UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
for the fiscal year ended December 31, 2004
Commission File No. 000-30681
DENDREON CORPORATION
(Exact name of registrant as specified in its charter)
| DELAWARE | 22-3203193 | |
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
3005 FIRST AVENUE, SEATTLE, WASHINGTON 98121
(206) 256-4545
(Address, including zip code, of registrant’s principal executive offices and telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $0.001 PAR VALUE
PREFERRED STOCK PURCHASE RIGHTS
Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨
Indicate by a check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. þ
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes þ No ¨
The aggregate market value of the common stock held by non-affiliates of the registrant based on the closing sale price of the registrant’s common stock on June 30, 2004, as reported on the National Association of Securities Dealers Automated Market, was $575,143,527.
As of March 4, 2005, the registrant had outstanding 59,193,630 shares of common stock.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant’s definitive Proxy Statement, which will be filed on or before May 2, 2005 with the Securities and Exchange Commission in connection with the registrant’s annual meeting of stockholders is incorporated by reference into Part III of this Report.
FORM 10-K
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SPECIAL NOTE ON FORWARD-LOOKING STATEMENTS
This annual report on Form 10-K contains forward-looking statements concerning matters that involve risk and uncertainties. The statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the Securities Act of 1933, as amended. These forward-looking statements concern matters that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Words such as believe, expects, likely, may and plans are intended to identify forward-looking statements, although not all forward-looking statements contain these words.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We are under no duty to update any of the forward-looking statements after the date hereof to conform such statements to actual results or to changes in our expectations.
Readers are urged to carefully review and consider the various disclosures made by us in this report which attempt to advise interested parties of the factors which affect our business, including without limitation the disclosures made under the caption “Factors That May Affect Results of Operations and Financial Condition” in Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth herein.
TRADEMARKS AND TRADENAMES
We own or have rights to various copyrights, trademarks and trade names used in our business, including the following: Dendreon®, the Dendreon logo, DACS®, Mylovenge™, Myezenium™, Neuvenge™, Neuzenium™, Provenge®, Prozenium™, Simplesep Enrichment System®. All other trademarks appearing or incorporated by reference into this report are the property of their respective owners.
AVAILABLE INFORMATION
We file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any reports, statements and other information filed by us at the SEC’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call (800) SEC-0330 for further information on the Public Reference Room. The SEC maintains an Internet web site that contains reports, proxy and information statements and other information regarding issuers, including us, that file electronically with the SEC. The address for the SEC’s web site is http://www.sec.gov.
We make available, free of charge, through our investor relations web site our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, statements of changes in beneficial ownership of securities, and amendments to those reports and statements as soon as reasonably practicable after they are filed with the SEC. The address for our web site is http://www.dendreon.com and the address for the investor relations page of our web site is http://investor.dendreon.com/edgar.cfm. The information contained on our web site is not a part of this report.
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OVERVIEW
Dendreon Corporation, a Delaware corporation originally formed in 1992 as Activated Cell Therapy Inc., is a biotechnology company focused on the discovery, development and commercialization of targeted therapies for cancer. Our mission is to target cancer and transform lives through the development of innovative cancer treatments. We strive to develop drugs that improve the treatment of cancer. Our goal is to build a profitable company by generating income from products we develop and commercialize, either alone or together with one or more potential strategic partners. Our portfolio includes product candidates to treat a wide range of cancers using active immunotherapy, monoclonal antibodies and small molecules.
Our most advanced product candidate is Provenge, an active immunotherapy for prostate cancer. Provenge has been and is currently being tested in several Phase 3 clinical trials. Our first Phase 3 clinical trial for Provenge, D9901, was a double-blind placebo controlled clinical trial in men with metastatic androgen-independent prostate cancer. The trial was designed to measure a delay in time to disease progression. Time to the onset of disease related pain was a secondary endpoint that was to be evaluated in concert with the results from a second, identical companion trial, D9902. Patients were given the option to receive salvage therapy on a separate open label study. Both protocols required patients to be followed for survival for three years after enrollment.
Trial D9901 approached, but did not meet its main objective of showing a statistically significant delay in the median time to disease progression in the overall patient population in the study. The trial results did, however, identify a group of patients, those with tumors that had been classified as Gleason score 7 or less, who appeared to benefit most significantly by treatment with Provenge compared to patients who received placebo. In these men, Provenge appeared to delay disease progression. Our second Phase 3 trial, D9902, was still underway when the D9901 results on progression were obtained and the survival follow up was still ongoing. Based on discussions with the Food and Drug Administration (FDA), we amended D9902 to contain two parts: D9902 Part A (D9902A) includes those patients enrolled regardless of Gleason score, and Part B (D9902B) restricts enrollment to those patients most like the group of patients that appeared to benefit in D9901, those with Gleason scores of 7 or less. Trial D9902B has received a positive Special Protocol Assessment from the FDA.
