In a quarterly earnings call May 7 and again at a presentation to the Deutsche Bank Health Care Conference the following day, Dendreon Corp. told a story of slow but ongoing sales growth for Provenge (sipuleucel-T).

Investors reacted to the latest data points, however, by dumping shares, while at least one major Wall Street investment bank lowered its rating for the biotech.

Provenge first-quarter sales were $82 million, up 6.5% and $5 million from the previous quarter. New CEO John Johnson, formerly the CEO at Savient Pharmaceuticals Inc. and ImClone Systems Inc., said Dendreon, the first FDA-approved active cellular immunotherapy, saw strong infusion patterns during March that mirrored trends seen at the end of fourth-quarter 2011. It was too early to determine if that trend would be repeatable quarter after quarter, he said Also see "A New Chapter, A New CEO For Dendreon" - Pink Sheet, 1 February, 2012..

Johnson predicted low-single-digit sequential sales growth for the drug in the second quarter of 2012. Since moving into the CEO’s office in February, he said he has talked to leading oncologists who treat advanced prostate cancer and received encouragement, as well as “feedback on areas that we can improve.”

He also pointed to the recent addition of Executive VP, Global Commercial Operations, Joe DePinto, who worked with Johnson at ImClone and then managed Johnson & Johnson’s international hematological cancer business. Johnson called his new hire a leader who would position Dendreon for global expansion and said DePinto is putting a “world-class” team in place.

Provenge is under review for EU approval by the European Medicines Agency, with a regulatory decision expected in mid-2013.

DePinto said the community oncology and urology segments are growing for Provenge, while the drug holds steady in the academic institutional setting. Community clinics account for 70% of Provenge sales, he said, with oncologists providing 72% of that business and urologists 28%. “Urology continues to be [our] fastest-growing segment,” the executive said.

Urologists represent a key growth opportunity for Provenge because they often treat earlier-stage prostate cancer patients – a challenge for Dendreon is to get these clinicians, who rarely administer complicated infusion therapies such as Provenge themselves, to do more screening of their patients for metastasis, with patients testing positive being suitable candidates for Provenge therapy.

Addressing the Deutsche Bank AG conference on May 8, CFO Gregory Schiffman spoke of increasing physician interest and confidence in Provenge as a therapy for castrate-resistant prostate cancer that offers a survival benefit over other therapies, a short, 30-day duration of therapy and a very clean safety profile by cancer treatment standards Also see "Dendreon Rebounds In Q4 2011, But Can It Keep It Up In 2012?" - Pink Sheet, 10 January, 2012..

“As of March 31, we had more than 570 accounts that have infused the product,” Schiffman said. “We’ve got a target of around 1,000 accounts that comprise about 80% of all the prostate cancer patients and so we’re about 60% penetrated in the account base target that we’ve got. Our focus in 2012 [is] continuing to add accounts but more importantly really increase the utilization within those accounts. We have extremely large as well as small accounts that we’ve signed up; a majority of them have been behaving as small accounts … putting on one patient, two patients [while] waiting for reimbursement.”

Reimbursement is an issue Dendreon thinks it got largely smoothed out in 2011, with average time to payment having remained in the area of 28 days over the past five months, the CFO added.

DePinto, addressing the earnings call, also noted that Dendreon has consistently grown its customer base, a trend that is continuing. The biotech ended 2011 with 595 U.S. infusion sites for the drug and added 128 new sites in the first quarter for a total of 723. The company’s focus going forward is deeper penetration of those accounts, he said.

Physician Education Of Patients Stressed

Dendreon has seen some of its smaller community urology accounts grow in the past six months, DePinto said, and it has begun a program called PROPEL to increase that tendency. “PROPEL is a new, branded patient education series, consisting of physician presentations to prostate cancer patients at local and regional meetings of the largest prostate cancer support groups throughout the country,” he explained. “The goal is to educate appropriate patients and their caregivers, and to encourage them to discuss Provenge with their doctors. Response has been very positive to date.”

Less favorable has been the response of shareholders and Wall Street analysts. With news that many analysts described as only modestly reassuring on May 7, Dendreon saw its stock price decrease 25% during the trading day May 8, closing at $8.95 per share. (The share price then held steady on May, closing the trading day at $8.96.)

Indicative of the unenthusiastic response from the Street was Credit Suisse Group analyst Lee Kalowski, who maintained a rating of “neutral” for Dendreon shares in a May 8 note but reduced his worldwide sales projections for Provenge through 2020 by 5% to 7%. He projects the product to sell in the mid $900 million range from 2017 to 2020, ultimately falling just short of blockbuster status.

More notably, Leerink Swann & Co. analyst Howard Liang lowered his rating of Dendreon from “market outperform” to “market perform” based on the results provided May 7. “The company guided to low-single-digit sequential growth for 2Q, which would imply a quarter-over-quarter increment of less than $4 million,” he wrote. “Given the current trajectory of two consecutive quarters of sequential growth that appears less than $5 million, we find upside from our current valuation of $13 [per share] difficult to justify.”

Deutsche Bank analyst Robyn Karnauskas wrote in a May 8 alert that, based on a private conversation with Dendreon executives, she expects the company to outline a new strategy for Provenge before year’s end, possibly including the shutdown of one of its three manufacturing plants. Dendreon has cited a goal of lowering cost of goods for Provenge, but also admits that will be a challenge, as many of the costs of producing the expensive drug ($93,000 a year per patient) are fixed.

Dendreon’s Story Of Continuing Slow Growth For Provenge Seems Unconvincing To Wall Street

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