`On several occasions, Dendreon has blamed sluggish sales on uncertainties in the
`reimbursement process. Given Provenge’s high costs, it makes sense that hospital
`centers or physician practices would demand strong visibility on reimbursement
`prior to making Provenge broadly available. However, in our view, Provenge’s
`reimbursement outlook has improved substantially over the past year, without little
`commensurate increase in demand. Questions around reimbursement materialized
`in June 2010, when CMS surprised the investment community by announcing the
`initiation of a National Coverage Analysis (NCA) of Provenge for CRPC. Because
`Medicare coverage is limited to treatments that are deemed “reasonable and
`necessary”, CMS has occasionally initiated an NCA to determine if it should
`implement a National Coverage Determination (NCD). CMS commissioned an
`external technology assessment and convened a meeting of the Medicare Evidence
`Development and Coverage Advisory Committee (MEDCAC) which took place on
`November 17, 2010. The MEDCAC panel voted (on a scale of 1-5) that there was
`evidence to support Provenge’s benefits on overall survival (score of 3.6) when used
`on label, but that evidence was lacking to support use in off-label indications (scores
`of <1.5). On June 30, 2011 CMS issued a final NCD concluding that Provenge was
`reasonable and necessary as it improves health outcomes fo