More recently, we completed the planned three year follow-up for survival on the D9901 patients and disclosed that a significant survival advantage was seen in those patients who had been assigned to the Provenge arm compared to those who had been assigned to receive placebo. This survival benefit is greater than that observed with any type of treatment in any published Phase 3 study in late-stage prostate cancer. In addition, at the 36-month final follow up, the percentage of patients alive in the Provenge-treated group is substantially greater than the percentage of patients who received placebo.
Final results from trial D9902A also did not achieve statistical significance for delaying the time to disease progression. A preliminary analysis of overall survival in the D9902A clinical trial indicated that both the survival rates and the median survival benefit compared to placebo show trends that are similar to the results observed in the final three-year survival analysis of the D9901 study. We plan to complete the final pre-specified, three year survival analysis of the D9902A study in the second half of 2005.
Provenge has Fast Track designation from the FDA for the treatment of men with Gleason score 7 or less with asymptomatic, metastatic androgen-independent prostate cancer. We are currently conducting a pivotal Phase 3 clinical trial of Provenge, D9902B, in this indication. We are also completing a double-blind placebo controlled trial (P-11) in androgen-dependent prostate cancer. We own commercialization rights for Provenge worldwide.
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If the final pre-specified three year survival analysis of D9902A is supportive to the data from D9901, we would anticipate submitting a biologics license application in 2006. Based on the results from D9901 and D9902A, we may amend the current D9902B protocol to enroll men regardless of their Gleason score. If D9902B is amended and is required for regulatory approval and is successful in meeting its specified endpoints, we would submit a biologics license application after 2006.
In addition, we are completing Phase 1 clinical trials of Neuvenge, our second-most advanced product candidate. Neuvenge is an active immunotherapy being developed for the treatment of HER2/neu over-expressing solid tumors. Our preclinical programs include other active immunotherapy targets as well as monoclonal antibodies and small molecule drug candidates that target the trp-p8 pathway and serine proteases for the treatment of cancer.
Corvas Acquisition
In July 2003, we acquired Corvas International, Inc. for approximately $69.6 million through the issuance of approximately 12.4 million shares of our common stock. This acquisition expanded our product pipeline and strengthened our balance sheet. To efficiently manage the ongoing programs located in Corvas’s San Diego operations, we relocated essential San Diego activities to our headquarters in Seattle and completed the closure of the San Diego facility in June 2004.
CANCER IMMUNOTHERAPIES
Cancer is characterized by abnormal cells that proliferate uncontrollably and metastasize, or spread, throughout the body, producing deposits of tumor cells, called metastases. These proliferating cells form masses called tumors. As the tumors grow, they cause tissue and organ failure and, ultimately, death.
To be effective, cancer therapies must eliminate or control the growth of the cancer both at its site of origin and at sites of metastases. Current therapies, such as surgery, radiation, chemotherapy and hormone treatments may not have the desired therapeutic effect and may result in severe side effects. Treatments known as active immunotherapies stimulate the immune system, the body’s natural mechanism for fighting disease, and may overcome many of the limitations of current cancer therapies.
The Immune System
The immune system is composed of a variety of specialized cells. These cells recognize specific chemical structures, called antigens. Foreign antigens trigger an immune response that results in the eventual removal of disease causing agents from the body.
The immune system recognizes and generates a strong response to hundreds of thousands of different foreign antigens. Tumors, however, frequently display antigens that are also found on normal cells. Thus, the immune system may not distinguish between tumors and normal cells and, therefore, may be unable to mount a strong anti-cancer response. Tumors may also actively prevent the immune system from fully activating. We believe one key to directing the immune system to fight cancers is to modify, or engineer, tumor antigens so that they are recognized by the immune system and to manipulate immune system cells to stimulate a vigorous response.
An immune response is started by a specialized class of immune system cells called antigen-presenting cells (APC). Antigen-presenting cells take up antigen from their surroundings and process the antigen into fragments that are recognized by specific classes of immune cells called lymphocytes. One category of lymphocytes, T-lymphocytes or T-cells, combat disease by killing antigen-bearing cells directly. In this way, T-cells may eliminate cancers and virally infected tissue. T-cell immunity is also known as cell-mediated immunity and is commonly thought to be a key defense against tumors and cells chronically infected by viruses. Our active immunotherapies are designed to stimulate a T-cell response to cancer cells.
