Transcript of Presentation by Mitchell Gold- CEO of Dendreon at the 12th Annual Bio CEO and Investor Conference

Below is a transcript of the presentation that Dendreon’s  (Nasdaq: DNDN) CEO Mitchell Gold gave at the BIO CEO and Investor conference February 9, 2010.  

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Dendreon CEO Mitchell Gold:

Dendreon is a company that is exclusively focused in the field of oncology. Our lead product is a product called Provenge, which goes by the generic name sipuleucel-T. Sipuleucel-T is a new class of product called ACIs (Active Cellular Immunotherapies) that are designed to engage a patient’s own immune system and to stimulate the immune system against a particular antigen found on the surface of cancer cells.

We’ve conducted multiple phase 3 clinical studies that have shown that Provenge prolongs survival in men with metastatic androgen-independent prostate cancer. We’ve begun, on the heels of this phase 3 data and completing our BLA filing to the FDA, to build up the commercial infrastructure to prepare for the launch of Provenge with a PDUFA date occurring in the middle of this year. The PDUFA date is May 1. The company currently has about 450 employees and that will obviously increase as we get closer to launching Provenge in the middle of 2010.

One of the key aspects of our approach to harnessing the patient’s own immune system is a proprietary piece of technology that we developed called an antigen delivery cassette. The cassette has really two key components that you see here (slide 5).

The orange helical structure is the target antigen, for Provenge that (target) is Prostatic Acid Phosphatase (PAP), which is found in almost all prostate cancer tissue. We fuse that via a dipeptide link to a GM-CSF head. That fusion protein allows us to get about 1,000-fold more efficient antigen recognition than if we just used a naked antigen all by itself. We make this in large scale bioreactors just as you would any traditional recombinant protein. By using this approach we can get a very reproducible and robust immune response that is extremely well characterized. We are able to generate an immune response against the antigen in 100% of the patients that are immunized.

The other key raw material for the manufacture of our product is the patient’s own antigen-presenting cells. We collect these through a standard blood collection procedure known as a leukapheresis. What we do is we ship these collected antigen-presenting cells to one of our manufacturing facilities.

Provenge is actually going to be launched out of a facility in Morris Plains, New Jersey that will support the initial launch of the product. We are also building out facilities in Atlanta, Georgia and in Los Angeles, California so we will have three facilities across the country that support the manufacturing approaches I am describing here.

So we take the patient’s own immature antigen-presenting cells and we combine that with the antigen delivery cassette. The cassette is taken up, most likely be a receptor-mediated endocytosis, taken into the androgen-presenting cell (APC), and then broken down into peptide fragments where it is displayed on the surface of the APC.

The APC goes through a maturation process. As it’s digesting the antigen, it becomes activated and is to able to very efficiently display these antigens to the patient’s own immune system. Those activated APCs are then infused into the patient where they elicit a T-cell based immune response against the tumor.

There are certain cell surface markers that we look at on the surface of the antigen-presenting cells that are a measure of product potency. The key one is CD54, also known as ICAM-1, and what we’ve seen in our clinical studies is that the amount of CD54 up-regulation correlates directly with overall survival in our clinical studies.

The patient population that we’ve studied Provenge in is men with metastatic androgen-independent prostate cancer. If you look at the continuum of prostate cancer, men that are initially diagnosed with prostate cancer will have some form of primary definitive therapy; either surgery or radiation therapy. About 40% of men or 30% of men will recur (relapse) after definitive therapy and they will classically go on some form of androgen-deprivation therapy.

That will last anywhere from 2-5 years. All men eventually fail androgen-deprivation therapy. They become what is known as androgen-independent. Today, for patients with metastatic androgen-independent prostate cancer there is only one approved therapy and that is the chemotherapeutic agent known as Taxotere or docetaxel. That (Taxotere) is typically reserved for men with symptomatic disease. It has been shown to prolong survival by about 2.5-3.0 months in clinical studies.

We are positioning Provenge as a front-line treatment for men with metastatic castrate-resistant prostate cancer so prior to the initiation of docetaxel-based therapy. In the U.S. there are about 103,000 men in that particular labeled indication. (slide 7)

If you look at the treatment modalities available to these men today, it really is comprised just of docetaxel, which provide about 2.0-3.0 months improvement in overall survival. Most men elect to either delay (docetaxel use) either they are either symptomatic or not go on it at all because of the significant side effects associated with chemotherapy so there is an urgent need for better tolerated, less toxic treatment options that prolong survival and allow men to maintain their quality of life.

The first phase 3 study that we completed was a study known as 9901. This study was started in 1999 and we published (its results) in JCO (Journal of Clinical Oncology) in July of 2006. This was a 127 patient study that had as its primary endpoint, time to disease progression, and the study protocol required that we follow all men for the most relevant endpoint in this patient population which was overall survival.

What we saw in this study, and this was the initial basis of our (Biologic License Application) to the FDA in 2006, what we saw is this study was a trend in prolonging time-to-progression but on the survival endpoint we showed a 4.5 month improvement in overall survival. This was statistically significant and at 3 years we had 34% of men on drug alive (versus) 11% (of those) on placebo.

This was the basis of our license application into the FDA in 2006. It went to a panel meeting. At the panel meeting, the panel voted 13-4 that this represented substantial evidence of efficacy. Subsequent to that the company received a Complete Response letter from the agency asking to see additional evidence of a survival benefit from another phase 3 study known as IMPACT.

The IMPACT phase 3 study was almost identical in design to 9901. It was a double blind randomized placebo controlled study. It was much larger in size. Instead of 127 men, it was 512 men and now we made the primary endpoint overall survival, which is the most important endpoint, the least biased (endpoint) in men with metastatic androgen independent prostate cancer. This study was conducted under a special protocol assessment that we have with the FDA.

When we look at this study it is very similar to the results that we saw in the 9901 study. Median survival again at 4.1 months improvement of overall survival in those men randomized to Provenge compared to those men randomized to placebo and at 3 years, 32% of patients on drug alive compared to 23% on placebo and it met the primary endpoint of the study with statistical significance. This allowed us to amend our application with the FDA, which has been completed, and we are waiting for the FDA decision on a May 1 PDUFA date.

This data held up to multiple sensitivity analyses and data from the IMPACT study were very robust. Whether we looked at it on the Cox model or the unadjusted log-rank test, the results were statistically significant.  Adjusting for both the use and timing of docetaxel did not significantly impact the overall survival results and prostate cancer specific mortality was similarly prolonged in patients who received Provenge compared to those patients randomized to placebo. We will continue to share additional evidence of the robustness of the data from the IMPACT study through multiple scientific presentations throughout the course of this year.

One of the most appealing aspects of this new form of treatment is the side effect profile. So the benefit to risk profile of this new therapeutic approach of ACIs is that you have the clinical benefit of prolonging overall survival but you are able to avoid many of the toxicities that you would classically see with the chemotherapy type of regimens. The most common side effects that we’ve seen in our clinical studies of Provenge are fevers and chills. They are usually of low grade and short duration. They last for about 1-2 days around the time of infusion and then they go away.

From a regulatory perspective as I’ve said already, the IMPACT study is a pivotal study that supports the licensure of Provenge. The FDA agreed in our special protocol assessment with them as well as their feedback to us from the complete response letter that a positive improvement in overall survival from the IMPACT study would be sufficient for licensure. There is a lot of consistency between the IMPACT study and those that we’ve seen in 9901 and we are awaiting an FDA decision by May 1 of this year.

So that is the clinical story and moving on to the commercial setting for Provenge, as I’ve said, this is for men with metastatic androgen-independent prostate cancer. The typical physician segment that takes care of these men are both urologists and medical oncologists. Our plan is to commercialize this product ourselves in the United States and we are currently evaluating potential structures for partnering outside of the United States. There will be about 100 sales reps and about 25 medical science liaisons that support the commercialization of Provenge in the U.S. market.

When you think about this from a patient’s perspective and a physician’s perspective, it is extremely convenient. A typical course of chemotherapy would (see you) coming in every 3 weeks to get infused with the product and the classic number of cycles that a patient would get for a course of docetaxel would be 7 cycles so that would be 21 weeks on chemotherapy and during that whole time, you’re having to deal with the side effects of chemotherapy and the eventual outcome would be a 2.5 to 3 month improvement in overall survival.

With Provenge, patients get their blood collected on day 1. It is sent off to our manufacturing facility and 3 days later it is sent back to your physician’s office where they administer the product over a 60 minute I.V. infusion in their office. In fact the urologists that were involved in our clinical studies just used an exam room and they infused this right in their exam room in their offices.

This process is repeated 3 times over a 1 month period and then they are done so they don’t need to keep coming into the physician’s office every 3 weeks for several months. They can go on and they can live their normal lives so the convenience of this is extremely apparent to the patients.

What’s unique about Provenge is that it’s the first autologous product to be brought into the marketplace in an oncology setting and the only thing that Dendreon has to create new here are the cell processing centers that we are building out in New Jersey, Atlanta, and L.A. The rest of the supply chain already exists in the commercial setting and we are just tapping in to existing partners there so the call center, the leukapheresis centers that we have a principle agreement with the American Red Cross that provides the leukapheresis services for us, the transportation…all that already exists so we are just leveraging and tapping into that infrastructure. We coordinate the logistics of Provenge around the unique advanced planning system called Intellivenge.

Talk a little bit about the build-out of our manufacturing plants: the plant that we are going to launch from is our plant that exists in Morris Plains, New Jersey. That has been built out to 25% of its capacity and that 25% that will be part of the FDA’s inspection will be the initial 25% that we launch from for the U.S. launch of Provenge.

