Why Sales Estimates for Dendreon's Provenge Are Too Low

After the initial excitement caused by the Phase 3 IMPACT study of Dendreon's (DNDN) Provenge for the treatment of metastatic prostate cancer has begun to fade (along with the stock price), it is time to consider just how big a drug Provenge can become.

Provenge is still around a year away from getting FDA approval, so I am sure many investors feel there is no rush to get involved in the stock at this point. The company's manufacturing facility will also go through a rigorous once over from the agency, and the data from the trials will be scrutinized with a fine tooth comb but make no mistake, Provenge will be approved and will become a blockbuster drug.

Most of the analyst reports I have seen assume peak sales in the U.S. somewhere between one and two billion dollars. These estimates are based on the assumption that the cost for Provenge will be somewhere between $30,000 - $50,000 and a penetration rate of around 10-20% of the total prostate cancer population of which there are around 230,000 annual new cases each year in the U.S., according to the National Cancer Society.

I am of the opinion that these peak sales estimates are way too low for three basic reasons. The first is that the pricing of Provenge will most likely be higher than the $30-50,000 per patient estimates. Many of the newer cancer therapies such as Erbitux cost as much as $10,000 per month, which could lead to a price of up to one hundred thousand dollars or more for patients who survive on treatment for more than a year. I would be shocked if the price for Provenge per patient is under $50,000 and I would not call it out of the question that the cost for the drug might run as high as $75,000 per patient. We might know more about the cost part of the equation sometime next month when Dendreon will brief the analyst community on their internal plans for Provenge's launch.

As far as the percentage of the total prostate cancer population who will take Provenge, that is too low for two reasons. The first reason is Provenge's ease of use and side effect profile, which makes the drug an easy choice for most prostate cancer patients. Provenge is a simple infusion taken twice over three weeks. The drug causes no side effects other than slight flu like symptoms. Finally, we know that the survival advantage over Taxotere, the current standard for metastatic prostate cancer, is a quite robust six weeks. Not only that, but Taxotere causes severe side effects that go along with chemotherapy PLUS it has to be taken for more than six months. Compare that with two simple infusions over three weeks (and possibly a booster at a later date, although a booster was not used in the trial) with NO serious side effects and Provenge becomes a "no brainer" for advanced cancer patients.

Finally, and this is the most exciting part of the story, I believe that Provenge will be used quite extensively off label by earlier stage prostate cancer patients. To explain this, one has to understand how prostate cancer works.

Unlike most cancers, prostate cancer is usually caught early before it spreads, through a biomarker called the PSA test. If the PSA test and a follow up biopsy determines the patient has prostate cancer, the patient goes through the removal of the cancer cells via either surgery or one of several other leading edge therapies such as cryotherapy or brachytherapy. After the tumor is removed, the patient is put on androgen deprivation therapy. Androgen is a hormone the tumor needs to feed on to grow, so using this therapy quite often slows down the tumor's growth over a period of years. However, in almost all cases, eventually the cancer comes back. The patient and doctor will know this because after a period of time, the patient's PSA levels will start rising once again.

The problem for patients though is that until the tumor actually shows signs of spreading into the bones (prostate cancer metastasizes into the bones not the organs), there is nothing for the doctor to give the patient, although a few will start patients on chemotherapy right away. While there are several drugs in development for this stage of the disease, such as CGRB's CB7630, currently there are no good options.

I feel that, considering the few options available, along with DNDN's ease of administration and stellar side effect profile, many physicians will start their patients at this earlier stage of prostate cancer and open a whole new segment of the prostate cancer population to Provenge. If Provenge gets some of this "mid stage" prostate cancer market, then the one to two billion dollar estimates for the drug will seem absurd and become more like three to four billion .

So how does one get to three billion in sales for Provenge? Well, if Dendreon decided to charge as much as $75,000, or even $60,000 per patient, it is really not that hard. Of the 230,000 new prostate cancer patients per year, roughly 80-85% of them will fail hormone therapy at some point. That leaves the current potential on and off label market for Provenge at roughly 180-190 thousand patients. At this past week's Merrill Lynch Healthcare conference, the CEO stated that the total metastatic hormone failure market is 102,000 patients. All Provenge has to do is capture about 50% of the more advanced stage, or 50,000 patients and 50,000 patients multiplied by the $75,000 price gets you to $3.75 billion. If Dendreon charges "only" $60,000 per patient and it captures the same 50,000 patients, then it will make $3 billion.