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A second category of lymphocytes, B-lymphocytes or B-cells, produce specific antibodies when activated. The antibodies are secreted by B-cells and are extremely specific. Each antibody binds to and attacks one particular type of antigen expressed on a cell, interfering with that cell’s activity or causing cell death. Our monoclonal antibody product candidates are manufactured antibodies that share characteristics of naturally occurring antibodies. They may be created to recognize a specific antigen present on tumor cells, but not on healthy cells, and to bind to that antigen and cause the death of the tumor cell. Because each monoclonal antibody targets only cells expressing a specific antigen, healthy cells may be unaffected, and many of the harsh side effects of conventional cancer therapies avoided. Monoclonal antibodies may be used alone or coupled with drugs or radioisotopes in combination therapies that attack cancer cells in several ways.
ACTIVE IMMUNOTHERAPY APPROACH
We combine our experience in antigen identification, antigen engineering and antigen-presenting cell processing to produce active immunotherapy products, also known as therapeutic cancer vaccines, which are designed to stimulate a robust T-cell immune response. Our approach to active immunotherapies is to:
| • | identify antigens on cancer cells that are suitable targets for cancer therapy; |
| • | create proprietary, genetically engineered Antigen Delivery Cassettes that will be optimally processed by antigen-presenting cells; |
| • | isolate and activate antigen-presenting cells using proprietary methods; and |
| • | combine antigen-presenting cells and engineered antigens in vitro and then infuse the antigen-loaded APC into patients to trigger a cell-mediated immune response to destroy tumors. |
Antigen Identification
Our internal antigen discovery programs begin by identifying novel antigens expressed in specific tissues or in malignant cells. We consider the antigens that we find localized in diseased tissue as candidates for antigen engineering. We also consider antigens from external sources that meet these criteria. Our lead product candidate, Provenge, targets the prostate cancer antigen, prostatic acid phosphatase, or PAP. PAP is found in approximately 95% of all prostate cancers. The antigen target for Neuvenge, our active immunotherapy for breast, ovarian and other solid tumors, is HER2/neu. Through licenses, we have also acquired the opportunity to work with the tumor antigens designated carcinoembryonic antigen, carbonic anhydrase IX, NY-ESO, and telomerase. We discovered the tumor antigen trp-p8.
Antigen Engineering
We engineer antigens to produce proprietary active immunotherapies. Our antigen engineering is designed to trigger and maximize cell-mediated immunity by augmenting the uptake and processing of the target antigen by antigen-presenting cells. We can affect the quality and quantity of the immune response that is generated by adding, deleting or modifying selected sequences of the antigen gene, together with inserting the modified antigen into our Antigen Delivery Cassette.
Our Antigen Delivery Cassette is a protein that enhances antigen binding and entry into antigen-presenting cells. The Antigen Delivery Cassette targets each engineered antigen to a receptor on antigen-presenting cells and provides a common key to unlock the potential of these cells to process antigen. The antigen-presenting cells process antigen along pathways that stimulate cell-mediated immunity. The antigen region of the Antigen Delivery Cassette thus gains access to processing by the antigen-presenting cell that would otherwise be denied to non-engineered antigen. We believe this process results in a potent cell-mediated immune response. Our Antigen Delivery Cassette technology also provides us with a foundation on which new proprietary antigens are built.
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Active Immunotherapy Production
Our manufacturing process incorporates two elements: the Antigen Delivery Cassette and antigen-presenting cells. To obtain antigen-presenting cells, we first remove white blood cells from a patient’s blood through a standard blood collection process called leukapheresis. Antigen-presenting cells are then separated from other white blood cells using our proprietary cell separation technology.
The antigen-presenting cells are then incubated with the required concentration of Antigen Delivery Cassette under controlled conditions. After approximately 40 hours, the antigen-presenting cells are ready to be used. We subject each dose to quality control testing, including identity, purity, potency, sterility and other safety testing. Our process requires less than three days from white blood cell collection to the administration of the active immunotherapy product candidate.
We believe that our proprietary technology is applicable to many antigens of interest and therefore may be developed to target a variety of solid tumor and blood-borne malignancies.
Active Immunotherapy Delivery
A dose is delivered as an intravenous infusion lasting about 30-60 minutes given as an outpatient procedure. Our clinical trials of Provenge indicate that maximum stimulation requires three infusions given at two-week intervals. Patients in our Provenge trials typically complete a course of therapy in one month.
