The roughly $230 million raised by Dendreon ( DNDN) Thursday night was the second largest follow-on stock offering by a biotech company in 2009 -- a year in which money raised by the sector overall is down significantly. That's a pretty good indication of strong demand from institutional investors for a piece of Dendreon and its prostate cancer vaccine Provenge. Only Vertex Pharmaceuticals ( VRTX) was able to price a larger stock offering this year, raising $320 million in February. After that sits Dendreon, followed by Cadence Pharmaceuticals ( CADX) ($86 million), Seattle Genetics ( SGEN) ($56 million), Allos Therapeutics ( ALTH) ($49 million) and Geron ( GERN) ($46 million), according to Burrill & Co., a San Francisco-based life sciences merchant bank. No one should be surprised that Dendreon chose to sell company stock to raise money. After last week's Provenge data presentation, CEO Mitch Gold was upfront about the company's plans to raise money in two ways -- both through a stock sale and by partnering Provenge's ex-U.S. commercial rights. Gold was more circumspect about the timing of a stock sale, but generally speaking, biotech companies try to raise money when they can -- when the demand for the stock is high -- and not when the money is desperately needed. In this case, Dendreon was able to sell 10.7 million shares with a 1.27 million-share over-allotment in an overnight deal handled by Deutsche Bank Securities. The company hasn't yet announced pricing, but the deal reportedly went off at $19.20 a share. That's at the high end of the range in which the stock was being offered Thursday night and a minuscule 3% discount to Dendreon's closing price of $19.76.
Dendreon needs the money. I know there is a contingent of investors out there under the impression that Provenge will just sell itself magically to prostate cancer patients, but sadly, it costs money to make money in the drug business. Dendreon will be using the money raised Thursday to ramp up manufacturing capacity and hire a sales force and all the other stuff necessary to build out commercial operations to support the launch of Provenge. Why did Dendreon management, including CEO Gold, sell some of their personal stock holdings in the company last week, ahead of Thursday's financing? These insiders were able to sell their shares at a higher price than yesterday's deal. Isn't that bad form? Look, insider sales always rub investors the wrong way, and there really isn't a best time for management to cash out. In this case, after all that's happened with Provenge, I'm not inclined to begrudge Gold and his crew a payday. Would it better if they sold stock after Provenge was filed again with the FDA? Perhaps, but wouldn't that just raise suspicions that something was wrong? And if insiders wait for the commercial launch, fears would arise that Provenge wasn't selling well. Those grumbling about the timing of the insider sales do have a valid bone to pick because the sales took down Dendreon's stock price this week and thereby, theoretically, caused the company to leave money on the table Thursday night. Point taken. But if Provenge is eventually approved and does well commercially, all these nits being picked will be forgotten footnotes to a successful and profitable story for Dendreon and its investors.