Dendreon: A Look at the Potential for Provenge in the European Market

| About: Dendreon Corporation (DNDN)

The European Union represents a large pool of hormone resistant prostate cancer patients and could be a commercial opportunity for Provenge as large as that in the U.S. The treatment paradigms in the U.S. and EU are similar. It is estimated that there are 1.5 to 2.0 times as many patients in the EU as in the U.S. However, reimbursement is more challenging so that the addressable market based on sales dollar potential may prove to be about the same in both areas.

On a recent conference call, management stated that they had met with several of the EU regulatory agencies. Based on these meetings, management expressed confidence that the data package used to gain approval in the U.S. will be sufficient to gain European approval. These are the 9901, 9902-A and IMPACT studies. Dendreon (NASDAQ:DNDN) now plans to file for approval in the EU in late 2011 or early 2012. A regulatory decision is expected in the first half of 2013. Commercial sales could start in the second half of 2013.

DNDN is beginning to build a new plant in central Germany that is very similar to the Los Angeles and Atlanta facilities. It is a 36 work station plant that is scheduled to come on line in the first half of 2013. Europe offers a very concentrated group of patients. About 20% of the market is within a four hour drive of the German facility and 50% is within an eight hour drive. The logistics of using trucks or cars creates significant logistic and cost efficiencies as opposed to using airplanes. Of course, the remaining 50% of patients can be reached by air or possibly truck.

Securing reimbursement in the EU is more challenging than in the U.S. and we are all aware of the focus placed on the $93,000 price in the U.S. Based on managements statement that the "dollar" commercial potential in the EU is similar to the U.S. even though there are more patients, indicates that the company may be expecting a lower price.

There are a number of things working in favor of Provenge reimbursement. The primary endpoint reached in its clinical trials of improvement in survival is the gold standard of outcomes and is very positive for reimbursement considerations. Another significant advantage is that Provenge does not need much supportive care. Its side effects of infusion related reactions and flu-like symptoms can be cheaply treated with Benadryl and aspirin. Chemotherapy and targeted therapies on the other hand can give rise to the need for supportive care to treat side effects that can sometimes cost as much or more than the drug regimen. In addition, Provenge is used as a single agent whereas many other drugs are used in combination with other expensive drugs.

Some drugs have been approved in the EU at the same price as in the U.S. Examples are Avastin, Tykerb and Affinitor. As an out and out guess, I am thinking that Provenge will be reimbursed at $50,000 to $60,000 in the EU per course of therapy.

Disclosure: I am long DNDN.