ACTIVE IMMUNOTHERAPIES
Provenge (APC8015)
Provenge is our active immunotherapy being developed for the treatment of prostate cancer. Prostate cancer is the most common solid tumor malignancy in men in the United States, with over one million men currently diagnosed with the disease. The American Cancer Society estimates that approximately 232,000 new cases of prostate cancer will be diagnosed in the U.S. and approximately 30,000 men will die of the disease in 2005.
We have conducted and are currently conducting a number of, randomized, double-blind, placebo-controlled Phase 3 trials of Provenge. Trials D9901, D9902A and D9902B were designed to test Provenge in men with advanced stage prostate cancer, men who have asymptomatic, metastatic, androgen-independent prostate cancer. Trial P-11 was designed to test Provenge in men with earlier stage disease, men who have androgen-dependent prostate cancer.
Androgen-independent prostate cancer is an advanced stage of prostate cancer in which the tumor growth is no longer regulated by androgens, or male hormones. In contrast, androgen-dependent prostate cancer is an earlier stage of the disease in which the tumor growth is still regulated by androgens. The Gleason score is the most commonly used prostate cancer scoring system. It is performed at the time of diagnosis and is considered an important prognostic indicator for prostate cancer. The Gleason score is a measure of the aggressiveness of a patient’s tumor and ranges in score from 2 to 10.
Provenge Clinical Trials in Advanced Stage Prostate Cancer
Clinical Trial—D9901
In June 2001, we completed a 127-patient double-blind, placebo-controlled Phase 3 clinical trial, D9901, of Provenge in men with metastatic asymptomatic androgen-independent prostate cancer. Comparison of the Provenge-treated group to the placebo-treated group in the overall population showed a 43% benefit in delaying time to disease progression, the primary endpoint of the trial. The results of the D9901 trial approached but did not achieve statistical significance at p-value = 0.061. A p-value of less than 0.05 indicates statistical significance in this study. The study did not meet its secondary endpoint of delay in the onset of disease-related pain. Men with Gleason scores of 7 and less receiving Provenge demonstrated a statistically significant benefit in delaying
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time to disease progression, p-value = 0.001. For these men, the probability of remaining progression-free while on the study was over two times higher than for men treated with placebo. In addition, six months after randomization, these men had a greater than eight-fold advantage in progression-free survival compared to men who received placebo (35.9% of Provenge men versus 4% of placebo patients). Provenge treatment was generally well tolerated, with most side effects resolving within 24 to 48 hours.
In June 2003, at the American Society of Clinical Oncology meeting, D9901 trial data was presented confirming that Provenge induced a statistically significant T-cell based immune response in patients compared with placebo (p-value = 0.0070).
On February 17, 2005, we announced that the data from the final three-year follow-up of D9901 showed a statistically significant survival benefit in patients treated with Provenge. Survival was pre-specified for analysis at 36-month post immunization. The final 36-month survival analysis showed a statistically significant survival benefit in the overall intent-to-treat population, defined as all patients randomized in the study, regardless of Gleason score. The survival benefit is greater than that observed with any type of treatment in any published Phase 3 study in late-stage prostate cancer. The final survival data also showed patients receiving Provenge had a median survival of 25.9 months compared to 21.4 months for patients in the placebo arm, a 4.5 month improvement (p-value = 0.01, hazard ratio = 1.7). This hazard ratio implies that patients receiving placebo have a relative risk of dying that is 70% higher than those patients receiving Provenge. In addition, 34 percent of patients receiving Provenge were alive at 36 months compared to 11 percent of patients receiving placebo (p-value = 0.0046). The survival benefit seen with Provenge was independent of a patient’s Gleason score. The study’s principal investigator presented the complete survival data from this trial at the American Society of Clinical Oncology Prostate Cancer Symposium on February 19, 2005, and plans to submit it for publication in a peer reviewed medical journal.
Clinical Trial—D9902
In August 2002, a companion study to D9901, D9902, was stopped after 98 of 120 patients were enrolled when the analysis of the completed D9901 trial showed that no statistically significant benefit in time to disease progression had been observed in the overall group, but that a benefit was seen in the subgroup of patients with Gleason scores of seven and less. We amended the D9902 protocol to become what is the ongoing D9902B pivotal Phase 3 study. The portion of D9902 under which the 98 patients were enrolled before the amendment was designated trial 9902A. In June 2003, we received an agreement under a Special Protocol Assessment, or SPA, from the FDA for D9902B. We have also received Fast Track designation from the FDA for Provenge for metastatic asymptomatic, androgen-independent prostate cancer, with Gleason scores of 7 and less. The SPA contains a binding agreement with the FDA that the design and planned analysis of D9902B could form a basis for a Biologics License Application, if the trial is successful in meeting its pre-determined objectives. Fast Track designation allows for a rolling submission of a potential Biologics License Application with the FDA, and ordinarily provides for a priority review. Priority review is defined by the FDA as a six-month review cycle.
