Dendreon has just nailed down one of the biggest biotech financings in the U.S. this year. The Seattle-based biotech company (NASDAQ: [[ticker:DNDN]]) has secured $356 million for its quest to market the first treatment in the U.S. designed to actively stimulate the immune system to fight cancer cells like a virus.
The company sold 15 million shares at $24.75 apiece in an offering underwritten by JP Morgan Securities and Deutsche Bank. The price represents a 7 percent discount for investors from $26.64, the final market price on Tuesday before Dendreon announced its plan to sell new shares. The underwriters are also getting the option to buy another 2.25 million shares at the same price, which could bring in another $55.7 million.
After paying expenses, Dendreon expects to net $356 million from the offering, and possibly $409 million if the underwriters exercise all their options. Besides JP Morgan and Deutsche Bank, the offering was co-managed by Citigroup Global Markets, Morgan Stanley, Lazard Capital Markets, Leerink Swann, and Needham & Co.
This is the second major financing of the year for Dendreon, bringing its grand total of fundraising to $577 million. The company raised $221 million from investors back in May, just a few weeks after it shocked the cancer research and investment worlds by reporting that its immune-booster, sipuleucel-T (Provenge) was able to help men live longer with terminal prostate cancer. The company has filed for FDA clearance to start selling Provenge, as its first-ever marketed product after 17 years in existence. The agency has a deadline of May 1 to complete its review. If approved, the Dendreon treatment could eventually exceed $1 billion in sales, analysts say. About 30,000 men in the U.S. die of prostate cancer each year.
Snagging this much money greatly strengthens the balance sheet, and bargaining position, for CEO Mitchell Gold. Back in June, he told me that Dendreon envisions itself emerging as the next great anchor tenant for Seattle biotech, like Immunex once was in the 1990s, or like Biogen Idec is for Boston.
I don’t have a comprehensive list of the biggest financings of the year in biotech, but this has to rank pretty high. Cambridge, MA-based Vertex Pharmaceuticals (NASDAQ: [[ticker:VRTX]]) just raised $500 million in a stock offering this month to support its drugs in development for hepatitis C and cystic fibrosis. Rockville, MD-based Human Genome Sciences (NASDAQ: [[ticker:HGSI]]) also snapped up $456 million, after expenses, from investors who want a piece of its experimental drug for lupus, an autoimmune disease.
What will Dendreon do with all the loot? Dendreon plans to use the cash to build up manufacturing capacity at its initial site in Morris Plains, NJ, and at additional factories near Atlanta, GA, and in Orange County, CA. The company has gone on a hiring binge to get additional expertise in drug manufacturing, quality control and assurance, and marketing—things that it didn’t need a lot of when it was only an R&D shop. The company says it plans to double in size to about 600 employees.
Those people will be charged with a daunting manufacturing task. Dendreon said earlier this year that its initial plant in New Jersey only had enough capacity to meet demand for $500 million to $1 billion worth of drug per year. And manufacturing enough to meet demand is critical if Dendreon is going to successfully commercialize the new treatment.
Doing everything right in manufacturing is important for Dendreon, because Provenge isn’t made like a standard pill in a bottle, or liquid in a vial. It is composed of a genetically engineered protein found on prostate cancer cells, called PAP, fused to an immune-boosting compound, called GM-CSF. This fusion protein is incubated for a couple of days with an individual patient’s own white blood cells to “teach” them to fight prostate cancer. The revved-up cells are personalized to each patient, and need to be shipped back to the clinic to be re-infused into the patient.
So if there’s ever a major snowstorm in New Jersey, an earthquake in California, or a simple mix-up anywhere, it’s important that Dendreon have some extra capacity in the system to pick up the slack so patients aren’t left in the lurch, waiting for vital infusions of their precious cells. Dendreon doesn’t plan to have a big sugar daddy to help it do the heavy lifting in the U.S., because it has said it plans to commercialize the drug on its own here. The company is, however, looking for a partner to help develop and market Provenge overseas.