But even if Dendreon captures a bit less of the advanced prostate cancer stage, a 10% penetration into this middle stage prostate cancer market would yield the company possibly another 10,000 new patients per year. So if Provenge captures say 40,000 advanced patients and 10,000 mid stage patients or some combination thereof, AND the price is lower than $75,000 per patient, one still gets to three billion dollars in annual sales. For example, if the price charged will be $60,000 and it is taken by 50,000 patients, that also gets the drug to $3 billion in sales.

I know my projections sound bullish, but these kind of projections should lead one to consider what would happen even if Provenge turns out to be a real disappointment. Let's say the company only charges $50,000 per patient, and let's say it only captures a bit less than half of the patients I am projecting, or 24,000 patients. That would get the drug to "only" $1.2 billion in sales, still a blockbuster drug by any measure.

While these projections are exciting, I am NOT including potential international sales. I will wait until the company signs partnerships for the rest of the world before determining just how big the drug can be internationally but suffice it to say that the prostate cancer market in western countries not including the US is roughly DOUBLE the size of the US market

The wait for Provenge to reach its ultimate potential might take a few years, but this kind of exciting new drug in the biotech space doesn't come around often . It should be a fun ride as the drug goes through the final approval process and becomes available to prostate cancer sufferers worldwide.

Disclosure: Long DNDN.

Comments

[tredleon:]

While it seems plausible that there will be significant off-label demand from earlier-stage patients, I have doubts about long-term pricing and competition. The most troubling thing to me about the data for Provenge is how at the end of the study period, which I believe was 5 years, there was no difference in survival - in other words, the Kaplan Meier curves between the treated and placebo groups merged back together - the same percentage of patients were alive from both groups at the end of the study. And since I would guess 75%+ of the patients suffering from prostrate cancer are under Medicare/Medicaid, pricing will be subject to whatever new rules the Obama administration is going to push through. Call it rationing or whatever you want, I question whether the govt is going to be willing to spend $4Billion+ per year to give a small patient population 4 extra months of survival. And even if they do, it is only a matter of time before a better vaccine or treatment comes along - 4 months will not be hard to beat.

May 18 05:16 PM

[micro:]

>>Of the 230,000 new prostate cancer patients per year, roughly 80-85% of them will fail hormone therapy at some point.<<

That's nonsense. Roughly 80-85% of them never even begin hormone therapy (actually hormone DEPRIVATION therapy) because they are completely cured of their prostate cancer or die of something else before it becomes a problem.

May 18 06:38 PM

[Dondiego:]

The logic in the article seems quite plausible to me. I might even hypothesize that off-label use will be somewhat higher. Even a prostate cancer victim whose doctor recommends watchful waiting may opt for Provenge, given the side effects profile. At worst, the patient would be out a lot of money, as insurance is unlikely to cover off-label use. At best, the patient may buy even more time, which could open up even better treatment options down the road.

May 18 10:46 PM

[Dan Rosenblum:]

I got the number of Hormone refractory failures from the company's presentation at Merril Lynch last week. They put the number at 140,300 for some reason I thought it was 180,000.

Remember, there are over 2 million men in the US that have had at one point or do currently have prostate cancer. Some do die from other things and some are completely cured, but very many become hormone refractory too. I was using the incidence number to try and figure out some sort of sales estimate. I am sure one can get a different number using the prevalence.

May 18 11:14 PM

[Robert0713:]

$4 billion per year to keep a handful of geezers alive for a month? If ever there were evidence that this country has got its priorities totally screwed up, this is it. I'm not in favour of Soylent Green, but $4 billion can be put to much better use in public health. Especially if it's a month more in a hospice bed.

May 18 11:34 PM

[NYC-PC:]

There are a number of errors in your column. 1st, the current incidence of PC in the US is 192,000 [www.cancer.gov/cancert...], not the 230,000 you quote. In addition, the observation that 80-85% will become hormone-refractory is grossly wrong. It is estimated that about 1/3 of newly diagnosed patients will fail management of their localized disease. This translates to estimates of 50-60,000 people failing surg and/or radiation therapy yearly and these are the people who may go on to become hormone-refractory--well below your figure of 180,000. I don't know the source of the Merrill Lynch estimate of 140,000 but that is also way off. You indicate that Provenge is given in '2 simple infusions over 3 weeks'--also wrong. It was actually given as 3 infusions every other week. It requires a leukophoresis [white blood cell removal from the patient], shipment of the cells to a processing facility and shipment back to the infusion center followed by the 'simple infusion' you mention. Not a big deal, perhaps, but you ought to get your information correct. Lastly, you comment "we know that the survival advantage over Taxotere, the current standard for metastatic prostate cancer, is a quite robust six weeks." Please tell me where a study was done that compared Provenge to taxotere? The fact is that no such study has been done. I would hope that if you had the 'expertise' to comment on biomedical issues/clinical trials that you should know that you cannot directly compare results of 2 separate studies--that's called a 'historical' comparison but it holds little weight beyond being 'hypothesis-generating'. From my perspective, you've made numerous errors and I have to question whether you are really qualified to draw the conclusions that you do. At least check your facts with someone who knows the field before you put them out to the general public.

