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Wednesday, August 9, 2006 - Page updated at 12:00 AM

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Building factory a balancing act for Dendreon

Seattle Times business reporter

Dendreon has a Goldilocks dilemma: It can't afford to overbuild its factory, or to underbuild. To make its prostate-cancer drug succeed, it must predict factory needs just right — before it even has permission to sell the drug.

The Seattle company, the only local biotech with a potential blockbuster near Food and Drug Administration approval, said on its quarterly conference call Tuesday that plans are on track. It finished the initial building phase of its leased factory in Hanover, N.J., and made FDA-required test batches at a supplier in North Carolina in July. The company spent $60 million of its reserves through June, and expects to meet its spending forecast of $100 million this year. That would leave it with at least $65 million in reserves at year end.

Before it can ask the FDA to approve Provenge at year end, Dendreon still must do consistent test runs of its unique manufacturing process.

Dendreon Chief Scientific Officer David Urdal said in an interview that if the company had more cash, it might be comfortable building bigger "to be really aggressive" with the Provenge launch. Instead, it laid off 34 workers in January.

To adapt, it decided to initially build 12 factory workstations instead of 48. The company has hired 25 employees to operate the factory at first, and plans to hire more later, Urdal said.

The company said it still believes it can meet demand for Provenge. Unlike other biotech drug factories, which can take years to build, an expansion at Dendreon's would take one year to build and do test runs, Urdal said. At full tilt, the company said, it will be able to make $1 billion a year worth of Provenge — enough, it believes, to supply the U.S. market.

Urdal said the company is being careful not to repeat mistakes like ones he saw earlier in his career at Seattle-based Immunex. He was there in the early '90s when Immunex built a factory for Leukine that wasn't needed because big demand never materialized. But in later years, Immunex lacked manufacturing capacity for its hit drug Enbrel, and missed out on hundreds of millions of dollars in sales.

"We're not interested in repeating the Immunex history," Urdal said. "History will ultimately tell us how good we were."

Luke Timmerman: 206-515-5644

Dendreon
Dollar figures in thousands, except per share; parentheses denote losses.
June 30 %
2nd QTR 2006 2005 CHG
Profit ($18,786) ($17,520) -7.2
Per share (0.26) (0.30) +13.3
Revenue 78 58 +34.5
1st HALF 2006 2005 CHG
Profit ($43,142) ($37,021) -16.5
Per share (0.61) (0.63) +3.2
Revenue 103 115 -10.4

Copyright © 2006 The Seattle Times Company

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