How much will people in the U.S. pay for a new prostate cancer drug that helps dying men live a few months longer? This is one of the tricky questions Seattle-based Dendreon (NASDAQ: [[ticker:DNDN]]) is wrestling with these days. The decision will have a significant impact on how successful Dendreon is for years to come.
The issue is all about how much to charge for an immune-boosting treatment for elderly men with terminal prostate cancer, called sipuleucel-T (Provenge). Dendreon showed last year in a clinical trial of 512 men that this drug helped men live a median time of four months longer than those on a placebo, with minimal side effects. Dendreon is seeking clearance from the FDA to start selling the treatment, and the agency’s deadline to complete its review is May 1. If approved in the U.S., the Dendreon drug would be the first in a new class of therapies that actively stimulate the immune system to fight tumors.
Most of Wall Street projects this drug will emerge as a billion-dollar blockbuster in a few years. JP Morgan analyst Cory Kasimov, for one, forecasts $1.49 billion in U.S. sales in 2014. But his model, and all the rest, are based on a lot of unknown factors at this time, like how much the drug will cost, and how many men will get prescriptions. Dendreon hasn’t said anything specific about its pricing plan, other than an often-repeated line about how the product will be priced similarly to “other novel biologic drugs that extend lifespan“—which is sort of a coded way of saying, “This drug will save your life, and it will be expensive like all the rest.” A spokeswoman for the company declined to comment for this article.
Analysts have reported on a wide variety of estimates on what Provenge will cost, between $40,000 and $100,000. While different analysts use different models, I found that the expected price is about $61,714, according to the average estimate of seven analysts surveyed by Xconomy. But this is truly a guessing game at the moment. While Kasimov uses $65,000 as his estimated price per patient, he says it could run as high as $75,000 to $100,000. You can see the estimates listed from all seven analysts in the chart below.
| Analyst | Affiliation | Est. Provenge Price |
Source |
| Ren Benjamin | Rodman & Renshaw | $40,000 | November 12 note to clients |
| Cory Kasimov | JP Morgan | $65,000 | February 22 note to clients |
| Howard Liang | Leerink Swann | $60,000 | April 13 e-mail |
| David Miller | Biotech Stock Research | $72,000 | February 27 note to clients |
| Mark Monane | Needham & Co. | $50,000 | April 13 e-mail |
| Christopher Raymond | Robert W. Baird & Co. | $70,000 | March 12 note to clients |
| Eric Schmidt | Cowen & Company | $75,000 | February 1 note to clients |
There are a lot of factors to consider as Dendreon makes the decision on the actual price of what would be its first marketable product. Set the price too low, and it would fail to recoup enough of the $783 million deficit the company has racked up since its founding in 1992. The company’s stock (NASDAQ: [[ticker:DNDN]]) would probably tumble. Dendreon also would probably struggle to keep up with demand from patients, leaving many of them frustrated at their inability to get a potential life-saving drug.
But setting the price too high is obviously a perilous thing to do as well. Insurers would probably set up all kinds of red tape to ensure the drug is being prescribed in precise accordance with the FDA-approved label, creating hassles for doctors that they might prefer to avoid. Competitors