In January 2005, we announced the final analysis of the primary endpoint of time to disease progression in D9902A. The trial did not show a statistically significant delay in time to disease progression in the overall group or in the Gleason score subgroups. An interim analysis of overall survival in the intent-to-treat patient population, the secondary endpoint of the D9902A study, indicated that both the survival rates and the median survival benefit compared to placebo show trends that are similar to the results observed in the final three-year survival analysis of the D9901 study. As in previous studies, Provenge was generally well tolerated. The final pre-specified, three-year survival analysis of the D9902A study will be conducted in the second half of 2005.
If the final pre-specified three year survival analysis of D9902A is supportive to the data from D9901, we would anticipate submitting a biologics license application in 2006. Based on the results from D9901 and D9902A, we may amend the current D9902B protocol to enroll men regardless of their Gleason score. If D9902B is amended and is required for regulatory approval and is successful in meeting its specified endpoints, we would submit a biologics license application after 2006.
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Patients randomized in the placebo arm in both D9901 and D9902 have the option to receive therapy in an open label salvage study after their disease progresses.
Other Provenge Clinical Trials in Early Stage Prostate Cancer
Clinical Trial—P-11
We are currently conducting a double-blind, placebo-controlled Phase 3 clinical trial called PROTECT (PROvenge Trial of Early Prostate Cancer Treatment), or P-11, to evaluate the safety and potential effectiveness of Provenge in treating men with early stage, androgen-dependent prostate cancer. Men whose prostate cancer is responsive to hormone treatment are considered androgen-dependent. We expect to receive the initial analysis of this study in 2006. The prevalence of androgen-dependent prostate cancer in the U.S. and Europe is approximately 600,000, which is approximately four times greater than the prevalence of androgen-independent prostate cancer.
Clinical Trial—P-16
An open label clinical trial, P-16, was recently completed testing Provenge together with Bevacizumab (Avastin) to treat patients with androgen-dependent prostate cancer. The trial was conducted at the University of California San Francisco and was sponsored by the National Cancer Institute. In February 2005 at the 2005 Multidisciplinary Prostate Cancer Symposium, we announced that the combination of Provenge and Bevacizumab increased PSA doubling time (PSADT) in patients with prostate cancer that had relapsed after prior surgical and radiation therapy. The median pre-treatment PSADT for the 21 evaluable patients was 6.7 months and the median on-treatment PSADT was 12.7 months, an approximate 90 percent increase in PSADT (p = 0.004).
Clinical Trial—D9905
We are also conducting an open label Phase 2 clinical trial, D9905, evaluating men with biochemical recurrence after prostatectomy. We anticipate presenting the results of this study in the second quarter of 2005.
Neuvenge (APC8024)
Our second most advanced product candidate, Neuvenge, is an active immunotherapy for the treatment of breast, ovarian and other solid tumors directed against the antigen, HER2/neu. The immunotherapy is manufactured in a similar fashion to Provenge, and uses a recombinant version of the HER2 antigen.
Over the last several years, we have conducted Phase 1 clinical trials for Neuvenge. In December 2004, we announced results from two Phase I studies of Neuvenge indicating that Neuvenge stimulated an immune response and may provide clinical benefit in patients with advanced, metastatic HER2/neu positive breast cancer. The data indicates that Neuvenge stimulates a robust immune response and is well-tolerated. We are presently designing Phase 2 trials of Neuvenge in women with metastatic breast cancer.
OTHER IMMUNOTHERAPY TARGETS
Trp-p8
Trp-p8, the protein encoded by the trp-p8 gene, is an ion channel. It was identified through our internal antigen discovery program. A patent on the gene encoding trp-p8 was issued to us in 2001. Trp-p8 displays numerous characteristics that make it an attractive target for immunotherapy, as well as for small molecule drug therapy. In normal human tissues, trp-p8 is expressed predominantly in the prostate and is over-expressed in hyperplastic prostate. It is present in 100% of prostate cancers and approximately 71% of breast cancers, 93% of colon cancers and 90% of lung cancers.
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NY-ESO
NY-ESO is a protein that is present on many cancers, including melanoma, breast, prostate, lung, ovarian/uterine and bladder cancers. We licensed the NY-ESO antigen from the Ludwig Cancer Institute, where scientists performed a series of preclinical studies that demonstrated that NY-ESO is an appropriate immunotherapy target.
