Biotech giant buys stake in Dendreon

Dendreon has struck a deal in which one of the biotech industry's leading companies, Genentech, will potentially pay more than $110 million to team up and develop cancer drugs aimed at a specific gene.

Terms of the deal weren't fully disclosed, but it will give Dendreon cash and expertise to move into a new class of drugs.

Under the deal, Genentech is buying an equity stake in Dendreon and paying an upfront fee and a series of milestone payments that kick in as experimental drugs progress. The news continued the Seattle biotech company's quick reversal of fortune.

One week ago, Dendreon was left for dead by many investors, who considered the company worth less than its cash in the bank. Its stock was trading at around $1.50.

But Friday, the stock shot up 45 percent when Dendreon showed that a significant number of prostate-cancer patients in a pivotal clinical trial lived longer on one of its drugs. Yesterday, the Genentech deal pushed Dendreon stock up $1.06, or 34 percent, to close at $4.14 on heavy trading.

Dendreon Chief Business Officer Mitchell Gold pointed out the company also isn't giving away the farm to Genentech to get the money. The company will keep rights to co-promote future products in the U.S. It will conduct some of the early clinical trials and will hang on to a double-digit chunk of future profits. Genentech will pay for the most expensive clinical trials and be responsible for manufacturing. It will share in the profits.

Dendreon Headquarters: Seattle 2001 sales: $13.8 million 2001 profit: $23.1 million loss Cash and investments: $63.4 million as of June 30 Employees: 145 Chairman and CEO: Christopher Henney Top product: Provenge, which stimulates the immune system to fight prostate cancer for patients with no other options. It has completed one pivotal clinical trial in 127 men; it didn't meet its overall goal but did show increased survival rates for a significant number of patients. Largest shareholder: Paul Allen's Vulcan, with about 16 percent of the company, according to the most recent proxy statement.

Gold said Genentech was one of many bidders for its gene, and it was chosen because of the cash it offered and its experience with cancer drugs using different scientific approaches.

"There's a lot of buzz," Gold said. "It's palpable around the office.

"This is great news for Seattle because this is a company that was written off and now, a week later, has new life in its lead drug candidate and a blockbuster partnership."

Page Sargisson, a spokeswoman for Genentech, said her company has the scientific ability and the money to try several simultaneous approaches to develop drugs homing in on Dendreon's gene. She said prostate cancer will be the first target.

Encouraging as the work has been, both companies are well aware that it is years away from translating into a clinically proven drug.

Genentech Headquarters: South San Francisco 2001 sales: $2.2 billion 2001 profit: $150 million Cash and investments: $969 million as of June 30 Employees: About 5,000 worldwide Chairman and CEO: Arthur Levinson Products: Rituxan for non-Hodgkin's lymphoma and Herceptin for breast cancer are its most prominent biotech drugs. Both have been shown in clinical trials and medical practice to prolong survival. The company also developed and sells human growth hormone, plus products for heart attacks, strokes and cystic fibrosis. — Company reports

So far, the research revolves around a gene Dendreon has discovered and patented, called trp-p8. Dendreon said the gene is found in a range of cancers, including prostate, breast, lung and colon.

Genentech has experience in genetic approaches to cancer: Its blockbuster breast-cancer drug, Herceptin, zeroes in on a gene that is active in about one-fourth of breast-cancer patients. The drug doesn't work for the rest.

Dendreon believes its gene is unusual because it is common in cancer cells and seldom found in healthy cells.

The companies' next job is to create antibodies or conventional chemical compounds that will kill cancer cells.

Gold said it could be two more years before that work is tested in humans.

Mark Monane, an analyst with Needham & Co., said the news was significant because it diversifies Dendreon, allowing it to move forward on several approaches to drugs, some of which are more proven in the eyes of investors than Dendreon's method of stimulating the immune system. Luke Timmerman: 206-515-5644 or ltimmerman@seattletimes.com