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Dendreon's Biggest Provenge Problem? Managing Demand


The worry is no longer whether the FDA will approve the drug, but how the company will keep up production.


No later than May 1, 2010 the FDA will make a decision whether to approve Dendreon's (DNDN) prostate cancer drug Provenge. The FDA, which should have approved the drug in 2007, is very likely to approve Provenge this time around. The FDA has few excuses this time. Provenge has two clearly positive Phase III trials showing a survival advantage, a third Phase III positive once imbalances in favor of the control arm are corrected, and a FDA advisory panel that stated the drug was safe, demonstrated substantial evidence of efficacy, and (by my unofficial count) thought the drug should be approved.

My sense of the investment community -- at least those present at the recent JPMorgan (JPM) Healthcare Conference in January -- is that the "Will they approve it?" question is no longer pertinent for those interested in Dendreon. What's up next is whether the company can sell it and whether they can manufacture it.

The answer to both is a clear "yes," in my view. Before I explain why, some background is in order:

I first met with company management in 2000. My firm initiated coverage in 2001, and there's only one firm who has longer continuous coverage of the company than ours. Our firm has been positive on Provenge since the first release of data from the 9901 trial way back early last decade. And while predicting Dendreon's stock price has been the most difficult aspect of this story, anyone following along with the Dendreon stock and option plays in our Biotech Stock Research Model Portfolio have banked significant returns despite all the ups and downs over the years.

The other thing worth knowing is my firm has never issued positive coverage on another active immunotherapy company. This has allowed our clients to miss huge blowups in every other name in this market segment. There are lots of science-geek reasons why. But the biggest reason why is that we never believed other companies could manufacture their drugs at the level the FDA requires of an approved drug (which is a higher standard than required to manufacture for clinical trials).

Manufacturing was one of our biggest concerns in our initial meetings with the company. I was relieved to learn early on it was Dendreon's biggest concern as well. In fact, Provenge filtered to the top out of a heap of many alternate approaches precisely because Dendreon's management knew it could be manufactured to FDA specifications. It's also worth knowing key Dendreon people had gone through Immunex's Enbrel manufacturing problems -- the problems that lead to Immunex's acquisition by Amgen (AMGN) for a song.

With that background out of the way, let's dig into the process.

About Provenge

Provenge is unlike any current cancer drug because it needs a component of the patient prior to manufacturing. Provenge doesn't need a piece of the tumor, which is where most other personalized active immunotherapies fail. Provenge requires a patient's immune cells -- largely untrained/immature dendritic cells -- to start the manufacturing process. Collecting these cells is simple, requiring the patient visit a blood bank and sit in a chair for one to two hours while they're filtered out of his bloodstream. This isn't special science. In fact, the process utilizes industry-standard equipment already in place at blood banks run by folks like the American Red Cross, New York Blood Centers, and Puget Sound Blood Centers. Dendreon has agreements with all three organizations, by the way, for this step of the process.

Dendritic cells tell the human T-cell immune system what to attack. Prostate cancer cells do a good job of fooling dendritic cells into ignoring the growing tumors. Dendreon solves this problem by removing dendritic cells from this environment, training them outside the patient's body to recognize cancer cells, and giving these infused cells back to the patient.

Dendreon trains dendritic cells to recognize an antigen called PA2024. This is a recombinant antigen manufactured just like any other recombinant protein. It is a construct of PAP, a prostate cell marker, and GMCSF. The added GMCSF helps the dendritic cells learn to recognize PA2024 more quickly. This is the "secret sauce" of Provenge, is not personalized to the patient, and provides absolutely no challenge in terms of manufacturing.

The Basic Steps

Patients prescribed Provenge will go through the following steps three times in four to six weeks.

1. Visit a blood center near their home to undergo a leukapheresis, the technical term for obtaining their immature dendritic cells.

2. Those cells will be shipped from the blood center to Dendreon's manufacturing facility.

3. Dendreon takes the next 36-48 hours to train the patient's immune system cells to recognize the PA2024 antigen.

4. After key potency tests are completed to make sure the training worked, Dendreon ships Provenge back to the prescribing doctor.

5. The patient comes into the doctor's office and receives Provenge on an outpatient basis via a 60-minute IV infusion.

Two weeks later, the process repeats -- and again two weeks after that. After three treatments, the patient is done and can go on with his life. Clinical trials prove the patient is two to three times more likely to be alive at three years because he received Provenge. Importantly, this significant survival benefit comes with no durable side effects and no serious short-term side effects.

The Details

Anyone who has had operational responsibilities for their employer instantly recognizes a ton can go wrong within those simple steps. Dendreon knows this and has been planning on how to handle Provenge manufacturing in the real world for approaching 15 years.

The core of Dendreon's approach is an enterprise-level software and logistics system called Intellivenge. This software handles everything related to Provenge. Working off of the steps listed above, here is a more detailed analysis of the Provenge manufacturing system.

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