Carcinoembryonic Antigen (CEA)
The carcinoembryonic antigen, or CEA, is present on 70% of lung cancers, virtually all cases of colon cancers and approximately 65% of breast cancers. We licensed the CEA antigen from Bayer Corporation, Business Group Diagnostics.
Carbonic Anhydrase IX Antigen (MN)
Carbonic anhydrase IX antigen is present on approximately 75% of cervical and colon cancers and 95% of renal cancers. We licensed the antigen from Bayer Corporation, Business Group Diagnostics.
Telomerase
The human telomerase antigen, or hTERT, is present on approximately 80% of tumor samples. We licensed the hTERT antigen from Geron Corporation.
MONOCLONAL ANTIBODIES
DN1924 and DN1921
We have therapeutic monoclonal antibodies for the treatment of cancer and autoimmune diseases in preclinical development. DN1924, our monoclonal antibody against HLA-DR positive cancers, is in preclinical development for the treatment of leukemias and lymphomas such as Non-Hodgkin’s lymphoma, Hodgkin’s lymphoma, and B-cell leukemia. Current treatments for these cancers include chemotherapy, radiation, and high dose chemotherapy with stem cell transplantation, all of which are highly toxic. More recently, a monoclonal antibody, rituximab, has been approved for use in some of these patients. It is directed to a different antigen than the antigen to which DN1924 binds. Preclinical studies suggest that DN1924 can kill human cancer cells without apparent toxicity or immune suppressive side effects. Furthermore, these preclinical studies suggest that cancer cells may not develop resistance to this treatment over time.
DN1921 is our monoclonal antibody that suppresses activities of the immune system. Autoimmune diseases, such as rheumatoid arthritis, systemic lupus erythematosus, multiple sclerosis, myasthenia gravis and pemphigus vulgaris, result from unwanted activities of the immune system. Current therapies include non-specific immune suppression by corticosteroids, methotrexate and other drugs. Although these treatments may reduce tissue damage in some patients, they are not curative.
DN1921 is specific for a well-known target for immunosuppression, HLA-DR. Previously, other companies have attempted to develop drugs that target HLA-DR. Although those drugs usually suppressed immune response, they failed in preclinical studies due to unacceptable toxicity. We have observed that suppression of immune response and toxicity are mediated by two separate parts of the antibody molecule. We are developing DN1921 to take advantage of this observation. DN1921 has shown encouraging immunosuppressive abilities in our preclinical studies without producing unacceptable levels of toxicity.
Trp-p8 Monoclonal Antibody
In collaboration with Genentech, Inc., we are working to develop a monoclonal antibody to trp-p8, a protein encoded by a gene discovered in our internal discovery program, which is a potential treatment for soft tissue malignancies such as prostate, breast and colon cancer.
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Serine Protease Monoclonal Antibodies
Proteases are proteins that act as molecular scissors to cleave other proteins to activate or inactivate them, and are responsible for regulating normal cellular function. Maintaining normal health requires that the activity of proteases be tightly controlled. Excessive or deficient protease activity underlies many serious diseases in humans, including cancer.
The growth and progression of human tumors involve different proteases at multiple stages during these processes. Serine proteases are thought to be important for tumor cell growth directly and through the modulation of growth factors required for tumor growth. In addition, serine proteases have been shown to indirectly support tumor cell growth through their effects on the network of blood vessels that is essential for tumor survival, a process known as angiogenesis.
Our serine proteases program is focused on the development of monoclonal antibodies that suppress the growth of primary and secondary solid tumors by inhibiting known and novel key serine proteases involved in cancer processes.
Our collaboration agreement with Abgenix, Inc., which we obtained through our acquisition of Corvas International, Inc., or Corvas, in mid-2003, focuses on the discovery, development and commercialization of fully-human monoclonal antibodies against two membrane-bound serine proteases implicated in several solid tumors including breast and prostate cancer. Under the terms of the collaboration, Abgenix agreed to use its human antibody technologies to generate and select antibodies against the targets. We and Abgenix have the right to co-develop and commercialize antibody product candidates discovered during the collaboration. Our agreement with Abgenix provides for both companies to share equally in the product development costs and any profits from sales of product candidates successfully commercialized from any co-development efforts.
We also have a research and exclusive license agreement with Georgetown University, which we obtained through our acquisition of Corvas, related to Georgetown’s intellectual property for one of the targets. In the event that we develop and commercialize any products covered by Georgetown’s intellectual property, we would be required to make milestone payments and pay royalties.