May 19 11:01 AM

[raytayzmd:]

...you should also bear in mind how provenge works...ultimately, one expects provenge to kill only 200-300 cancer cells...its primary function, therefore, is to "clean up" after an initial procedure that removes the bulk of the tumor...hence, it probably won't be used in, say, cancer that has already metastasized...so figure 200,000 new cases a year in the U.S. with about 20% already metastasized reduces the potential number of patients to 160,000...next, therapy depends upon staging as well as age of the patient -- e.g. an 80 year old patient with a low grade tumor probably needs minimal if any therapy...I think a more reasonable number for potential patients for provenge would be around 30,000...given the statistically significant although, in reality minimal, improvement in survival, I don't think provenge will grab as much of the market as DNDN shareholders hope for...

May 19 11:11 AM

[Jolly_Rancher:]

I agree with you. $75,000 for 4 months doesn't look great compared to some drugs in trial that are resulting in a large percentage patient complete remission, like SGEN, MITI, MNKD, CLDX, etc etc. There's going to be a lot of competition in immunotherapy. I am not saying sell DNDN, but I am saying diversification may be the best bet.

On May 18 05:16 PM tredleon wrote:

> While it seems plausible that there will be significant off-label
> demand from earlier-stage patients, I have doubts about long-term
> pricing and competition. The most troubling thing to me about the
> data for Provenge is how at the end of the study period, which I
> believe was 5 years, there was no difference in survival - in other
> words, the Kaplan Meier curves between the treated and placebo groups
> merged back together - the same percentage of patients were alive
> from both groups at the end of the study. And since I would guess
> 75%+ of the patients suffering from prostrate cancer are under Medicare/Medicaid,
> pricing will be subject to whatever new rules the Obama administration
> is going to push through. Call it rationing or whatever you want,
> I question whether the govt is going to be willing to spend $4Billion+
> per year to give a small patient population 4 extra months of survival.
> And even if they do, it is only a matter of time before a better
> vaccine or treatment comes along - 4 months will not be hard to beat.

May 19 11:17 AM

[quiact:]

The price, comparitively speaking, may be appropriate. Look the products of Genzyme. They are the bentleys of pricy products, and are close to 10 times the amount of Provenge.

Provenge history refresher:

