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What Dendreon Can Learn From Robots


If Intuitive Surgical can get urologists to front millions of dollars for robots to perform surgeries, why can't Dendreon convince them to float $93,000 for a month of Provenge?

Currently, Provenge's business case to urologists is unbalanced. Urologists take on a uniquely expensive risk when they prescribe Provenge. If Medicare declines to reimburse even one patient in 16, an urologist will lose money prescribing the drug. While Provenge is no more likely than other oncology drugs to fail a reimbursement test, this issue of uniquely expensive (cost density) makes it different. (Incidentally, I would argue now less likely since the Centers for Medicare and Medicaid Services (CMS) issued a National Coverage Assessment requiring on-label Provenge reimbursement. This decision was effective nationwide only this week.)

Dendreon needs to balance this business case the same way ISRG did. The company needs to appeal directly to patients and tell them to ask about Provenge treatment when their PSA starts rising while on hormone therapy, demanding to receive it at the very first sign of metastatic disease. Urologists need to learn -- the hard way and via Dendreon's promotional work -- that if they don't prescribe Provenge, their patients will go to another urologist who will.

The parallels between robots and Provenge are striking. There is skepticism in urology about the efficacy of robots, just like there remains skepticism about Provenge. Both increase the cost of care. We don't know precisely which patients benefit most from either. Robots represented a practice change for urologists, just like Provenge. Robots represented a significant financial investment and risk, just like Provenge. Men see robot surgery as cool, just as they see potential for Provenge's harnessing of their own immune system to fight cancer. Sales were slow to start for robots, eventually exceeded a billion dollars, just as I still believe they can for Provenge.

The number one question Wall Street has is whether this cost density issue masks a demand problem. I don't believe this issue exists. Does Dendreon have to do a better job marketing Provenge? Absolutely. Do urologists need a great deal of education as to how to set their practices up operationally and financially to prescribe Provenge? Absolutely.

Provenge has a marketing and sales problem, not a demand problem. We all naively thought Provenge would largely sell itself. Turns out we were wrong. Like almost every product ever created, smart sales strategies must be employed to maximize Dendreon's return on this investment.

While there is much unique about Provenge, the solution to the mess Dendreon currently finds itself in is not all that special. ISRG solved it with their robots and there is no reason to expect Provenge will be any different. Dendreon management must focus on ameliorating Provenge's unique effect on urology practice cash flows, but they cannot ignore the robot experience.

Twitter: @BiotechStockRsr

No positions in stocks mentioned.

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