We have already begun to build out the remaining 75% of the New Jersey capacity and that will come online in the first half of 2011. At full capacity New Jersey can support somewhere between $500 million and $1 billion in annual revenue.

Given the anticipated large demand for this product, we’ve already begun to build out 2 additional facilities. As I’ve mentioned earlier, one in Atlanta and the other in Orange County, California (L.A.). The financing that we completed in December allowed us to accelerate the build out of these plants so now we expect them to be online by mid 2011. Within 1 year of potential approval, we will be at full capacity in terms of our manufacturing infrastructure that we are able to supply into the marketplace. These will be slightly smaller facilities. There will be 36 work stations each and as a result each of them will supply $375 to $750 million in revenue or support that amount of revenue in the marketplace. In total we will have the potential capacity to support about $1.2 to $2.5 billion in annual sales off of these 3 plants that we are building in L.A., Atlanta, and New Jersey.

To me, what is most unique about Dendreon as a company, not only are we bringing the first ACI program forward in terms of Provenge, but we really have a whole platform of products that are based on the antigen delivery cassette technology sitting behind it. Behind Provenge, we have programs (Neuvenge) targeting HER2/neu+ tumors such as breast, ovarian, colorectal, but also HER2/neu+ bladder cancer and our plan is to initiate a phase 2 study in metastatic bladder cancer later on this year or early in 2011. (slide 20)

Many years ago we in-licensed two antigens from Bayer Diagnostics; both CEA which you know well as a diagnostic marker for colorectal cancer but one you may not know as well is CA9. CA9 is the most prolific and well understood marker for metastatic renal cell carcinoma, renal cell (carcinoma) being obviously a highly immunoresponsive tumor.

We plan to move the CA9 program forward into phase 1 studies in 2011 and then CEA in 2012. So one new ACI candidate going into the clinic each year for the next 3 years allows us to really build on the momentum of Provenge and the validation of our ACI product platform.

Now we do have a single small molecule program TRPM8 targeting the TRPM8 channel. We discovered that ourselves through our own in-house antigen discover program. It’s a small molecule that activates the TRP-M8 channel and we’re studying that right now in phase 1 clinical studies.

In terms of the cash, as I mentioned earlier, we did do a cash raise in December. The cash we raised in December allowed us to have a very strong balance sheet. As of December we had approximately $600 million on our balance sheet and that cash will allow us to commercialize Provenge, bring it into the market, and allow us to execute on our operating plan going forward.

I do believe Dendreon offers a unique investment opportunity. Provenge is a first in class active cellular immunotherapy targeting men with late-stage prostate cancer that have few appealing treatment options, that offers a favorable benefit to risk profile for men with this stage of the disease. The commercialization of this product is something that the FDA needs to make a decision on by May 1 of this year, that is the PDUFA date. We will be presenting additional data that supports the robustness of the overall clinical package at upcoming scientific meetings this year.

We’ve made a strategic decision to maintain ownership of 100% of the commercial rights to the product and we are currently evaluating partnering opportunities outside the U.S. and we have the ability to expand the Provenge technology into other disease states using our ACI platform. (end of speech)

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Transcript of Presentation by John McLaughlin- CEO of PDL BioPharma at 12th Annual Bio CEO and Investor Conference

Below is a transcript of most of the presentation that PDL BioPharma’s  (Nasdaq: PDLI) CEO John McLaughlin gave at the BIO CEO and Investor conference February 08, 2010.  Anything in brackets “( )” represents our words in an attempt to clarify unusual speech patterns or McLaughlin’s reference to a particular slide. If you want to see the slides that go with the speech then look at PDL’s 8-k issued on the same day found directly here:  www.sec.gov/Archives/edgar/data/882104/000119312510024206/dex991.htm

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PDL CEO John McLaughlin:

We think that PDL represents a unique opportunity in the landscape of biotech companies and today I’ll tell you a little bit more about why we think that’s attractive for investors.

As you can seen here (slide 4), the technology that is at the core of PDL is the humanization of antibodies. It is incorporated in products that last year’s revenues were somewhat in excess of $18 billion worth and we’re seeking new licenses. We do have a number of licenses that I’ll talk more about those today and we’re looking to get some more. As you can see they represent some of the most important companies in the biotech industry.

If you look at our 2009 performance for a second (slide 6) it gives you a good instance into how we intend to manage the new PDL on a going-forward basis. You can see that our revenues were in excess of $315 million. We are a considerably smaller enterprise than the PDL of years ago where it was upwards of 200 (employees), 400 (employees) and some years as high as 1,200 (employees). There are 10 of us. We manage the portfolio. We are domiciled in Nevada. We have a portfolio we think could be worth $1 billion or $2 billion. The fact that there is no state (corporate income) tax in Nevada is obviously consequential in terms of increasing returns for our shareholders.

You can see that in 2009 we paid 3 dividends: two dividends that we announced at the beginning of the year to shareholders of $0.50 each and then a third one at the end of the year of $1.67 from a securitization that we did towards the end of the year. Our goal is to pay dividends each year in or of around a $1.00, perhaps more. We’ve announced a dividend policy for 2010 and we will pay two dividends of $0.50 each.

We’ve signed one new license (in 2009) and we hope that you’ll see some additional licenses signed in calendar year 2010. The one thing we don’t do, and that is pretty much unlike everyone else you’ll see today, we don’t spend any money on R&D….and we’re not gonna.

When you have a broad patent portfolio such as the Queen patents, and I say that as a former general counsel of Genentech, they are often subject to attack. That is true for these patents as well.  Here (slide 7) you can see a brief summary of some of the past and current litigation. You can see back in 2003 there was a significant dispute with Genentech. It was resolved and as part of the settlement agreement Genentech acknowledged the validity and the infringement of the patents as well as took out a number of licenses that cover some existing products such as Herceptin, Xolair, Avastin, and (now withdrawn from the market) Raptiva.

(With) Alexion there was a dispute that began in 2007. It was successfully resolved in 2008 with a one-time payment of $25 million (to PDL) as well as options for 4 additional licenses.

Our most recent dispute involves a company called MedImmune (which is) owned by AstraZeneca. They market a product called Synagis. It’s an antibody to a virus more commonly known as RSV (Respiratory Syncytial Virus). They had been a licensee for a number of years- -10 years in fact– and prior to the initiation of litigation paid us about $240 million. In late 2008 they filed a lawsuit alleging that the (Queen) patents were invalid and not infringed (upon by them). Subsequently they have modified that (lawsuit) to add an additional (claim) to suggest that they are entitled to a lower royalty rate based on certain agreements we’ve done with third parties (i.e. the Alexion agreement). We don’t think they are entitled to a lower royalty rate. Most recently, in late December 2009, we declared MedImmune in breach (of the license) agreement. We did that for two reasons: First of which was there was evidence that they were not paying us all the royalties due and second, they effectively blocked our contractual right to audit them as is typical in most license agreements to determine whether or not we were being paid the appropriate amounts. As of right now they are not a licensee. We do not expect to receive royalties from them. The consequence of this is that if in fact they are patent infringer they are subject to treble damages and all the other sorts of remedies a licensee can have against infringers.

We have one other dispute and that is a patent interference (case) with UCB Celltech. You can see that it has now expanded into two (interference proceedings) and this is ongoing and this involves some applications made by UCB Celltech many, many years ago.

We do have some debt (slide 8). Some we inherited and some we generated ourselves.  Initially we had almost $500 million in convertible notes in two tranches. You can see the 2.75% convertible notes. We’ve been buying those down periodically. We’ve picked up $50 million as the price dipped and we will also periodically go into the marketplace for both of those notes and opportunistically buy them down. You can see that the conversion ratio for those is about $6.07 a share so they are in-the-money. The holders have various put rights; the first of which comes up in August, 2010. You can see they (the put rights) are followed two years later and then out at 2018.

What is interesting about the 2010 put is that at the noteholder’s discretion they can ask for either cash or stock. We don’t think there are going to be many notes put to us simply because as you can see (the notes) are trading at around $115 and they have been bouncing around someplace between $110, $111 and as high as almost $120. It is (thus) not an economically wise decision at this point to be putting them to us (at that rate).

If you look at the 2000 notes you can see that we’ve repurchased some of those. They are down to about $228 million (in notes outstanding). The conversion ratio there is about $8.38 (per share). They are out-of-the-money right now. Our stock is bouncing around $6 and $7 a share and they (the notes) are trading in the $96 range.

We did do a securitization towards the end of 2009. It is a different kind of note offering. What that means is that we pledged some of our future royalty income to securitize this note for $300 million. We are anticipating the final maturity is December 2012. The legal maturity is out in 2015. It represents about 60% of the Genentech royalties. At the end of when this note is paid off (the rights to the 60% of the Genentech royalties) reverts back to us. We have distributed about $200 million of that $300 million as a dividend at the end of 2009 and we’ve held about $100 million for some other corporate purposes which I’ll talk about in a minute.

To give you a quick overview of our corporate governance (slide 9), previously I held positions such as executive vice president of Genentech and I’ve founded and managed a number of biotech companies. Chris Larson, our CFO who is with me today, has been a CFO of biotech companies as well as has a great deal of experience with many of kinds of instruments we have been talking about today because the PDL of today is a biotech company but is also a financial instrument and her expertise is quite relevant there. Chris Stone, our general counsel, has worked in a number of biotech companies including those that deal with antibodies and has great experience in both patent prosecution and management of litigation. Karen Wilson rounds out our finance group with also great experience. Fred Frank is a banker of long term theme, now with Peter J. Solomon. Skip Klein, an investor on the buy-side of many years. Jody Lindell comes from KPMG and has an accounting background, chairs our audit committee, and has great financial experience, but also experience in healthcare. Paul Sandman used be general counsel at Boston Scientific (which is) important given that we do have some litigation. Barry Selick is currently the CEO of Threshold (Pharmaceuticals) and is actually one of the inventors of the Queen Technology.

