Summer Street Research Partner, Novenber 15, 2012

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Dendreon Corp. (DNDN)

Thoughts on Combination and Sequence Trials of Provenge

Linda Wang, CFA
Senior Biotechnology Analyst

SUMMARY
DNDN expects to treat all the patients in the ongoing phase II trial evaluating
the concurrent versus sequential use of Zytiga/prednisone with Provenge in
4Q12 and report initial data in 2013. Assuming a positive outcome from either
of the two arms, we expect the data to potentially remove clinicians’ concerns
on the potential impact of steroid on Provenge and a long delay between
Provenge and Zytiga/Prednisone therapies. Additionally, we view the potential
advancing of Xtandi to the pre-chemo CRPC as positive for Provenge since
Xtandi does not require the concurrent administration of prednisone. We reiterate
our Buy rating and $18 target price. We strongly believe that
Provenge and the novel hormone therapies including Zytiga and Xtandi are not
mutually exclusive and expect the sequencing studies to shed light on the
optimal timing of combining Provenge with these therapies.

EVENT
DNDN has fully enrolled the randomized, open label phase II trial evaluating
the concurrent versus sequential use of Zytiga/prednisone with Provenge in
CRPC patients. Patients in the trial should complete treatment in 4Q12, with
initial data available in 2013. In responding to investigator enthusiasm, DNDN
has also decided to conduct a similar sequencing trial for Xtandi with Provenge.

INTERPRETATION
In our view, the Provenge/Zytiga sequencing study will shed light on the effect
of low doses steroids on the immune response to Provenge and the optimal
timing of using the two therapies. Assuming positive outcome from either of
the two arms (i.e. immune response of Provenge can be produced without
issues with the usage of Zytiga), we believe it could potentially remove
clinicians’ concerns on the potential impact of steroid on Provenge and a long
delay between Provenge and Zytiga/Prednisone therapies, since right now
clinicians try to delay Zytiga plus prednisone for at least 12 weeks after
completing Provenge (in the sequential arm of the trial, Zytiga is started 6
weeks after completing Provenge). Additionally, we view the potential
advancing of Xtandi to the pre-chemo CRPC as positive for Provenge since
Xtandi does not require the concurrent administration of prednisone. In the
future, we believe clinicians would like to combine or sequence immunotherapy
such as Provenge with their best next line of therapy.

ACTION
We reiterate our Buy rating and $18 target price. We continue to expect
significant turnaround starting in 1Q13. Investors are overly concerned with
Zytiga’s obtaining a pre-chemo CRPC label will negatively impact the utilization
of Provenge. We strongly believe that Provenge and Zytiga are not mutually
exclusive and expect the sequencing studies to shed light on the optimal timing
of combining Provenge with other therapies.

VALUATION
Our target price of $18 is based on the average of revenue multiple and earnings multiple valuation methods: applying a 25x multiple on our fully diluted 2015 EPS of $0.99 discounting back at 15%, we derive a PT of ~$19, and applying a 5x multiple on our 2015 sales projections of $798MM, we derive a PT of ~$18. Our model factors in a risk-adjusted
contribution from Provenge potential sales in the EU, with a probability of success of 50%. In deriving EPS, we project DNDN will improve gross margins to ~65% by 2015.
 
























The more you spread your propaganda on a board for salespeople, the more the ugly truth comes out.

Speaking of Herceptin, here is a quote from Mitch Gold from the Aug 3, 2011 earnings conference call-

"Our commercial team is led by our Senior Vice President of Global Commercial Operations, Robert Rosen, whose extensive oncology experience includes the launch of several major products including Eloxatin, Herceptin, and Nexavar."

About 10 posters on a since removed thread said Rosen never worked on the Herceptin launch. A few days later, Rosen was fired.
 






How is historical sales for Herceptin, a similar product to Provenge, "propaganda"? What does what a CEO that stepped down a year ago talking about Rosen have to do with anything?

The truth is that sales are currently doing well and will likely gain strong momemtum in coming years. We will have to wait for the next earnings call in late Feb. for this to begin to be shown.
 






I worked as a rep at Genentech for 6 years selling Herceptin during those launch years and I have been with Dendreon for nearly 2 years selling Provenge. There are many similarites between Provenge and Herceptin. These similarities are exactly why I came to Dendreon and exactly why I will remain.

Herceptin was a very early monoclonal antibody, so for the first few years the MDs were reluctant to use it, but this gradually changed and eventually sales took off and the drug became a multi-blockbuster. Herceptin was the first "targeted" therapy for breast cancer. I made a bundle of the drug, but I had to be patient and it eventually paid off big. Herceptin is designed to counter the overexpression of HER2, which is involved in the growth and spread of tumor cells in 25–30% of all metastatic breast cancer patients. Over a period of years more and more MDs began using the treatment for their HER2 positive advanced breast cancer patients. Sales were built two ways: 1) gradually signing up more docs to use the drug, 2) educating the docs on what patients could benefit from the drug - this led to higher usage rates. Sales built momentum exactly this way. Sure we faced strong competition from Tykerb, chemotherapy and other therapies, but the docs eventually began sequencing all the therapies for most of their patients. I fully expect the same for Provenge and that is why I came here in the first place.