We have a collaboration with Dyax Corp., which we obtained through our acquisition of Corvas International, Inc., to discover, develop and commercialize monoclonal antibody and other products against two other proteases, endotheliase 1 and endotheliase 2, that are over-expressed in certain cancers. Under the terms of this agreement, both companies will jointly develop any inhibitory agents that may be identified and will share commercialization rights and profits, if any, from any marketed products.
OTHER PRODUCT DEVELOPMENT PROGRAMS
Trp-p8 Small Molecule
Small molecules are a diverse group of natural and synthetic substances that generally have a low molecular weight. They are either isolated from natural sources such as plants, fungi or microbes, or they are synthesized by organic chemistry. Most conventional pharmaceuticals, such as aspirin, penicillin and chemotherapeutics, are small molecules. Ion channels like trp-p8 that transport calcium through the cell membrane may be an attractive target for manipulation by small molecule drug therapy.
We are currently engaged in discovering, evaluating and developing small molecule therapeutics that modify trp-p8 function. Through screening and drug design efforts, we have discovered several classes of small molecule drugs that manipulate the trp-p8 channel and selectively kill trp-p8 expressing cancer cells by modifying the movement of calcium ions through the cell membrane. We are evaluating these compounds in preclinical studies and working to expand the number of candidate compounds through additional screening and synthesis efforts.
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Protease Activated Therapy (PACT) Prodrugs
Our PACT program, obtained through our acquisition of Corvas, focuses on exploiting the activity of proteases that are present on the surface of tumor cells. The goal of this pro-drug approach is to deliver a potent cytotoxic, or cell-killing, drug directly to the tumor cells, thereby sparing healthy tissue from the toxic treatment. PACT involves the design of synthetic molecules composed of a sequence of amino acids recognized by a targeted serine protease. This sequence of amino acids is chemically attached to a known cancer chemotherapeutic or cytotoxic drug such as doxorubicin, yielding a hybrid or conjugate molecule. This approach may reduce damage to normal, non-tumor cells because the sequence of attached amino acids will prevent the cytotoxic drug from entering the normal cells where it could cause lethal effects. In contrast, with the PACT approach, a solid tumor should be more susceptible to the cytotoxic drug because the serine proteases in the tumor cells should free the cytotoxic drug in the vicinity of the tumor cell. Once free, the cytotoxic drug can enter into the tumor cell and kill it. We believe that this strategy of using the conjugate molecules may result in fewer side effects compared to cytotoxic drugs alone.
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PRODUCT CANDIDATES
The following table summarizes the target indications and status of our product candidates in development.
| Product Candidate |
Target Indication(s) |
Status | ||
| Product Candidates in Clinical Trials |
||||
| APC8015 (Provenge) |
Androgen-independent prostate cancer (D9901) Androgen-independent prostate cancer (D9902A) Androgen-independent prostate cancer (D9902B) Androgen-dependent prostate cancer (P-11) Androgen-dependent prostate cancer (P-16) Androgen-dependent prostate cancer (D9905) |
Phase 3 complete Phase 3 ongoing Phase 3 ongoing Phase 3 ongoing Phase 2 complete Phase 2 complete | ||
| APC8024 (Neuvenge) |
Breast cancer (2000-1) Breast cancer, ovarian cancer, colon cancer (2000-2) |
Phase 1 complete Phase 1 complete | ||
|
Product Candidates in Research and Development
Vaccine Immunotherapy Targets
| ||||
| Trp-p8 |
Lung cancer, breast cancer Prostate cancer, colon cancer |
Preclinical | ||
| NY-ESO |
Bladder cancer, lung cancer Breast cancer, prostate cancer Ovarian/Uterine cancer, melanoma |
Preclinical | ||
| CEA |
Breast cancer, lung cancer Colon cancer |
Preclinical | ||
| MN |
Kidney cancer, colon cancer Cervical cancer |
Preclinical | ||
| Telomerase |
Multiple cancers | Preclinical | ||
| Monoclonal Antibodies |
||||
| Trp-p8 |
Lung cancer, breast cancer Prostate cancer, colon cancer |
|||
| DN1924 |
Non-Hodgkin’s lymphoma Hodgkin’s lymphoma B-cell leukemias |
Preclinical | ||
| DN1921 |
Autoimmune diseases, including rheumatoid arthritis | Preclinical | ||
| Anti-Endotheliase (Dyax) |
Multiple cancers | Preclinical | ||
| Anti-serine protease (Abgenix) |
Multiple cancers | Preclinical | ||
| Small Molecule |
||||
| Trp-p8 |
Lung cancer, breast cancer Prostate cancer, colon cancer |
Preclinical | ||
Status shown above is as of March 2005. Preclinical means that a potential product is undergoing study and evaluation, including study in cell and animal disease models in preparation for potential human clinical trials. We continue to undertake preclinical development work with respect to potential products that are in clinical trials.