If I may talk a little bit about our revenue streams here (slide 11). You can see in this chart depicting from 2000 up through the end of 2009, the contributions (to revenue from) various products. You can see here significant growth (in revenue). Predominantly (PDL’s revenue comes from) the Genentech/Roche products but you see nice year-to-year growth and I’ll talk in a second about why we think that’s going to continue.

Our patents expire generally in 2013 and most of them in 2014 (slide 12). One of the questions we are often asked is “how long are you going to get paid (royalties)?” There (are) a couple of (items to consider) about (this). The first (thing to consider) is that we are paid a quarter in arrears so in fact we will get monies (from royalties) up through the first quarter of 2015 but the real answer (to this question) is depicted on this slide which has to do with how antibodies are manufactured.

This is an example of an antibody manufacturing schedule. The top panel represents the manufacture of bulk and the bottom panel represents fill and finish. What you can see here is that there is a substantial amount of time it takes to manufacture, release, and eventually have the product available for sale. Why that is important to us is because of this line here (showing that PDL gets royalties on all product made before the expiration of the patents even if sold after patents have expired). (PDL’s) patents cover when a product is made, used, or sold. The relevance here is the concept of manufacture because a product that is made prior to the expiration of our patents but sold after the expiration of our patents we still receive a royalty on.

So if, for example, a particular manufacturer keeps product in inventory for 12 months we’ll get paid (royalties on this product) 12 months after expiration (of our Queen patents). 24 months (of inventory time means PDL will get paid 24 months (after the expiration of the Queen patents) and on. This is particularly important for us…as Roche moves toward reconciling the Genentech and Roche philosophies in terms of how they inventory product.

Those of you that saw Roche’s announcement (of year-end earnings) last week where they made a number of disclosures. One of the things they did talk about was the restructuring of the manufacturing by the end of this year so that will provide some important information for us. One upside that could come from that restructuring of manufacturing is depicted on this slide (13).

As you can see here, for product that is made and sold in the United States we get tiered royalties which decrease with increasing volume. Another way to think about that is, for product that is made and sold in the United States by Genentech and Roche, our effective royalty rate is some place between 1.2% and 1.3% each year and that changes (decreases) if the volume (of sales) goes up.

For product that is made and sold outside the U.S., we get a flat 3% (royalty) that is not tiered. Currently only about 15% or so of the product that we are paid royalties on is made ex-U.S. while those markets represent between 50-55% of the overall worldwide market.

What we’ve seen in the last couple of months are announcements from Roche/Genentech that they are closing one of the (two Vacaville, California) facilities . There are two plants in Vacaville, which is about an hour outside of South San Francisco where Genentech is headquartered.

We’ve seen announcements that they are opening two plants in Singapore: one to make full length antibodies (a Chinese Hamster Ovary cell line plant) and one to make fragments such as Lucentis and that both of those are anticipated to be operational either this year or next year. To the extent that the mix moves more towards the ex-U.S. made and sold, that would give us some upside as we move from an effective royalty rate of 1.2-1.3% to a flat 3%.

This is not an eye chart (slide 14) but we were trying to give you some sense of some of the licensees we have. Some that are still in development and one of them (teplizumab) that we just signed towards the end of 2009.

You can see here that a substantial number of products are Genentech products… (reads listing of products)…

Here are two (products) I will spend just a second on: These two (bapineuzumab and solanezumab) are antibodies to Alzheimer’s (disease). Both target beta-amyloid. One of them (bapineuzumab) Johnson and Johnson just bought 50% rights into* They paid $700 million plus upfront and another $500 million in committed financing. There is some evidence that this trial that some people were thinking would conclude in 2011…will have data available towards the end of 2010 (as they have dropped the highest dose bapineuzumab cohort from the study). Solanezumab, similar target, data is expected in 2011.

*our note: actually Johnson and Johnson bought approximately 25% rights into the overall bapineuzumab program and approximately 50% rights into Elan’s half of the program. McLaughlin was unclear on this in his presentation.

To give you some idea of the highlights of news flow….(for several minutes goes into some of the recent and upcoming milestones for antibodies partners are developing)…

(to 22:42 mark in speech)

Our focus is really on optimizing return for our shareholders so we make decisions about (our) dividend or should we securitize or sell assets. Our focus is really on how can we increase the ROI for our shareholders. As you can see we paid dividends in 2009 and we intend to pay additional dividends in 2010.

Other things we will do to try and enhance shareholder return is we will periodically look at buying back some of the converts. We have done that previously when it has been opportunistic and favorable for our shareholders. Sometimes we will look at repurchasing shares. We will also look at selling the company when that makes sense, if we think we can get an appropriate price for it.

We are also looking at purchasing some of the commercial stage assets out there. There are a number of royalty streams out there. We wouldn’t buy products to be clear, we would be buying the royalties associated with those products (such as) commercial stage biotech products to see if we can enhance shareholder returns in that regards.

Lastly, we did do a securitization in 2009 and people have asked if we are going to do another one or sell more of our royalty assets in 2010 and the answer is no. We have probably (in 2009) optimized returns from that perspective.

If you were thinking about buying PDL shares the reason you were thinking about buying them is because it gives you a play on commercial stage products. They are mature (products). There is (the potential for) additional indications with substantial upside associated with (these products) without any of the risk in terms of financial exposure to R&D and clinical (activities). We are an efficient operation. We have a low (cash burn) as you can see most of the money goes out to shareholders and the best proof of that is we are shipping it out. (end of speech)

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Earlier this month Vanda Pharmaceuticals produced the biggest pharmaceutical sector surprise of 2009 when the FDA approved for marketing its atypical antipsychotic drug iloperidone (Fanapt).

Fanapt has had the most circuitous path towards FDA approval of any compound we know save for perhaps Celgene’s Thalomid. Iloperidone started as a molecule discovered by Hoechst Marion Roussel before it merged with Aventis and later became Sanofi-Aventis. Hoechst Marion Roussel gave up on the compound and out-licensed it to Titan Pharmaceuticals (OTC: TTPN) on the last day of 1996.

Titan didn’t keep iloperidone to itself for very long before out-licensing it that same year to Novartis, which then pushed it into phase 3 testing. Novartis tested iloperidone in three short-term phase 3 studies and three long-term studies in over 2,000 patients but then gave up on the drug after it failed to show superiority to currently marketed atypical antipsychotics in reducing prolongation of the QT interval (a potentially dangerous heart condition). This is where Vanda stepped in.

Novartis iloperidone short-term phase III studies

Vanda Pharmaceuticals’ (Nasdaq: VNDA) whole existence is a result of iloperidone. A onetime executive of Novartis, Mihael Polymeropoulos, saw that iloperidone would be languishing at Novartis, quit his job at Novartis, raised a bunch of cash (including some from MedImmune which is now owned by AstraZeneca), and founded Vanda to in-license iloperidone and continue development of the drug in 2004.

Vanda in-licensed iloperidone from Novartis in exchange for $500,000 in upfront cash, potential milestone payments worth “less than $100 million” (mostly based on Fanapt reaching certain sales levels), and an approximate 25% royalty on any sales of iloperidone.

Vanda pushed Fanapt into another large phase 3 study and eventually filed for its FDA marketing approval in 2007. In 2008 the FDA issued a non-approvable letter for Fanapt and requested additional studies comparing it to already approved atypical antipsychotics like Zyprexa or Risperdal (invoking memories of Neurocrine’s unprecedented FDA issues striking once again).

Vanda ignored the FDA’s requests for comparative studies (Fanapt had already been tested against another atypical antipsychotic, Geodon) and submitted its approvable letter response later in 2008. With Vanda’s shares trading at less than the value of its net cash up until May 7, it’s safe to say that the market wasn’t ascribing much value to Vanda’s pipeline or Fanapt.

We all know the unlikely conclusion to the iloperidone/Fanapt story: after getting marketing approval for the drug earlier this month, Vanda’s share price has risen an incredible 1205% and Vanda is now sporting a $375 million market capitalization (as of June 01). Now that Vanda has gone from a drug development story to a drug commercialization one, the question is how strong will iloperidone sales be?

No Way Fanapt Gets To $1 Billion In Sales

The first point that we want to make is that there is no way that Fanapt will get to $1 billion in sales if Vanda is marketing it only in the U.S. with approval to treat schizophrenia. Fanapt is going to be the seventh atypical antipsychotic on the market in the U.S. with several more potentially on their way.

Let’s first flesh out the schizophrenia market opportunity that Fanapt is facing:

The branded and generic atypical antipsychotic drug category is a crowded one with six main branded compounds, their derivatives like extended release formulations and depot injections, and several generic atypical antipsychotic drugs as well.

Despite the fact that there are so many atypical antipsychotics on the market (not to mention the multiple genericized “typical” antipsychotics as well), the market opportunity for atypical antipsychotics worldwide was upwards of $20 billion in 2008 according to IMS Health. Atypical antipsychotic compounds like Eli Lilly’s (NYSE: LLY) Zyprexa and AstraZeneca’s (NYSE: AZN) Seroquel generated worldwide sales of $5.0 and $5.4 billion respectively last year.