Published on: psa-rising.com
The Unreachable Unavailability of Provenge
*FDA’s mission statement: To promote and protect public health.
Terminal patients are those who are not expected to live due to usually illness such as advanced prostate cancer (cT3). If the patient has 6 months or less to live, those patients are considered terminally ill.
Regardless, if a patient is terminal, they are without a cure or tolerable treatment for their illness presently. Since such patients will likely die in a short period of time, treatment options, even if they are not entirely unproven, are often desired by such patients.
This is understandable, because at such a severe stage of illness, such as prostate cancer, possible extension of their lives with comfort is worth it to them, regardless of lack of evidence of proof of whatever treatment that may be advantageous to them regarding these issues.
The Food And Drug Administration (FDA), however, claims authority on the treatment options of such patients, although that administration has proven itself over the years to be rather inadequate with its frequent drug recalls and black box warnings, and they do these things only under pressure from the public, usually. Reform has to start somewhere at some time.
Prostate cancer is a rather frequent occurrence- with between 10 to 20 percent of men predicted to acquire the disease during their lifespan, resulting in about 30,000 deaths a year from this disease of the one million men. Furthermore, out of all cancer types more are dying from prostate cancer now than other cancer diagnoses.
For those unaware, there are different stages of prostate cancer, and the more severe the prostate cancer cases are which is determined by such methods as bone scans and Gleason’s scores, which is a score that assesses prostate tissue after it is biopsied and if it is determined that the stage of cancer is severe by this and to estimate proper treatment options if proven to be malignant.
Typically, the initial suspicion of prostate cancer is determined by the results of what is called a PSA blood test, as PSA is a protein produced by prostate cancer cells. If the PSA blood test is above normal limits, a prostate biopsy is performed to determine and confirm not only the presence of cancer, but also the severity of the disease on such a patient.
Yet fortunately, and as you will read, innovation still exists in medicine. A few years ago, a small Biotechnology company called Dendreon was working on a conceptually new treatment for the worst prostate cancer patients, and this treatment therapy created by Dendreon was named Provenge.
Provenge is the first immunotherapy biologic treatment for the progressed prostate cancer patients, and has proven to be a very novel and innovative treatment option for advanced prostate cancer patients who are terminally ill.
Usually, these patients are unresponsive to usual treatment methods for prostate cancer, and are left with chemotherapy as their only treatment option at such a traumatic stage of prostate cancer.
Understandably, most patients at this stage refuse treatment entirely, largely due to the brutal side effects of such chemotherapy treatments as taxotere. The immunotherapy method developed by Dendreon required the removal of white blood cells of the diseased patient and, after altered, are re-injected into this patient now designed to attack what is called PAP, which is on prostate cancer cells only.
This treatment required only three such injections in a period of six weeks. This resulted in life extension twice that of chemotherapy treated prostate cancer patients of this severity, and without the concerning side effects of chemotherapy. The medical community and survivors of prostate cancer were elated and waited with great anticipation for access to this treatment method.
Fortunately, as the years passed, Provenge, by 2007, had convinced others of its safety and efficacy in its benefit for severe prostate cancer patients. This caused great joy to such patients and their families. Perhaps greater elation was experienced by the caregivers and specialists of such a disease, such as Urologists and Oncologists who treat such patients.
While Provenge was on fast track status at this time at the FDA, the FDA panel thankfully recommended with clarity the approval of Provenge based on its proven and substantial efficacy and safety demonstrated in its performance in past trials. The FDA announced this to the public in the early Spring of 2007, I believe.
Now for the bad news: With great shock and surprise, the FDA agency rejected the approval of this great treatment for very sick patients due to, they said, ‘lack of data’ in May of 2007. This contradicts their favorable opinion of Provenge weeks before delivering this terrible news. Especially when one considers the FDA Commissioner is a prostate cancer survival himself!
Soon after this judgment was passed by the FDA, conflicts of interest were discovered by others. For example, a member of the FDA agency who was evaluating Provenge, Dr. Scher, was found to have a financial commitment to a future competitor of Provenge that was being produced by a company called Novacea.
Novacea had signed a co-promotion agreement with Schering with this similar prostate cancer drug being developed by this company. Dr. Scher never disclosed this conflict during the approval process of Provenge.
As it turns out, this anticipated prostate cancer drug made by Novacea was discovered to have serious flaws, and Schering pulled out of the agreement with Novacea. In addition to this incident and before May of 2007, baseless letters were anonymously delivered to the FDA stating negative qualities about Provenge that were without Merit and speculative claims about the treatment.
Yet overall, the disapproval by the FDA of Provenge angered many, and a newly formed advocacy group called Care to Live filed a lawsuit against the FDA for their clear lack of protocol or knowledge about such complex treatment agents as Provenge at the end of last year.
Terminal patients, I surmise, desire comfort during their progressive disease that has placed them in the last chapter of their lives, and certainly should have a right to choose any treatment that possibly could benefit them.
At this stage of such a patient, one could argue, safety of any treatment option is not of concern to these patients, because they are going to die anyway. Yet the FDA, with reckless disregard and overt harshness for these very ill patients, ultimately harmed others more by not approving Provenge with deliberate intent.
The FDA does in fact presently have the ability to grant what is called conditional approval for such treatment methods as Provenge, and why they have not expanded this approval process to all terminally ill patients remains completely unknown.
What is known is that they are harming those they pledged to protect so long ago by depriving such patients in need of treatment, as no other options are viable presently that are as safe and effective with great tolerability associated with Provenge.
So now the FDA appears to be a bought, corrupt, and incompetent administration without loyalty and dedication to the public and its health. This needs to be corrected in any way possible for the lives of others.
A terminally ill patient has a personal right to obtain and access such treatments upon their own volition as well as the discretion of their doctor, just as a terminally ill patient is granted an individual right to die, if they choose to do so. It is an individual decision in such cases that should be void of interference from others.
“Politics is the systematic organization of hatreds.” --- Henry Adams
Dan Abshear
Author’s note: What has been written is based upon information and belief

May 19 11:16 PM

[Dan Rosenblum:]

For those of you who think I am way off base with my assumptions on both pricing and the potential Provenge market size, I urge you to avoid DNDN or even short the stock .

