Washington Editor

Dendreon Corp. could gain more than $110 million in a deal with Genentech Inc. to develop monoclonal antibodies, small molecules and other products from Dendreon's preclinical Trp-p8 gene platform.

The Street viewed the deal as favorable for Dendreon (NASDAQ:DNDN), whose stock shot up $1.06, or 34.4 percent, Tuesday to close at $4.14. Genentech's stock (NYSE:DNA) closed at $34.15, down $1.30.

Tuesday's hefty collaboration comes on the heels of Dendreon's statement last week that Phase III data for Provenge in end-stage prostate cancer patients show the vaccine works well in men with a Gleason score (measure of the aggressiveness of a tumor) of 7 or less. Dendreon said 75 percent of metastatic, hormone-resistant prostate cancer patients have a Gleason score of 7 or less. (See BioWorld Today, Aug. 12, 2002.)

That news drove Dendreon's stock up 90 cents Friday, or 45 percent, to close at $2.90.

Mitchell Gold, chief business offer for Seattle-based Dendreon, told BioWorld Today, "The Genentech announcement in combination with last week's news on Provenge positions the company for both near- and long-term opportunities well into the future. I think this makes us a very well-rounded and diverse cancer immunotherapy company."

"This deal provides Genentech with exclusive access to Trp-p8," Page Sargisson, spokeswoman for Genentech, told BioWorld Today. "This collaboration also gives us access to Dendreon's clinical development expertise in Phase I and Phase II studies and Dendreon's strong relationship with prostate cancer physicians."

Genentech will purchase equity in Dendreon and will provide up-front and milestone payments totaling in excess of $110 million for resulting development of Trp-p8 products. The companies jointly will be responsible for conducting preclinical and clinical work, with Genentech ultimately funding the majority of the activities. Genentech will be responsible for all manufacturing of resulting products.

While Gold would not discuss specific details of the financing, Thomas Dietz, analyst with Pacific Growth Equities in San Francisco, released a research note saying 80 percent of the $110 million would be received by Dendreon on the first product developed, and more than half the money would be received prior to approval.

The Genentech agreement is structured around Trp-p8, a gene discovered and patented by Dendreon in April 2001. Dendreon said Trp-p8 is overexpressed in a number of cancers such as prostate, breast, lung and colon. Trp-p8 is a transmembrane, voltage-gated calcium channel and is a member of the transient receptor potential ion channel family.

"I think this agreement is a reflection of how valuable this discovery is," said Gold, who described South San Francisco-based Genentech as a reputable player that does its homework. "We believe this is a historical event for biotech because it is the largest amount ever paid for a single preclinical target, which is a reflection of the potential value of Trp-p8 and the potentially resulting products."

He estimated that it would take at least two years to advance a Trp-p8 product into Phase I trials.

Dendreon would have the opportunity to co-promote and share profits with Genentech on resulting products in the U.S., while Genentech would be responsible for commercialization in the rest of the world, except Asia and Oceania where Dendreon retains all development and commercialization rights.

"This is a very important part of the deal, as you know, because it is very difficult sometimes for smaller biotechnology companies to have an opportunity to co-promote, and those that do, receive a much higher value in the long term than those who do not," Gold said.

Dietz said in his note that the deal strengthens Dendreon's balance sheet, but the company's near-term value is in the timeline to potential approval of Provenge and the progress of Mylovenge, a treatment for multiple myeloma in three Phase II studies. Dendreon also is studying APC8024, a vaccine designed to trigger T-cell immunity of the antigen Her2-neu for women with breast cancer, in Phase I trials.

Regarding Provenge, Dendreon and the pharmaceutical division of Tokyo-based Kirin Brewery Co. Ltd. have a licensing and development agreement for the vaccine, giving Kirin rights and options to the Asian marketplace with Dendreon retaining rights in North America and Europe. Signed in 1998, the deal was expanded last summer, triggering a $10 million payment to Dendreon. (See BioWorld Today, Aug. 13, 2001.)