Drug	Brand Name	Company	Year Approved by FDA	Marketing Exclusivity In U.S. Until
clozapine	Clozaril	Novartis	1989	already expired
risperidone	Risperdal	Johnson and Johnson	1993	oral formulation already expired.
olanzapine	Zyprexa	Eli Lilly	1996	late 2011
quetiapine	Seroquel	AstraZeneca	1997	early 2012
ziprasidone	Geodon	Pfizer	2001	late 2012
aripiprazole	Abilify	Otsuka and Bristol-Myers Squibb	2002	early 2015
iloperidone	Fanapt	Vanda	2009	late 2016

The reality of the matter is that the market opportunity for Fanapt at this point in time is actually much smaller than $20 billion. First of all Fanapt is only approved in the U.S. and the U.S. market opportunity for atypical antipsychotics was approximately $12.8 billion in 2008.

Secondly, all of the other atypical antipsychotics are approved for marketing in multiple CNS disorders like the bipolar disorders or depression. At this point in time, iloperidone is only approved for use in schizophrenia. Cowen and Company estimate that schizophrenia accounts for “approximately 50%” of the broader antipsychotic market (atypical and typical antipsychotic agents).

Off-label usage of Fanapt in bipolar and the other CNS disorders is likely to some small extent but Fanapt’s current label indicating it only for  second-line schizophrenia cuts down the on-label market opportunity to $6.4 billion if the usage of atypical antipsychotics in schizophrenia is at roughly the same 50% rate as the usage of all antipsychotics in schizophrenia. (source: Cowen and Company)

Vanda has indicated in the past that Fanapt will be competing among the 50% of atypical antipsychotic users that end up switching their therapy due to ineffectiveness or side effect issues like weight gain. If this second-line schizophrenia indication represents 50% of the atypical antipsychotic market opportunity in the U.S. as Vanda suggests then that means that the market potential for Fanapt in the U.S. will be $6.4b*0.50= $3.2 billion.

Vanda 2006 corporate presentation showing iloperidone target market

Now that we’ve shown that the on-label schizophrenia market for iloperidone is much smaller than it looks at first blush, it’s also important to realize that Vanda will only have marketing exclusivity for iloperidone until late 2016 in the U.S. and 2015 in Europe assuming it receives the standard six-months extra of marketing exclusivity for running pediatric studies with Fanapt.

This short marketing window probably means that iloperidone is dead in the European Union. Vanda hasn’t even filed a marketing application for it over there yet and from marketing application date to drug approval (assuming no hiccups along the way) it will take Vanda or its potential partner at least 15 months and then up to a year to work out reimbursement issues in many EU countries. The reference pricing reimbursement systems in effect in many European countries like France also means that Vanda’s marketing partner also won’t likely be achieving very favorable margins on sales of Fanapt considering that nearly all the atypical antipsychotic compounds with be genericized in Europe in the next couple of years.

Now back to the U.S.: The main reason why iloperidone won’t get to $1 billion in sales is that it has taken Fanapt’s closest competitor, Geodon, eight years to eclipse the $1 billion sales mark. Since Fanapt will primarily be used as a second-line atypical antipsychotic like Geodon, we can’t compare other recently approved antipsychotics like Abilify to Fanapt.

	2001	2002	2003	2004	2005	2006	2007	2008
Pfizer Geodon Sales	$150m	$222m	$353m	$467m	$589m	$758m	$854m	$1007m

Geodon was approved for marketing February 2001 and only last year reached $1.07 billion in worldwide sales by Pfizer. With Fanapt losing marketing exclusivity in 2016 and being launched later this year, Vanda will have roughly eight total years of generic free competition for Fanapt in the U.S.

Add in the facts that Pfizer’s sales resources are much greater than Vanda’s, Geodon has been approved in many more markets than Fanapt has been, Geodon has been approved for bipolar disorder as well (LEK Consulting estimates 20% of atypical antipsychotic prescriptions are for bipolar disorder), and that Fanapt will be facing a much more genericized atypical antipsychotic market and it is hard to see how Fanapt’s sales will be able to ramp up fast enough to get above $1 billion in sales by the time its marketing exclusivity runs out in 2016 even accounting for Fanapt’s efficacy and safety profile.

Is Fanapt Unique?

Vanda is going to have a hard time convincing psychiatrists to start prescribing Fanapt with six oral atypical antipsychotics compounds on the market and the fact that all the others have been a part of the large CATIE study whereas Fanapt is the only oral antipsychotic to not have been a part of that study.

We know this is all very basic but it’s worth mentioning that different pharmaceuticals in the same class of therapy differentiate themselves from their competition through these variables:

1. Efficacy
2. Safety
3. Ease of use
4. Cost

While Fanapt does have some attractive traits, in no category is it going to be a leader. Nor does Vanda have much time to start running large expensive studies to start differentiating Fanapt’s profile from the other atypicals on the market. Below is a chart comparing the top-selling antipsychotic drugs on the market and Fanapt according to their drug labels:

	Weight Gain >7%	Warning for QT Interval Prolongation	Increased Prolactin	Somnolence	All Extrapyramidal Symptoms	Discontinued Therapy	Dose Regimen
Risperdal	18%	no	yes	8%	15-31%	10%	2x/day
Placebo	9%			1%	11%	7%
Zyprexa	29%	no	yes	29%	15-32%	5%	1x/day
Placebo	3%			13%	16%	6%
Seroquel	23%	no	no	18%	8%	4%	2-3x/day
Placebo	6%			11%	5%	3%
Geodon	10%	yes	yes	14%	14%	4%	2x/day
Placebo	4%			7%	8%	2%
Abilify	8%	no	no	11%	13%	7%	1x/day
Placebo	3%			8%	12%	9%
Invega	9%	no	yes	11%	10-26%	5%	1x/day
Placebo	5%			7%	11%	5%
Seroquel XR	10%	no	no	25%	8%	6%	1x/day
Placebo	5%			10%	5%	8%
Fanapt	13%	yes	yes	12%	14-15%	5%	2x/day
Placebo	4%			5%	12%	5%

Keeping in mind that the clinical trials that this data is derived from are not directly comparable against each other and that the CATIE study does a good job of evaluating most of the above compounds, where in the above chart does Fanapt differentiate itself against the competition (especially Geodon)?

Is Vanda A Buy?

All that being said, Vanda is by no means horribly overvalued at its $335 million enterprise value (as of June 01) and there is nothing particularly special about whether it will hit that blockbuster $1 billion in sales status.

A $3.2 billion near-term market opportunity for Fanapt is nothing to sneeze at even if Vanda is only going to be keeping around 75% of all Fanapt sales. We’ll also point out that Fanapt will have a very low cost of goods sold, likely no more than 12% because it is an easy to manufacture small molecule drug.

Vanda doesn’t meet our investing criteria at this point in time but if Vanda watches its expenses, particularly its R&D expenses which many young drug developers seem to lose track of after getting a compound on the market, is able to effectively get the Fanapt marketing message out there, and focuses on increasing shareholder value then it could easily be a valid investment prospect for certain investors even if Fanapt only brings in a couple hundred million dollars annually.

If Titan Pharmaceuticals wasn’t such a bottomless money pit run by executives set out to capture any shareholder value created by the company then we’d recommend investors consider a “pairs trade” by going long on Titan and short on Vanda. The premise behind this type of trade would have been that Titan, valued at less than a fourth of Vanda’s valuation but potentially achieving operating margins of more than one-fourth that Vanda will achieve from Fanapt, would be a better investment than Vanda. This is not a valid strategy though, because after Fanapt was approved for marketing, Titan threw its recently enacted cash preservation strategy out the window and rehired its former executive team back at exorbitant compensation packages.

Vanda Pharmaceuticals (Nasdaq: VNDA) May 07, 2009 Fanapt FDA marketing approval conference call transcript with analyst question and answer session:

Mihael Polymeropoulos (Vanda CEO and founder) Prepared Remarks

MP: We are excited to discuss with you the approval of Fanapt for treatment of schizophrenia. Vanda announced yesterday that the U.S. FDA had granted marketing approval to Fanapt/iloperidone for the acute treatment of adult patients with schizophrenia.

The approval of Fanapt by the FDA represents many years of tireless efforts by countless former colleagues, many investigators, and thousands of patients that participated in the development of this new treatment for schizophrenia.

I would like first to extend my gratitude to all those who contributed and reaffirmed the commitment of Vanda Pharmaceuticals to the discovery and development of medicines for those in need.

The approval was supported by two placebo-controlled phase 3 clinical studies comparing Fanapt to placebo and active control in patients with schizophrenia as well as safety data for more than 3,000 patients. Fanapt is a mixed dopamine D2 / serotonin 5HT2A receptor antagonist and belongs to the class of atypical antipsychotics.

The efficacy of Fanapt for the treatment of schizophrenia was supported by two placebo-controlled short term four and six week trials. Both trials enrolled patients who met the DSM-III/IV criteria schizophrenia and Fanapt was shown to be superior to placebo in controlling symptoms of schizophrenia across doses of 12-24 mgs per day.

The recommended target dose range for Fanapt is 12 mg to 24 mg per day. Titration to a target dose of 12 mg per day can be achieved in as little as four days.

In a little more detail; In the four week placebo-controlled study involving one fixed dose of Fanapt 24 mg per day compared to placebo and an active control (Geodon), the 24 mg per day of Fanapt was superior to placebo in the Positive and Negative Symptom Scale (PANSS) total score.

Similarly, in the six week placebo controlled trial, enrolled in two dose ranges of Fanapt, 12-16 (mg) and 20-24 mgs per day, compared to placebo and an active control (Risperdal), both doses of Fanapt were superior to placebo on the Brief Psychiatric Rating Scale (BPRS) total score.

