`
`
`
`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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` 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
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
`
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`
`
`
`
`
`
`
`
`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
`—
`
`
`WCK1131
`Wockhardt Bio AG v. Janssen Oncology, Inc.
`IPR2016-01582
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`

`

` 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
`
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`

`

` 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
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`

` 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
`
`
`
`Source: Dendreon Investor Presentation
`
`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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`

` Dendreon
`
`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
`
`
`
`Source: Dendreon Investor Presentation
`
`
`
`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).
`
`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
`
`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
`
`609
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`

` Dendreon
`
`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
`
`
`
`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.
`
`
`
`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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` Dendreon
`
`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 for Medicare beneficiaries
`with asymptomatic or minimally symptomatic metastatic CRPC. CMS further
`announced that effective July 1, 2011, Provenge will have a specific Q-code allowing
`more standardized claims reimbursement. Additionally, in November 2011, DNDN
`announced that CMS would cover infusion costs associated with Provenge treatment.
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`These advances should have reduced uncertainty concerning which patients are
`appropriate for therapy and speed up the claims process, respectively, and
`Dendreon notes that reimbursement concerns are now beginning to fade.
`
`…But Demand May Be More To Blame
`
`As of Q2:11, Dendreon indicated that Provenge’s launch was in “full swing” with
`utilization limited only by how fast physicians could prescribe the drug. Dendreon
`ended Q1:11 with 135 “active” Provenge accounts, and the company guided to 225
`active accounts by the end of Q2, and roughly 500 active accounts by year end.
`Dendreon exceeded its guidance for opening new accounts during Q2 with more
`than 265 sites, but the average number of patients treated per center (0.8/month)
`was well below expectations (1-2/month). As a result, Dendreon missed its guidance
`for Q2 sales (reported sales of $49MM versus a target of $54-60MM) and withdrew its
`2011 sales projection. At the end of Q4:11 and Q1:12, the number of sites infusing
`Provenge increased to 595 and 723, respectively, but with similarly low numbers of
`average patients per site. In our view, visibility into identifying patients who are
`suitable for Provenge is lacking.
`
`There are several factors that could explain the lower than expected demand. First,
`patients with minimally symptomatic PRCA are not always closely followed by their
`physicians, and clinical practices have a difficult time recalling such patients in
`order to recommend a therapy like Provenge. Second, patients rapidly progress into
`and out of a metastatic, asymptomatic CRPC state of disease. Unless patients are
`caught while asymptomatic or minimally symptomatic, it may be too late to offer
`Provenge. Lastly, JNJ’s Zytiga may be gaining traction in Provenge’s market. Checks
`with consultants indicate increasing off-label prescribing in pre-chemotherapy
`patients, and although Zytiga’s mechanism is viewed as complementary to Provenge,
`it is clear that some physicians are satisfied giving only Zytiga based upon its
`convenience (oral), rapid onset, and symptomatic benefits. Provenge may also face
`future competition from Medivation’s enzalutamide, which is also being tested in
`metastatic CRPC. Our consultants expect earlier use of both Zytiga and enzalutamide
`to pressure Provenge, but overall expect sales growth to “stagnate” as opposed to
`decline.
`
`What Is The Potential Opportunity For Provenge In The U.S.?
`
`According to the American Cancer Society, approximately 217K new cases of
`prostate cancer were diagnosed in the U.S. in 2010, with an estimated 32K deaths.
`Patients’ disease is usually controlled for many years on anti-androgen therapies,
`eventually becoming refractory, or “castrate-resistant”. We estimate that roughly 30-
`35K patients in the U.S. develop metastatic CRPC each year.
`
`According to consultants, the large majority (80-90%) of patients with metastatic
`CRPC initially have few or no symptoms. Most CRPC patients are usually treated
`initially with a second-line hormonal agent (e.g. Casodex, ketoconazole, estrogens,
`steroids), and chemotherapy with Taxotere is usually delayed until patients develop
`symptomatic metastatic disease. Our consultants estimate that about 16K patients
`with CRPC are treated annually with Taxotere in the U.S., representing about half of
`all U.S. metastatic CRPC patients.
`
`In general, physicians expect to administer Provenge prior to chemotherapy, based
`on their view that Provenge takes time to manifest its effect, and because many
`patients refuse chemotherapy. We note that Dendreon’s marketing campaign is
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`primarily directed toward urologists who treat the bulk of earlier-stage CRPC
`patients. Under ASP+6% economics, Provenge should be profitable to administer.
`
`Prostate Cancer Treatment Paradigm
`
`
`
`Source: Dendreon 2009 Investor Presentation
`
`Physicians Recognize Provenge’s Benefits…
`
`To better understand physicians’ attitudes toward factors that might impact uptake
`of Provenge, we queried 32 physicians on their level of comfort or concern (with
`scores ranging from 1 through 5, respectively) with each of five factors relating to
`Provenge: efficacy, safety, cost, convenience of administration, and ease of obtaining
`reimbursement. As might be expected, Provenge’s cost arose as the top concern,
`followed by the ease of obtaining reimbursement. Meanwhile, physicians appear
`comfortable with the various aspects of Provenge’s clinical profile.
`
`Respondent Attitudes Toward Various Aspects of Provenge
`
`Scale of 1 (comfortable) to 5 (concerned)
`
`April
`June
`
`reimbursement
`
`Ease of
`
`administration
`Convenience of
`
`Cost
`
`Safety profile
`
`Efficacy profile
`
`12345
`
`Number Patients
`
`
`
`Source: Cowen and Company Provenge Tracking Survey – July 2011
`
`
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`…But Forecast Somewhat Modest Penetration
`
`Despite strong appreciation for Provenge’s efficacy and safety profile, surveyed
`physicians were surprisingly conservative in their estimate of the drug’s peak
`penetration. In mid 2011, surveyed physicians projected Provenge to penetrate just
`24% of the overall mCRPC market in 3 years. Reasons to explain why 75% of patients
`might not get a life-prolonging therapy are still unclear. However, when asked what
`in their experience is the greatest near-term barrier to adoption of Provenge, a
`variety of issues were cited, including reimbursement, logistical issues, and
`leukapheresis access.
`
`Respondent Attitudes Toward Various Aspects of Provenge Treatment
`
`Greatest Barrier To Treating With Provenge
`
`Competition, 15%
`
`Dendreon's ability
`to supply my
`demand, 7%
`
`Logistical issues
`at my center, 26%
`
`Access to
`leukapheresis
`centers, 19%
`
`Reimbursement
`constraints, 33%
`
`
`
`Source: Cowen and Company Provenge Tracking Survey – July 2011
`
`Not Your Standard Pharmaceutical Model
`
`Because Provenge is a personalized, cell-based therapy, its commercialization is
`atypical for a pharmaceutical or biotech product. Provenge cannot simply be
`manufactured, inventoried, and shipped as orders come in. Rather Dendreon will
`need to successfully navigate several logistical issues related to the supply chain in
`order to maximize Provenge’s sales potential. Thus far, selling and manufacturing
`costs associated with Provenge have exceeded nearly all expectations.
`
`A Look At The Steps Involved In The Provenge Process
`
`From a patient’s perspective, the process of receiving Provenge treatment is
`relatively simple. After a patient is prescribed Provenge, his/her physician contacts
`the Provenge call center, which coordinates the process providing the patient with
`six appointments: three appointments (two or more weeks apart) for blood sample
`collection at a local apheresis center, and three follow-up appointments for
`Provenge infusion at the physician’s office or infusion center. Each infusion takes
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`place a few days after each blood sample is collected, but the preparation and
`administration of each infusion involves a sequence of steps that must be precisely
`coordinated. From a patient’s perspective, there will be some scheduling bu