After An Embattled Year, Dendreon Has A New CEO
After a year of tumult, Dendreon has replaced Mitchell Gold as ceo with John Johnson, a relatively new Dendreon board member with a long track record of working for big pharma – notably, Eli Lilly and Johnson & Johnson. His job is akin to the entering the next stage of a clinical trial – transforming the Little Vaccine Maker That Could into a full-fledged biotech that can deliver on its promises.
For those who are unfamiliar, Johnson (pictured to the left) was most recently ceo at Savient Pharmaceuticals, which stumbled last year trying to launch a new gout drug. But he is probably best known – and won investor praise – for running ImClone Systems after the insider trading scandal that involved Martha Stewart and later selling the biotech to Lilly for $6.5 billion. Besides becoming Dendreon ceo immediately, he will also become chairman next June when Gold leaves that post as well (see here).
The change comes after a difficult stretch for Dendreon, which sells the controversial Provenge vaccine for prostate cancer. Last summer, the vaccine maker shocked investors by disclosing that sales were slower than planned, guidance was revised and 500 jobs would be axed, which sent Dendreon shares diving (see this and this).
Why? There was a failure to properly educate doctors in advance of the Provenge launch and an insufficient promotional campaign for the $93,000 per year treatment. One key problem that haunted the vaccine maker for several months was considerable confusion over reimbursement for physicians, some of whom were subsequently reluctant to embrace Provenge (read here).
This chain of events followed increasing complaints from some investors that Dendreon was repeatedly missing forecasts, failing to disclose important info and ignoring worthwhile suggestions, and that the board was not proving sufficient managerial oversight (read here). This led to calls for a shake up amid an outcry that Dendreon management had sold big chunks of stock just weeks before the bad news was announced. Among them was Gold, who sold about $1 million worth of shares.
As a result, Gold won a dubious distinction – he was voted worst biotech ceo of the year in the annual poll run by TheStreet (look here). This was a decided fall from the grace for the former urologist, who became Dendreon ceo at age 33 back in 2003 and only the year before was named the best biotech ceo by in the same poll.
His departure was met with enthusiasm by one outspoken Dendreon critics. “I like John Johnson a lot. I think he’s a smart guy and a very capable leader. But the significant thing is that they made change at all,” Brad Loncar, a Dendreon investor who met with the board last year and publicized his concerns on the Internet (see this), tells us.
“I think it is a big win, because Dendreon has actually listened to its retail shareholders who have been asking for this. You do not see big corporations do that often. I believe it is a sign of how investing has become democratized. With things like social media, companies now have to listen to their shareholders. They cannot ignore them. That is a good thing because it will improve corporate governance and hold managers to a higher standard of accountability.”
Johnson has a big task in front of him, though. The results of a recent survey of 98 oncologists prompted RW Baird analyst Christopher Raymond to call the outlook for Provenge a ‘mixed bag.’ On the plus side, he found increased physician usage and less confusion over reimbursement. And more doctors who work at a site where Provenge is not available indicated they would prescribe the vaccine.
However, preference share was below peak. After the Provenge launch, doctors indicated almost 40 percent of all castrate-resistant prostate cancer patients were candidates for Provenge. And account penetration was heading in the wrong direction: the average number of patients per physician was five in November, compared with nine in July.
There is another issue – the so-called sequencing in which patients receive medications. A rival med known as Zytiga, which is sold by Johnson & Johnson, was approved last year to treat advanced prostate cancer patients who did not benefit from chemotherapy. The survey found that physician awareness of the J&J pill was just as high as for Provenge, and its share has doubled since last summer. Raymond also found that the percentage of Zytiga patients who are chemo-naive remained constant, and the majority had not received Provenge.
One Wall Street analyst expressed optimism, though, that Johnson can guide Dendreon successfully. “Clearly, (the Savient) gig has not been his most successful,” ISI Group biotech analyst Mark Schoenebaum wrote investors. “However, in total, his 29 year career is clearly one of success, in my opinion… Johnson is a well respected long time pharma/biotech executive with extensive management experience in oncology, CNS, and biologics.”