While it is not known for how long patients treated with Fanapt should be maintained on treatment, it is generally recommended that responding patients be continued beyond the acute response. Patients should be periodically reassessed to determine the need for maintenance treatment.

Fanapt was generally well tolerated and the most commonly observed adverse reactions (incidence >=5% and two-fold greater than placebo) were dizziness, dry mouth, fatigue, nasal congestion, orthostatic hypotension, somnolence, tachycardia, and weight increase.

Weight gain was mild and the overall mean weight increase in short and long term 52 week studies was 2.1 kg. Fanapt was not associated with any medically important elevations in glucose, triglycerides, or cholesterol.

Fanapt was also associated with only modest elevations of prolactin as compared to larger elevations seen with some other drugs in this class.

Fanapt has a low incidence of extrapyramidal symptoms (these are movement disorders and tremors) and a placebo-like rate of akathisia. This is restlessness and an ability to sit still, which are adverse events that are often associated with some other drugs in the class of atypical antipsychotics leading to discontinuation of treatment.

Similarly to some other drugs in this class, Fanapt may affect heart rhythm parameters and specifically the QTc interval, which may lead physicians to consider prescribing Fanapt after other antipsychotics have been tried first.

Vanda plans to make Fanapt available in pharmacies later this year. Again, we’re very excited and we’re very appreciative that the FDA reviewed all the information in the data and found Fanapt to be a compelling treatment for schizophrenia with efficacy equal to other atypical antipsychotics and a compelling safety profile with significant advantages, especially in (inaudible) patients and physicians.

(Q&A instructions…)

Questions from COREY DAVIS of Natexis Bleichroeder (7:48 mark)

DAVIS: What was it, if there was one thing that really changed the FDA’s mind in what you had submitted for your response?

MP: Let me first suggest something that usually gets unrecognized, which is the quality of the team that we have at Vanda. That was a critical factor. The second is the way that Vanda has operated, and Corey you know that very well, is to be very true to the science and the facts.

The third aspect is that the FDA decides (inaudible) so that they are open-minded to good scientific arguments so all along there was one lingering detail that goes into approval; Is this drug inferior to other antipsychotics and we have answered the FDA that this is not the case and they approved the drug.

DAVIS: I think a lot of people out there that are thinking whether or not to buy your stock right now are asking probably the biggest question which is, are you going to sell it yourself or are you going to try and partner this thing. How do you balance thinking about those two things?

MP: First of all lets talk about what is the value proposition to patients and physicians and then lets (discuss) what is the value to physicians for the products. The profile of the product and the label is up for inspection at www.fanapt.com (and) is actually pretty convincing that this is probably one of the most compelling labels of all the atypical antipsychotics. This is not just (because) of the similar efficacy (to) other antipsychotics but actually the compelling safety profile, as I said before, on extrapyramidal symptoms, akathisia, weight gain, and metabolic which is all of them relatively mild and very competitive to other drugs in the class.

Now lets talk a little bit about what happens to patients with schizophrenia. First of all, this is a debilitating disease affecting 1% of the world’s population and these are patients very dear to me since as a psychiatrist I have treated them for many years.

Despite the availability of several treatments for patients with schizophrenia, still there remains a tremendous medical need. 50% of the patients with schizophrenia switch drugs in any given year. They do that because of dissatisfaction with current treatments. Most of the dropouts in treatment happen because of lack of tolerability from side effects. The two key categories of side effects are movement disorders and metabolic (disorders); both areas that Fanapt offers to be a very good alternative. We feel that there is a significant place for Fanapt to be used for patients with schizophrenia.

If you are trying to think what’s the value position, all I can tell you is that the class of atypical antipsychotics is one of the largest classes of therapeutics today in the U.S. and the world; commanding about $15 billion in the U.S., $20 billion worldwide. The lowest selling product today is Pfizer’s Geodon and that is $1 billion (in 2008 worldwide sales).

The second proposal (the next step) with Fanapt, (even though) we just got approval for the oral formulation, is actually the commitment of Vanda to continue to develop the once-a-month injectable formulation, which will offer a unique placement of the drug to address compliance issues.

Unlike the oral formulations where there are a few drugs available, the only atypical antipsychotic today available in the market for patients is Risperdal Consta, which has been, as you may know, immensely successful, commanding $1.3 billion in revenues last year. Of course there is a lot of development work (with the iloperidone depot formulation) to do. So that’s how we think about the (iloperidone) value proposition.

DAVIS: There are so many different things that I can think of that you can do to bolster the clinical trial…Basically you have a limited amount of cash to do so. You already mentioned the injectable form but how would you prioritize new studies or new spending? I’m thinking of things like the dossier for Europe, the (subcutaneous) form, maybe some bipolar studies. Is that all still going to be on hold until you set up more of a commercial infrastructure or can you start thinking about those types of things right now?

MP: Corey, it is too early to (start thinking) about any specific direction of your suggestions. All I can say is that it is clear, not only because of the size of the market but (because of) the profile of the product that this is a competitive position and Vanda will have a number of options but you spoke to commercialization (so) let me give you a number of thoughts: So what makes Fanapt competitive? We fit the (efficacy or safety?) profile, we said the market size, there are a couple of very specific things that make it even more competitive.

One is the concentrated prescribing base of physicians. There are 5,000 out of the 25,000 psychiatrists, 20% of them, that prescribe 60% of the atypical antipsychotics in the U.S. and you can see that this is addressable with a targeted sales effort.

The other piece of the puzzle is reimbursement. Again, there is some great news here. There are no formulated restrictions for patients with schizophrenia. 90% of them belong to either the Medicaid or Medicare Part D class. All antipsychotics are (part of) this protected class and they cannot be excluded from the formularies.

These are the characteristics: the large market, the competitive profile of Fanapt, the small prescribing base, and the access to the formularies that make Fanapt a very attractive asset to a number of potential (Fanapt marketing) candidates: big pharma, mid pharma, and even Vanda.

DAVIS: So not to put words in your mouth but you’re open to all options right now?

MP: Absolutely and I think there are many (options).

DAVIS: Last question, the second drug in your pipeline, the forgotten one, VEC-162, did this (Fanapt’s approval) in any way change your plans for the development of that one and what can you start now that you got (Fanapt approval) under your belt?

MP: So let me tell you what the ongoing plan is and we can update you. Tasimelteon or VEC-162 is a novel melatonin agonist that we have shown now in two phase 3 and one phase 2 studies compelling results in improving sleep onset and sleep maintenance, especially under conditions of a circadian dysregulation.

Circadian rhythm (disruption) shows up in a number of conditions that we all understand very well (like) jet lag, delayed sleep phase disorder, and shift work sleep disorder.

We are in the process now of finding a meeting which will happen with the FDA (an end of phase 2 meeting) late in Q2 which will clarify the entire path to a NDA (New Drug Application) filing.

As preliminary work on the market analysis (of) the jet lag application suggests, this is a large untapped market where tasimelteon would be extremely differentiated. We are also evaluating another very large potential market, which is the delayed sleep phase disorder area, where again tasimelteon could also potentially be a very differentiated and unique proposition.

DAVIS: You pay at a 25% royalty stacked to Novartis but is there a milestone payment due to Novartis based on this approval.

MP: Yes, $12 million.

Questions from ELEMER PIROS of Rodman and Renshaw (18:45 mark)

PIROS: Do you or is it Novartis who actually owes some royalties to Titan Pharmaceuticals?

MP: We only pay royalties to Novartis and Novartis distributes to Titan after that.

PIROS: So the mid-20% range royalties, that’s your only obligation?

MP: That is our only obligation, yes.

PIROS: If you could please help us understand the intellectual property. I understand that the patents on the oral formulation would expire in 2011 and then you would get an additional five years if I’m not mistaken. What is the situation with the injectable please?

MP: On the oral formulation the (new chemical entity) patent expires end of 2011 but of course we would be getting the five year Hatch-Waxman Extension making (marketing exclusivity) to late 2016. We are already in the process of applying for that extension and Vanda would qualify for an even larger number than five but unfortunately it is capped at five.

Now on the depot formulation the patent expires in early 2020.

PIROS: 2020. What do you think of the regulatory path for developing the injectable formulation would be? I understand that Novartis had some early phase 1/2 trials conducted.

MP: Correct. Back in history a little bit: Yes, Novartis has taken the depot formulation into patients in a phase 2 study and shown it to be very well tolerated. The path that we suspect we will have to take but we have not yet confirmed with the FDA is manufacturing our clinical supplies of the depot formulation, performing short pharmacokinetic studies to understand the profile and to choose the final formulation, and then conduct a phase 3 study, usually it is a 12 week study, which would be the pivotal and only study necessary for filing (for marketing approval). So we will have to try and file this with the FDA but it is possible that this program could be completed in the next three or four years.

PIROS: Excellent. Thank you very much.

(Conference call concluding remarks)

Dendreon (Nasdaq: DNDN) April 28, 2009 IMPACT final phase 3 study results conference call transcript with analyst question and answer session:

MITCHELL GOLD (Dendreon CEO and President) Prepared Remarks

GOLD: As you know, two weeks ago we were very pleased to announce that our pivotal phase 3 IMPACT study met its pre-specified primary endpoint showing that Provenge significantly prolonged overall survival in men with advanced prostate cancer.

Earlier today Dr. David Penson, one of the study investigators, presented results of the final analysis in a late-breaking clinical trial session at the American Urological Association’s annual meeting here in Chicago showing that Provenge extended median survival by 4.1 months and increased 3 year survival by 38% compared to placebo.

Dr. Mark Frohlich will take us through the data in more detail.