Phase 1-3 clinical trials denote safety and efficacy tests in humans as follows:
Phase 1: Evaluation of safety and dosing.
Phase 2: Evaluation of safety and efficacy.
Phase 3: Definitive evaluation of safety and efficacy.
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RESEARCH AND DEVELOPMENT EXPENSES
To support our on-going clinical trials and the development of new product candidates, we dedicate a substantial portion of our resources to research and development each year. Our research and development expenses for the years ended December 31, 2004, 2003 and 2002 were as follows (in millions):
| 2004 |
2003 |
2002 | |||||||
| Clinical programs: |
|||||||||
| Cancer |
$ | 27.2 | $ | 10.8 | $ | 8.2 | |||
| Cardiovascular (from our acquisition of Corvas) |
1.6 | 0.6 | — | ||||||
| Indirect costs |
25.8 | 16.7 | 16.2 | ||||||
| Total clinical programs |
54.6 | 28.1 | 24.4 | ||||||
| Discovery research |
9.8 | 10.8 | 8.2 | ||||||
| Total research and development expense |
$ | 64.4 | $ | 38.9 | $ | 32.6 | |||
COLLABORATIONS
Genentech, Inc.
We have a collaborative agreement with Genentech, Inc. for the preclinical research, clinical development and commercialization of monoclonal antibody and potentially other products derived from our trp-p8 gene platform. We will be jointly responsible with Genentech for conducting preclinical and clinical work. Genentech will fund a majority of these expenses for products that reach Phase 3 clinical trials. Genentech will also be responsible for all manufacturing of resulting products. The agreement provides for profit-sharing and co-promotion in the United States. Genentech will be responsible for the commercialization of trp-p8 products in the rest of the world except Asia and Oceania, where we retain all development and commercialization rights.
Abgenix, Inc.
Our collaboration agreement with Abgenix, Inc. focuses on the discovery, development and commercialization of fully-human monoclonal antibodies against the membrane-bound serine protease targets. Under the terms of the collaboration, Abgenix agreed to use its human antibody technologies to generate and select antibodies. We and Abgenix have the right to co-develop and commercialize antibody products discovered during the collaboration. Our agreement with Abgenix provides for both companies to share equally in the product development costs and any profits from sales of product candidates successfully commercialized from any co-development efforts.
Dyax, Corp.
We have a collaboration with Dyax, Corp. to discover, develop and commercialize monoclonal antibody and other products against endotheliase 1 and endotheliase 2, enzymes that are over-expressed in certain cancers. Under the terms of this agreement, both companies will jointly develop any inhibitory agents that may be identified and will share commercialization rights and profits, if any, from any marketed products.
OUR BUSINESS STRATEGY
Our goal is to become a profitable biotechnology company focused on discovering, developing and commercializing a variety of drugs and active immunotherapies to treat cancer. Key elements of our strategy are to:
Develop and Commercialize Provenge
We are seeking to develop and commercialize Provenge for the treatment of prostate cancer. Provenge is in late-stage clinical trials, and we are currently focused on obtaining regulatory approval in the U.S. to market Provenge for advanced prostate cancer.
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Continue to Build a Portfolio of Medically Important Oncology Product Candidates
We are developing a pipeline of oncology product candidates in various stages of clinical and preclinical development in a variety of therapeutic areas using multiple technologies. We believe this strategy increases the likelihood of successful product commercialization.
Leverage Our Core Competencies
We believe that we have significant expertise in the development of novel immunotherapies, which we have used to establish a strong platform for the development of product candidates to treat a variety of cancers. We intend to leverage our core competencies to develop high-value products in oncology markets with large unmet medical needs. When strategically advantageous, we may seek licensing or collaborative arrangements for our product candidates.
Seek to License or Acquire Complementary Products and Technologies
We intend to supplement our internal drug discovery efforts through the acquisition of products and technologies that complement our general product development strategy. We continue to identify, evaluate and pursue the acquisition or licensing of strategically valuable organizations or product opportunities.
MANUFACTURING AND COMMERCIAL INFRASTRUCTURE
We manufacture the Antigen Delivery Cassettes for our preclinical studies and clinical trials as recombinant proteins using production methods in compliance with current good manufacturing practices, or cGMP. