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Biotech Stock Mailbag: GenVec

Dendreon is on the mind of Louis V. " I was surprised by your lack of comment on the recent secondary offering and value your opinion on why it had to be done. Obviously the share price move was positive but I think the speculation factor is pushing much of this right now as the J.P. Morgan Healthcare Conference unfolds. I hope your activity at the conference will prompt comments... I guess my immediate concern is why they needed the additional capital, unless there is no rest-of-world partnership or buyout pending and they wanted to have resources to satisfy the FDA.

"Also, do you think the FDA still has any concerns with Dendreon's manufacturing setup that will force a decision delay? My feeling on Provenge acceptance is that it should be a done deal, but why hasn't the FDA fast-tracked its decision unless manufacturing capability is suspect?

"I guess everyone's question is will there be a buyout and/or rest-of-world partner? My main questions to you: 1) Are you still a Dendreon bull? 2) When do you think the FDA will publish its decision? 3) Is the stock pricing in the FDA approval and rest-of-world partner? 4) Presuming FDA approval, are you still a bull afterwards and do you think the demand for Provenge will be as expected, greater or less? 5) Do you think Dendreon has the manufacturing capacity to match its potential? 6) Do you think Dendreon will maintain independent?

I sat in on Dendreon's presentation to investors last week at the J.P. Morgan confab in San Francisco. I know CEO Mitch Gold very well and have heard him speak often, but I must say his current presentation is impressively smooth. I don't think Gold said anything new last week about Provenge, but he and his entire team came across very confident, knowledgeable and prepared. It's a bullish sign.

Dendreon raised the extra money needed to accelerate the build-out of its two new manufacturing facilities. When completed in the middle of 2011, these sites in Atlanta and Southern California, coupled with the operational facility in New Jersey, will be able to produce $1.2 billion to $2.5 billion in total Provenge revenue.

Dendreon's decision to push its Provenge manufacturing sites to full capacity soon is a signal that the company knows demand from patients will be strong.

I don't believe the FDA will have any problems with Provenge manufacturing that might delay the drug's approval, but bear in mind that manufacturing is probably the biggest risk factor going into the May 1 approval decision date. I will be very surprised if the clinical efficacy or safety of Provenge is going to be an issue for regulators.

Quick answers for Louis' other questions:

1) Yes. (And yes, I know, I wasn't always a Dendreon bull.)
2) I'm assuming May 1. Surely, the approval decision could come sooner, but it's really hard to make a bet on that.
3) Yes, to some extent, but not completely.
4) Depends on the stock price at approval, but if it were at $28 to $29 like it is this week, I'd still be a bull. I think demand for Provenge will be very strong, which is a blessing and a curse because it puts added pressure on Dendreon to get the launch done right.
5) Yes, see above.
6) I'm not so fixated on the partnering issue. I'm assuming Dendreon will partner Provenge in Europe. If the company waits until after the drug launches in the U.S. -- and that launch goes well -- Dendreon will get much better terms from prospective partners. I don't think you need a rest-of-world partner for Dendreon's stock to move higher.
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