FROHLICH: Thanks Mitchell. Before we review the results in further detail, I would like to review the IMPACT study design and plan for statistical analysis. IMPACT, also known as D9902b, was a randomized, multi-center, double blind, placebo controlled phase 3 study that enrolled 512 men with metastatic androgen-independent prostate cancer.

The primary endpoint of the study was overall survival. Overall survival is the gold standard endpoint in oncology clinical trials because it is the least biased, least variable, and most clinically meaningful assessment.

The study was stratified (slide 4) for bisphosphonate use, primary Gleason score, and the number of bone metastases. Hazard ratios and p-values were calculated from a Cox model adjusted for PSA and LDH. P-values were two-sided and the log-rank analysis was performed as a sensitivity analysis.

One interim analysis was performed. To meet the primary endpoint the final data had to meet a pre-specified level of statistical significance with a p-value less than 0.043. The major eligibility criteria were (slide 5) metastatic, castrate-resistant (also known as metastatic) prostate cancer, life expectancy of at least 6 months, serum PSA of 5 or greater, castrate level of testosterone, and adequate hematologic, renal, and liver functions, and negative serology for HIV and hepatitis.

Baseline disease characteristics were well-balanced between the treatment arms as shown on slide 6, in terms of age, race, performance status, Gleason score, localization of disease, the number of bone metastases, bisphosphonate use, and prior docetaxel use.

Baseline laboratory values were also well balanced (slide 7) including PSA, prostatic acid phosphatase, alkaline phosphatase, hemoglobin, LDH, and white cell count.

Overall survival was the primary endpoint of the study (slide 8). Survival follow-up at the time of data cut-off was obtained in 99% of patients. Only 6 patients were lost to survival follow-up.

The survival data are very mature with a median follow-up time of close to 3 years. The Kaplan-Meier curve plots the percentage of people still alive in the trial on the vertical (y-axis) as a percentage versus time-from-randomization on the horizontal (x-axis) in months.

The Kaplan-Meier curves separate early and then remain separated for more than four years following randomization. The hazard ratio was 0.775, indicating a 22.5% reduction in the risk of death in the treatment arm. The p-value was 0.032, clearing exceeding the pre-specified level of statistical significance of less than 0.043.

The median survival difference was 4.1 months (slide 9). The median survival in the Sipuleucel-T treatment arm was 25.8 months versus 21.7 months in the placebo arm. The median survival of the treatment arm exceeds that reported in prior randomized trials of men with asymptomatic or minimally symptomatic androgen-independent prostate cancer.

The percentage of patients alive at three years by Kaplan-Meier estimates was 31.7% (for Provenge-treated patients) compared to 23.0% (for placebo), a 38% relative increase in three year overall survival.

We performed several analyses to test the robustness of these survival results (slide 10). To rule out the possibility that the survival benefit was being driven by a particular group of patients, we assessed the treatment effect in multiple population subsets.

As examples, forced slots are shown for ten baseline factors. This includes factors such as laboratory parameters like PSA and LDH and the number of bone metastases. All sub-populations demonstrated a positive treatment effect with a hazard ratio of less than one.

In additional sensitivity analyses (slide 11), the results were consistent with the primary statistical model. Using an unadjusted Cox model and a log-rank test, the hazard ratio was 0.766 with a p-value of 0.023. Adjusting for the use and timing of docetaxel initiation in a time-dependent covariate model, the hazard ratio was 0.763 with a p-value of 0.036. Therefore there was no evidence to suggest that post-progression treatment with chemotherapy affects the interpretation of the survival results.

Furthermore, the hazard ratio for prostate cancer-specific survival was 0.772 with a p-value of 0.036, indicating that the survival results cannot be explained by non-prostate cancer-related deaths.

The secondary endpoint of the trial was time to objective disease progression (slide 12). Consistent with the previous phase 3 trials of Sipuleucel-T in this patient population, we were unable to demonstrate a statistically significant difference in this endpoint. This result was consistent with the data from other randomized studies in advanced prostate cancer where progression has proven difficult to measure reliably and has not correlated with overall survival.

The safety profile of Sipuleucel-T was found to be consistent with that reported in previous studies (slide 13). The most common adverse events observed at a higher frequency in the treatment arm were chills, pyrexia (fever), and headache. The majority of these events occurred within a day of infusion and resolved within one to two days. Most events were mild to moderate in severity with very few grade 3 or 4 events.

The percentage of patients that experienced serious adverse events was comparable between the treatment arms (slide 14) at 24.0% (for Provenge) and 23.8% (for placebo). The serious adverse events experienced in four-or-more patients are listed and reveal no clinically significant differences between the treatment arms.

Of note, only 1.2% of Sipuleucel-T patients were unable to receive all three infusions due to treatment-related adverse events.

The cumulative evidence on the efficacy of Sipuleucel-T is based on three randomized, multi-center, double blind, placebo controlled trials with consistent results (slide 15). The median survival benefits observed have been 4.5 months in D9901, 3.3 months in D9902A, and 4.1 months in the IMPACT study.

The percentage of patients alive at 36 months by Kaplan-Meier method in the treatment arms was 34%, 32%, and 32% respectively. Again, remarkably consistent across these studies.

An integrated analysis of these three studies, comprising a total of 737 patients reveals a hazard ratio of 0.735, a 26.5% reduction in the risk of death with a p-value of less than 0.001.

In summary (slide 16), Sipuleucel-T is the first active immunotherapy to demonstrate an improvement in overall survival for advanced prostate cancer. The treatment effect is clinically meaningful, robust, and consistent across sub-populations.

Sipuleucel-T appears to have a favorable benefit-to-risk profile, a short duration of therapy (only a month), and most importantly, has the potential to create a new treatment paradigm in oncology. Based on the strength of these data and following discussions with the FDA, patients in the placebo arm of the study will now be offered access to Sipuleucel-T and other patients may be eligible for one of our ongoing studies. More information is available on clinicaltrials.gov.

GOLD: (10:44 mark) Our focus now turns toward the regulatory pathway to bring Provenge to patients who currently have few appealing treatment options. As you may know, IMPACT was conducted under a Special Protocol Assessment (SPA) with the U.S. Food and Drug Administration. Because the data successfully exceeded the pre-specified level of statistical significance and met the criteria outlined in our SPA agreement, we plan to file an amendment to our existing BLA (Biologic License Application) in the fourth quarter of this year to seek licensure of Provenge in the United States.

In addition, we are preparing our manufacturing, sales, and marketing operations to ensure we are able to launch Provenge successfully in the United States. We plan to update you further on our commercialization plans and progress in an upcoming analyst day this summer.

The results of the IMPACT trial are unambiguous, (therefore) making this a momentous occasion for prostate cancer patients, the cancer community, and certainly Dendreon. We could not have made the significant clinical advancement possible without so many others. We want to thank the more than 1,000 prostate cancer patients and their families who are willing to participate in our clinical trials. In addition, we are grateful to the clinical investigators and their teams that helped conduct our trials over the past decade.

For years scientists have been trying to harness the immune system to fight cancer. Our comprehensive clinical development program for Provenge has been rigorous and we are extremely proud to be pioneering cancer research that has been shown to offer patients prolonged survival with a favorable benefit-to-risk profile.

As you know, Provenge employs our novel proprietary antigen delivery cassette technology that may be leveraged to develop similar products to treat breast, colon, bladder, kidney, and multiple other types of cancer. The IMPACT results validate this platform technology and the potential for us to extend its benefits across other cancer types.

Today Dendreon, our employees, and the scientific community have made a major step forward in demonstrating that the immune system can be harnessed in the fight against cancer. We hope and sincerely believe that this is just the beginning of a new era in medicine.

(Q&A instructions….)

Questions from JOEL SENDEK of Lazard Capital Markets (13:31 mark)

SENDEK: Given how impressive the data is, especially the clean safety profile, it seems to me that it shouldn’t be difficult for the FDA to move this forward quickly so I’m wondering why you couldn’t just file (for approval) sooner than the fourth quarter? And then the next question is, how quickly can you try and get trials up and running in other cancers?

GOLD:  First off Joel, this (IMPACT) is a study that has been going on for almost six years and it’s a fairly large study in advanced prostate cancer. The timing of submitting this application in the fourth quarter has nothing to do with the FDA, it has to do with the company putting together the best amendment that it can for its existing license application.

As we talked about in our call when we announced the top-line results, the amendment to the application will be what’s called a type 2 resubmission. The FDA will have six months from the time we amend the application to review the data that we resubmit.

Regarding the question on when do we have the opportunity to bring other trials on-line, we are pretty excited about the platform overall and as we said in our prepared comments, we believe this data validate our approach to using the immune system to fight cancer. We have two other studies ongoing in different stages of prostate cancer. The NeoACT study in men that are having radical prostatectomy and the other one in a very similar patient population to what we studied in IMPACT.

We are going to be evaluating how we move the program forward and that we plan to update you on at an upcoming analyst day this summer.

SENDEK: Just two quick follow-ups, can you give us any more clarity on how comfortable you are that it’s (the type 2 resubmission) is going to be the fourth quarter as opposed to December 31?

GOLD: You know we aren’t going to get any more granular than that but historically the company has been pretty conservative in its guidance.

SENDEK: Is there any potential for patients to get more than three infusions? Do you have any history of that being associated with any side effects and why did you choose three infusions to begin with?

GOLD: To refresh your memory we had a study called P-11, which was a study in early stage prostate cancer (patients) that had serological recurrence after radical prostatectomy. The initial treatment protocol was basically identical to what we saw in 9902B in that they saw three infusions over one month.