Provenge is the first immuntherapy, and similarily doctors are initially slow to use, but once they gain comfort in using it, they begin to use it more and more of it. Provenge is the first "targeted" therapy for prostate cancer. We are at that same 1 and 2 stage with Provenge where we need to get the docs comfortable and educating on patient identification. I have a few accounts which were real slow in the beginning, but are now sending me several patients a month.

=Both Herceptin and Provenge are infusion therapies.
=Both Herceptin and Provenge attack similar sized patient populations.
=Although Herceptin is also approved for gastric cancer, that market is small, so effectively both Herceptin and Provenge treat one form of cancer, breast or prostate.
=Both Herceptin and Provenge are price similarly, ie, they are expensive. One thing Provenge has over Herceptin is that we get a lot of Medicare patents, so their is little reimbursement kickback on that side. I saw more kickback from insurers on Herceptin than I do Provenge.
=Both Herceptin and Provenge are infusion therapies, so the docs liked the ASP-plus 6% and were motivated to use more once they got used to using the drug a few years.
=Both Herceptin and Provenge proved a 4 to 5 month survival benefit.
=One thing Provenge kills Herceptin on is side effects. My docs love this about Provenge. With Herceptin the breast cancer patients had to be closely monitored for potentially life threatening heart and lung problems. Docs also like that their patients are done with Provenge in a month.

Sure, prior management made a lot of mistakes with the Provenge early launch, and new management makes some mistakes, but things have improved markedly. Many of the new marketing strategies make sense to me and are beginning to work. Genentech made mistakes with there launch as well, but eventually they were corrected as well. Novel therapies like Provenge take time to build momentum. The hormone based therapies have been around for decades and the Zytiga and Xtandi are just new and improved hormone therapies, so they have an initial easier sell. I think that Provenge will sell very well, it is a real good drug, but it will take time to build, just as it did with Herceptin
.
So, I am not sure where your "propaganda" comment comes from. You seem to know little about the prostate cancer treatment space and seem to really have a grudge against Dendreon. If you do in fact work for Dendreon, which I sincerely doubt, I think it would best for all involved if you moved on to another company. If you don't work for Dendreon, which I think is very likely, I do not understand why you spend so much time here attacking a company that is doing a lot of good in the world. I personally do not appreciate it and wish you would stop it. I feel that your actions are hurting me financially.

Happy Holidays
 






Anonymous said:
What does what a CEO that stepped down a year ago talking about Rosen have to do with anything?
Click to expand...

It has everything to do with what you are talking about. You are giving a detailed illustration of the successful launch of Herceptin. If people listening to an earnings call hear that the head of sales for a company worked on a very successful launch, that can send a buy signal to investors and analysts. What if those posters were correct that he never worked on the launch? Maybe they were incorrect, but one poster of those many posters did say he would be contacting HR about that and a few days later Rosen was fired.
 






Thanks for your response. I worked as a rep at Genentech for 6 years selling Herceptin during those launch years and I have been with Dendreon for nearly 2 years selling Provenge. There are many similarites between Provenge and Herceptin. These similarities are exactly why I came to Dendreon and exactly why I will remain.

Herceptin was a very early monoclonal antibody, so for the first few years the MDs were reluctant to use it, but this gradually changed and eventually sales took off and the drug became a multi-blockbuster. Herceptin was the first "targeted" therapy for breast cancer. I made a bundle of the drug, but I had to be patient and it eventually paid off big.

Herceptin is designed to counter the overexpression of HER2, which is involved in the growth and spread of tumor cells in 25–30% of all metastatic breast cancer patients. Over a period of years more and more MDs began using the treatment for their HER2 positive advanced breast cancer patients. Sales were built two ways: 1) gradually signing up more docs to use the drug, 2) educating the docs on what patients could benefit from the drug - this led to higher usage rates. Sales built momentum exactly this way. Sure we faced strong competition from Tykerb, chemotherapy and other therapies, but the docs eventually began sequencing all the therapies for most of their patients. I fully expect the same for Provenge and that is why I came here in the first place.

Provenge is the first immuntherapy, and similarily doctors are initially slow to use, but once they gain comfort in using it, they begin to use it more and more of it. Provenge is the first "targeted" therapy for prostate cancer. We are at that same 1 and 2 stage with Provenge where we need to get the docs comfortable and educating on patient identification. I have a few accounts which were real slow in the beginning, but are now sending me several patients a month.

=Both Herceptin and Provenge are infusion therapies.
=Both Herceptin and Provenge attack similar sized patient populations.
=Although Herceptin is also approved for gastric cancer, that market is small, so effectively both Herceptin and Provenge treat one form of cancer, breast or prostate.
=Both Herceptin and Provenge are price similarly, ie, they are expensive. One thing Provenge has over Herceptin is that we get a lot of Medicare patents, so their is little reimbursement kickback on that side. I saw more kickback from insurers on Herceptin than I do Provenge.
=Both Herceptin and Provenge are infusion therapies, so the docs liked the ASP-plus 6% and were motivated to use more once they got used to using the drug a few years.
=Both Herceptin and Provenge proved a 4 to 5 month survival benefit.
=One thing Provenge kills Herceptin on is side effects. My docs love this about Provenge. With Herceptin the breast cancer patients had to be closely monitored for potentially life threatening heart and lung problems. Docs also like that their patients are done with Provenge in a month.

Sure, prior management made a lot of mistakes with the Provenge early launch, and new management makes some mistakes, but things have improved markedly. Many of the new marketing strategies make sense to me and are beginning to work. Genentech made mistakes with there launch as well, but eventually they were corrected as well. Novel therapies like Provenge take time to build momentum. The hormone based therapies have been around for decades and the Zytiga and Xtandi are just new and improved hormone therapies, so they have an initial easier sell. I think that Provenge will sell very well, it is a real good drug, but it will take time to build, just as it did with Herceptin.

So, I am not sure where your "propaganda" comment comes from. You seem to know little about the prostate cancer treatment space and seem to really have a grudge against Dendreon. If you do in fact work for Dendreon, which I sincerely doubt, I think it would best for all involved if you moved on to another company. If you don't work for Dendreon, which I think is very likely, I do not understand why you spend so much time here attacking a company that is doing a lot of good in the world. I personally do not appreciate it and wish you stop the Dendreon attacks. I think you are trying to hurt me and other reps financially.

Happy Holidays
 






Anonymous said:
Thanks for your response. I worked as a rep at Genentech for 6 years selling Herceptin during those launch years and I have been with Dendreon for nearly 2 years selling Provenge. There are many similarites between Provenge and Herceptin. These similarities are exactly why I came to Dendreon and exactly why I will remain.
Click to expand...

Herceptin was brought up by someone (maybe not you) who has his own motives for bringing it up. You may not want to comment on Rosen, but maybe you can at least convince that poster to stop posting if he is going to continue attacking and dismissing people and call people mentally ill liars who may have a different opinion than he does about the prospects for the company. That poster is intolerant, mean, insulting, dismissive and makes the company look awful if anyone reading this board thinks he represents the company.

Just because this bulletin board is a Dendreon board, it is not by definition a board to promote Dendreon. It is a board for meant for a free flowing of ideas and opinions. By nature, debate can arise from that which is good. It is the complete non-acceptance of any opinion different than his and the brutal name calling and personal attacks that go along with it that makes this board non civil.

You posting a long post does not make those posts containing vicious attacks acceptable, just because you may agree with his opinion (assuming you aren't him). Maybe you should find one of the many 100's of posts that contain his brutal attacks, quote that post and address him directly and tell him he is hurting the company. It would solve a lot of the problems on this board. Maybe if he becomes more tolerant of opinions that differ from his and stops the name calling, this board can become a civil place again.

The events in CT, should serve as a reminder of how important civility is. It should also serve as a reminder of what mental illness is and that it is not a term that should be used lightly on a bulletin board for people who have opinions that differ from your own.
 






Poster #9. Thank you for your comparison of Provenge and Herceptin. I have passed your post along to several DMs. I also see the similarity between the two treatments. I am also seeing greater acceptance and uptake of Provenge in my territory. I agree that it is only a matter of time for Provenge to do very well. The new marketing strategies are working.
 
























Prediction - Company pre-announces a decent 4th qtr of about 86M this week.

That might help stakeholders have some confidence before next week. Someone in another post said something about perp walks if deals are not signed by next week.
 












I don't "treat" the patients, just sell them provenge. Correct, we sold provenge to 6 patients at a single provider site just last week. Obviously you are totally in the dark.
 






Anonymous said:
Prediction - Company pre-announces a decent 4th qtr of about 86M this week.

That might help stakeholders have some confidence before next week. Someone in another post said something about perp walks if deals are not signed by next week.
Click to expand...

Probably did have a good quarter. There seems to be no evidence to the contrary.

It remains to be seen if a good early announcement of revenues would offset what another poster said about the 2nd week of January. If he is correct when he said either signed deals or perp walks in the 2nd week of January, either one of those options could resonate with shareholders and potential business partners or suitors.
 






Wow! You must be a VIP at dndn & high up on the sales command ladder since you're responsible for just ONE SITE.
Yeah, you're really in the know
Roflmbo
Get back to work simple sales rep!
 












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