However I would point out that yesterday in Boston at investor meetings ,the Dendreon CEO Mitch Gold hinted at pricing of Provenge around $80,000 per patient. He aso stated that the potential market size for the drug was around 100,000 patients per year.

So even if they capture only half the potential market that makes it a $4 billion dollar drug, higher than my estimate .

May 20 11:30 AM

[NYC-PC:]

I didn't quibble with your projection at all, just your 'facts'. Although that's not to say, I accept your projections either. I guess the market size all depends on how you (or Mitch Gold) define 'potential' market size. Provenge was tested in patients with hormone-refractory metastatic PC and will get a label limited to hormone-refractory metastatic disease, maybe narrower. He may be including in 'potential' off-label use or the expectation that they will later get approval in an earlier stage setting. But the incidence of HR, met PC in the US is +/- 55,000 patients/year. As for $80,000 per patient--I personally think that would cause a backlash and MDs would not prescribe it--i know i would not at that price.

May 20 06:41 PM

[Dan Rosenblum:]

I agree with you on the pricing. I would like to see them price Provenge in the $60-70,000 range, the last thing Dendreon needs is a backlash.

May 20 11:36 PM

[Michael Murphy:]

Dan - in my article on Dendreon at seekingalpha.com/artic..., I used only $45,000 per treatment and only 33,000 patients after five years, and Provenge is a $1.5 billion drug, US, on-label. We all know the ROW market is about the same size. We all know there will be some, if not extensive, use of the drug off-label, say only $500 million in the US and an equal amount in ROW. That gets revenues up to $4 billion after ROW approval. The technology should work on any solid tumor cancer, so I think you can double the $4 billion at least for the eventual approvals for breast, colon, head & neck and other cancers. As all this unfolds, I expect the analysts to stay behind the curve all the way up. As Gold pointed out in Boston, not one analyst is looking for more than $50 million in sales in 2010, when they will have 6 months to market. I am at $117 million in 2010 and $238 million in 2011.

May 21 03:50 AM

[NYC-PC:]

Michael, 33,000 patients/year out of 50-60,000 eligible is do-able, but it probably represents pretty high market penetration. I don't do these kind of projections, so I don't know what's a 'typical' penetration figure. As for off-label use--let me ask you, who's going to pay for it? 3rd party payers are not going to pony up for an unapproved indication--at least that's my understanding. And virtually no patients are going to pay out of pocket for a $45-80,000 therapy unless maybe they feel they will be cured and there's zero evidence to support that. And while the rest of the analysts may stay behind the curve, I have to think that your sweeping statement that '[t]he technology should work on any solid tumor cancer...' is the new definition of irrational exuberance. Have you forgotten that no other therapeutic vaccine has ever worked in cancer? And what antigens will they use in breast, colon, head & neck and other cancers? I think Dendreon would appreciate your guidance on the last question.

May 21 05:15 PM

[GotDOCG:]

True... relatively few ever use the treatment... and with surgery, there is no use of hormone therapy... or ought to be none... that would be from up front and personal experience...


On May 18 06:38 PM micro wrote:

> >>Of the 230,000 new prostate cancer patients per year, roughly 80-85%
> of them will fail hormone therapy at some point.<<
>
> That's nonsense. Roughly 80-85% of them never even begin hormone
> therapy (actually hormone DEPRIVATION therapy) because they are completely
> cured of their prostate cancer or die of something else before it
> becomes a problem.

May 22 11:20 AM

[GotDOCG:]

I pray that you are one of the 230,000 diagnosed with pc this... perhaps even one of the 29,000+ who die from it... please go hug a tree...


On May 18 11:34 PM Robert0713 wrote:

> $4 billion per year to keep a handful of geezers alive for a month?
> If ever there were evidence that this country has got its priorities
> totally screwed up, this is it. I'm not in favour of Soylent Green,
> but $4 billion can be put to much better use in public health. Especially
> if it's a month more in a hospice bed.

May 22 11:27 AM

[Agrippa:]

Provenge demonstrated 4 months of survival benefit versus placebo (not standard of care) with no improvement in quality of life, time to progression, or PSA levels - in short, this therapy hasn't been shown to retard the disease at all. Additionally, IMPACT only reached its endpoint (22.5% RoD reduction vs. 22% minimum) in April after failing to reach it in October, and then combining results from an earlier trial. I know everyone assumes FDA approval based on the SPA they signed, but I don't see it as a sure thing, not to mention the cost/benefit analysis of a $70,000 drug with limited benefit (remember the 4 months isn't vs. standard of care).

May 29 06:56 PM