The interesting part of that study is that we actually followed (the patients) out for a period of time, on average it was just over a year, but in some men it was over five years. We took a peak at their immune systems to see what was going on and what we saw there was that there was a persistent immune response against the immunizing antigen, on average at about a year out but which persisted up to five years.

We reboosted a portion of those patients (with Provenge) and what we saw was that we were able to get a significant impact, an increase, in their immune response against the immunizing antigen at that time. So there’s no reason to believe that you couldn’t give additional boosters later on but that was not part of the IMPACT study.

FROHLICH: At the time we designed this study back in 1999 we had looked at protocols in our phase 1/2 program that were looking at giving three doses of Provenge and then a boost at six months.

In our assessment of those data at that time, we saw that the three doses given at 2 week intervals was important to get all patients to a point where they were responding to the therapy but the immune response that we measured was persistent and at six months we couldn’t actually see that the boosting we did at that point provided us any additional advantage so we when designed a phase 3 protocol we stuck with the three doses at 2 week intervals as the protocol that we would follow.

Questions from RENI BENJAMIN of Rodman & Renshaw (17:30 mark)

BENJAMIN: A couple of quick questions starting off with the side effect profile. I believe it was Mark that mentioned that the side effects have no clinical significance. Can you comment were any of them were statistically significant? I would imagine chills and fever and headache were statistically significant. Were any of the other ones statistically significant?

FROHLICH: So the slide that you’ll see on the webcast (slide 13), we list those side effects that were seen more frequently in the treatment arm at the p-value of less than the .05 level. Those were chills, fever, headache, hyperhydrosis (which is just sweating) and… hypertension.

BENJAMIN: Regarding the median survival in the statistical analysis, it looks like in your slide that you used an unadjusted Cox model and log-rank analysis in the first two trials but I noticed in this trial the log-rank analysis on the earlier slides. The unadjusted log-rank analysis was 0.023. Is the unadjusted Cox analysis as well statistically significant and do we have that number?

GOLD: The unadjusted Cox is what you use to generate the hazard ratio that we show there and the p-value is what is derived from the log rank test and we did that as a sensitivity analysis in the IMPACT study (slide 11) but the primary methodology as Mark said in his comments was the Cox-adjusted model where we achieved a p-value of 0.032 and a hazard ratio of 0.775. We did do an unadjusted Cox as well as a long rank test as part of a sensitivity analysis plan.

BENJAMIN: And both of those hit as well? (Please see slide 11 for god’s sake, Ren)

GOLD: Yes.

Questions from AARON RINGS of Wachovia Securities (19:52 mark)

RINGS: I was just wondering if you could discuss the median survival results of the placebo patients that didn’t crossover to Provenge and went directly on to Taxotere?

GOLD: Whenever you look at those types of subgroups you have to be careful that you’re not introducing bias into the equation. A good example of that was a subgroup analysis that we did many years back with a Gleason score subgroup and we thought that patients with a Gleason score subgroup of 7 or below performed better…and that turned out to be a red herring so subgroup analysis as we all know, as perils associated with it.

That being said, we believe that there is a benefit to the salvage arm and as Dr. Kantoff said in his comments today in the media, the true treatment effect of Provenge may in fact be greater than what we’ve demonstrated in this clinical study given that we did allow crossover to cryo-preserved version of the product.

RINGS: Can you just remind us again what we should expect from a partnering standpoint? Are you leaning more towards a global partnership now based on the totality of the data, opportunity, and interest? Are you still looking at maintaining rights in the U.S. and out-licensing ex-U.S.?

GOLD: We believe the data support the utility of Provenge. The proposed label for Provenge would have a survival benefit associated with it and we believe it has a very favorable benefit-to-risk profile. We think those characteristics of this product make it a very appealing commercial opportunity.

Our goal is to keep that product ourselves in the United States and to seek a commercialization partner outside the United States. I think it’s fair to say that this data has attracted a lot of interest but we’re not going to comment on anything else beside that.

Questions from DAVID MILLER of Biotech Stock Research (21:49 mark)

MILLER: You mentioned that you talked to the FDA and that patients who were enrolled into the control arm are going to get crossover. Are they going to crossover to Provenge or to “Frovenge” (frozen version of Provenge)?

GOLD: The patients in the placebo arm will actually crossover and get the genuine bonafide version of the product. They will get Provenge.

MILLER: So those patients who had crossed over to “Frovenge” (frozen version of Provenge) originally, are they going to be able to go back and get Provenge too or just the patients that didn’t crossover to anything?

FROHLICH: We would offer it to all patients on the placebo arm including those who had crossed over and received the version of the product prepared from prior preserved cells.

MILLER: The enrollment criteria of having a PSA below 50; was that new to IMPACT or was that in (9901) and (D9902A)?

FROHLICH: It was (the enrollment criteria) just a PSA greater than 5, not less than 50. There was no restriction on the PSA level.

MILLER: Do you have the medians on the time to progression?

GOLD: It was pretty consistent with what you’ve seen in other studies and (in) this study (it) was about 14 weeks.

MILLER: Can you remember the span of the enrollment dates for 9901, D9902A, and IMPACT?

GOLD: I don’t. No I don’t have those. I have a lot of numbers memorized (laughter) but not those.

MILLER: The (placebo) patients who got no crossover at all, their median (survival) was below the patients who crossed over and got Provenge?

GOLD: That is correct.

Questions from MARK MONANE of Needham & Company (23:49 mark)

MONANE: When I look at the results here, should I be or does your group look at this in comparison to Taxotere (docetaxel) studies or mitoxantrone studies or do you believe that the data should be looked at in and of itself in terms of the regulatory and in terms of the commercialization strategy going forward?

GOLD: I think you have to look at it more from a patient’s perspective. You always have to be careful when you compare products across studies. This study was not designed to be a comparison to Taxotere. It’s (IMPACT) positioning Provenge as a therapy for front line use in men with metastatic androgen-independent prostate cancer.

However from a patient’s perspective, there is only one approved form of treatment (to benefit overall survival) and that is Taxotere. As you know it has a median improvement in survival of 2 ½ months and the three-year survival rates on the updated data is about 18%.

I think from a patient perspective (Provenge) offers an appealing alternative to that, particularly given that it has a very appealing safety profile combined with the fact that, and we shouldn’t overlook this, Dr. Penson said that in his talk and Mark (Frohlich) reiterated it, it’s a huge advantage to the patient that they get a full course of treatment in one month (with Provenge). They are not having to go to one of their physician’s office once every three weeks for an I.V. infusion. They get (Provenge) over one month. They can go on and live their normal life. They can go out and play golf and travel and do things that they want to do. That’s a huge quality-of-life issue in terms of not having to go back into the physician’s office every three weeks.

MONANE: Speaking of Taxotere, I think Dr. Petrylak did a study from 9901 (titled “Defining the Optimal Role of Immunotherapy and Chemotherapy…”) that talked about the use of Taxotere after Provenge infusion and the potential priming, have we looked at that yet and is this dataset a planned analysis going forward?

GOLD: Those are the types of things we will look at as we dig into the data deeper but we have nothing there to share at this time.

MONANE: There didn’t seem to be a big effect on PSA? Is that consistent with the effect on the time to progression? Is that independent? A lot of cancer studies talk about tumor burden, how do you think about the effect on PSA or lack there of?

GOLD: So two things; One is that the study was not designed to measure PSA. There was no PSA measured in these patients after they progressed. Looking at PSA kinetics is not very helpful in this study.

PSA use in androgen-independent prostate cancer is not typically correlative with overall survival. When it is, what you see is it (PSA levels) staying in check or not going higher over a period of, say, two years…not dramatic decreases in PSA. That’s number one.

Number two is that the study was not designed to measure PSA in this patient population.

MONANE: There was some data presented on the quartile effects (75%, 50%, and 25%), it seemed that the longer you lived then the longer you lived (i.e. the survival curves were separating more over time). Is that a survival effect of the healthiest patients or could we make any hypothesis concerning the effect on the tumor burden and the primary disease?

GOLD: To us, what warmed our hearts, was looking at the shapes of these (survival) curves. If you look at the 75^th percentile (when 75% of patients in Provenge and placebo groups were still alive), so even early on in the curve, there is still a survival benefit of 4.1 months. They are almost identical to the median. This just shows how consistently the curves are separating across the length of the study.

Immunotherapy has this theory that there is a delayed treatment effect and we see that this does pan out to a certain extent. When you look at the 25^th percentile (the tail of the curve), the difference (in survival) is close to six months if I recall.

GEORGE FARMER of Canaccord Adams (28:08 mark)

FARMER: Regarding other endpoints such as pain, there was no difference on pain scores in Provenge versus the placebo arms. Was there any trend in any direction? What does it say about other measurements like as PSA and pain when thinking about treating these advanced patients?

FROHLICH: Pain was not an endpoint in the study after it was amended so we don’t have any data on pain scores to share with you. Just to reiterate what Mitch said about PSA and other surrogate measures, the challenge is that none of those have consistently correlated with overall survival, which is really the gold standard.

By definition, if you are extending overall survival then you must be slowing the progression of the disease. The challenge is really with how we’ve chosen to measure progression, which is an endpoint that has a lot of variability. It occurs very early, too soon for even the therapy to affect it.

FARMER: How do you think physicians going forward are going to be measuring progression? I mean, that’s not going to be a reliable metric in determining whether a patient should crossover onto new therapy or is it?

GOLD: I think from a clinical perspective what patients care about the most is living longer but in a clinical setting, when you see Taxotere being implemented, is typically when the patients become symptomatic, when they are having other issues with their disease.

Provenge we would see in the same position as a frontline treatment in men with metastatic androgen-independent prostate cancer and it certainly opens the field for other treatments later on, and someone speculated that it may increase the use of Taxotere or other agents that come downstream because these patients are living longer and they come into that era with a better performance status than they would otherwise.

PAUL LATTA of McAdams Wright Ragen (30:19)

LATTA: Question on the time to disease progression: it sounded like the data was consistent with what you’ve seen in previous trials. Maybe you could just refresh our memory why in both cases that endpoint didn’t work out?

GOLD: The biggest issue with progression is that it tends to be a difficult endpoint to assess reliably. In this study and in multiple other studies that have been reported, they typically have a high rate of discordance between reviewers on the progression endpoint. One reviewer will say the patient progressed and another reviewer say there was no progression.

The biggest issue with this is that there is a tremendous amount of noise in the endpoint and it ends up being an unreliable endpoint at the end of the day. It’s certainly not the type of endpoint that you’d want to put in as your principle endpoint in a large randomized study because of that noise factor you see with the endpoint.

LATTA: What are they typically measuring?

GOLD: They are either looking for additional radiographic criteria to suggest that the lesion has progressed such as new bony lesions or new soft tissue lesions and sometimes it can be clinical progression.

The endpoint that I think is pretty universally agreed upon now, is that survival is the appropriate endpoint to measure in this patient population.

LATTA: On slide 8, the two survival curves look like they separate real nicely and I assume that they rejoin at the end. That’s just sort of a statistical anomaly as you get close to zero or is that…

FROHLICH: I have two comments to make on that. The first is that all survival curves eventually come together because patients all eventually die.

The point made in the comments is that the survival follow-up is particularly long in this case. If you look at the Taxotere trial in which the median follow-up time was on the order of 21 months. Ours was close to three years so a much longer follow-up.

The other thing is that when you look at the number of patients at risk at the tail end of the curves, there is actually very few patients there so there is a lot of variability in those curves. They are a less reliable than in the earlier parts of curves where you see that dramatic separation.

GOLD CLOSING REMARKS…

Anyone looking at the biotech and pharmaceutical sectors will notice an odd phenomenon. Some of these drug developers have share prices trading for less than the net cash on their balance sheet.

Our ears perk up anytime we can possibly buy $1 worth of assets in a stock for less than $1. Our interest definitely grows when we can buy shares of a drug developer for close to or less than the value of its net cash and in addition get whatever value of the rest of its assets like its pipeline compounds and any marketed drugs have.

The upshot is that some of these drug developers valued at less than their liquidation cash value even have FDA approved drugs on the market and are profitable. Here is the list of drug developers with shares that are trading for less than or only a little more than the value of the net cash on their balance sheet.

Adolor (Nasdaq: ADLR)

Share Price: $2.25
Net Cash Per Share: $2.48

Adolor is best known for its postoperative ileus (POI) drug Entereg. It was approved for marketing by the FDA last May albeit with a very strict Risk Evaluation and Mitigation Strategy (REMS) plan.

Adolor is still burning through its cash and Entereg’s uptake has been relatively slow with revenue from the drug only reaching $1.4 million in the first quarter this year. Adolor’s cash burn in the first quarter was $15.6 million so it’s still far away from profitability considering Entereg’s market potential in POI with its restrictive label.
All that being said, Adolor does have a commercialization deal with Pfizer (NYSE: PFE) to develop moderate-to-severe pain drugs in addition to its existing deal with GlaxoSmithKline (NYSE: GSK) for Entereg in POI. Without knowing if any of the details of its partnership deals would prohibit such a course of action, Adolor is exactly the sort of extremely cheap acquisition candidate that Pfizer or Glaxo often scoop up.

Although Adolor shareholders would be unlikely to get much of a premium to Adolor’s existing share price in any acquisition, with a market capitalization of only $104 million (as of May 1) and nearly $115 million in net cash (cash burn was $35 million last year), Adolor’s shares don’t deserve to be worth too much less than its net cash under many scenarios.

Adolor doesn’t exactly excite us with its early stage pipeline or with the restricted market opportunity for Entereg. Right now it also does not overcome our required return threshold considering. If its shares fall too far below its net cash and Entereg sales ramp up enough to cut into cash burn rate, then it could potentially become an investment candidate that meets our returns criteria for a company with its risk profile but right now we’ll pass.

Facet Biotech (Nasdaq: FACT)

Share Price: $9.26
Net Cash Per Share: $15.89

Definitely the most tempting investment on this list, paradoxically (paradoxerweise) Facet Biotech also has one of the longest histories of destroying shareholder value when you include its former parent PDL BioPharma in its history.

Nevertheless, Facet Biotech is an extremely interesting investment prospect when you consider that it has $15.89 per share in net cash on its balance sheet, a moderately interesting lead drug candidate, and a mostly value-oriented class of shareholders (Seth Klarman’s Baupost Group holds 17.8% of outstanding shares and D.E. Shaw another 3.2%).

Consider this: If Facet were liquidated today (May 1) and the net value of the cash on its balance sheet returned to shareholder, investors who bought its shares at today’s $9.26 a share closing price would see an immediate 72% return on their investment and this assumes that Facet’s pipeline has zero value.

Obviously we are ignoring the frictional costs that would be associated with transitioning to shutdown Facet and the fact that it will continue to burn through its $405 million in cash until shareholders are able to shut it down or get it sold to Biogen Idec. The other obvious downside to buying shares of Facet today for its cash is that you are relying on its other outside shareholders voting to shut it down or return a large chunk of this cash to shareholders through other methods. If that doesn’t happen then Facet will continue on burning through its cash, of which it estimates it will use $95 million to $100 million this year.

Maxygen (Nasdaq: MAXY)

Share Price: $5.65
Net Cash Per Share: $5.14

Like the aforementioned Facet Biotech, Maxygen was also spun-out from a famous biotech, in this case Affymetrix (Nasdaq: AFFX). It is also a money losing development stage biopharma like Facet but the difference is that since last year, Maxygen’s management team has been working on evaluating its “strategic options” and actively selling off parts of its operations.

In June, Maxygen sold a portfolio of hemophilia drug candidates to Bayer ‘04 for $90 million in upfront cash and this is largely why Maxygen’s market capitalization is less than $20 million above the $195 million in net cash on its balance sheet.

Maxygen stands to gain another $30 million from the Bayer deal in potential milestone payments and later in the year signed another deal with Astellas for a preclinical autoimmune diseases drug candidate that could bring in further cash

Having already enlisted the help of Lazard Capital to try and find an acquirer, Maxygen is the most likely company on this list to get sold. We like the fact that Maxygen management has also been taking actions to preserve its cash and reduce its burn rate until something happens with the company. The only problem is that Maxygen doesn’t have a lot of assets left to sell aside from its lead drug candidate. We’ll definitely be watching Maxygen’s shares closely because the lower its share price goes then the more likely a reasonable acquisition offer will pop up that values the company more than an approximate $20 million enterprise value

Pain Therapeutics (Nasdaq: PTIE)

Share Price: $4.43
Net Cash Per Share: $4.38

Pain Therapeutics’ top pipeline asset is its “abuse deterrent” opioid pain reliever Remoxy. In late 2005 Pain Therapeutics signed a commercialization deal with King Pharmaceuticals (NYSE: KG) to develop Remoxy and “no less than” three other abuse deterrent versions of already marketed pain drugs.

In conjunction with that deal, King paid Pain Therapeutics (PTI) $150 million in upfront cash and this is where the vast majority of the $187 million in cash that PTI has on its balance sheet came from. PTI expects to burn through only around $10 million of this cash in 2009.

The bad news is that PTI’s future rests almost solely on the fate of Remoxy. If the FDA refuses to accept King and PTI’s abuse deterrent claims and doesn’t allow Remoxy on the market then PTI’s clinical stage pipeline is reduced to one monoclonal antibody for melanoma still in phase 1 testing.

QLT (Nasdaq: QLTI)

Share Price: $2.07
Net Cash Per Share: $2.13

QLT is an interesting company because it has two drugs already on the market, a good amount of cash on its balance sheet, and is cash flow positive. The problem with QLT is that it is embroiled in a fair amount of litigation and just recently had to pay out $127 million after an appeal of a patent infringement judgment went against it.

QLT’s management have used its cash in the past primarily to reduce its share count. After several Dutch Auctions and open market buyback programs have cumulatively reduced QLT’s share count more than 40% (although often overpaying on their buybacks).

What gets our attention is that QLT’s cash flows are finally starting to stabilize after a precipitous drop in revenue in recent years. The investment case that can be made for QLT is that since its top-line is growing again due to growth with its hormone therapy Eligard eclipsing the sales declines of macular degeneration drug Visudyne, QLT will be generating more cash in the coming years and hopefully returning it to shareholders.

Targacept (Nasdaq: TRGT)

Share Price: $3.15
Net Cash Per Share: $3.19

With its lead drug only in phase 2 testing, Targacept is more like Pain Therapeutics or Facet Biotech than Adolor or QLT. The other thing that binds Targacept to PTI and Facet is that it is relying on the financial backing of large pharma partners, in its case AstraZeneca and GlaxoSmithKline, to help shepherd its drug candidates through the costly clinical trial pathway.

Without digging into the clinical trial data pertaining to Targacept’s compounds in development (which is outside the purpose of this article) there isn’t much more to say about Targacept. Targacept expects its cash to on hand to last “at least through the first half of 2011″ and for cash burn to be less than $35 million this year. It has been behaving like a typical development stage small molecule specialty pharma and unlike a few of the other companies on this list, Targacept has taken no steps to wind its operations down or publicly put itself up for sale.

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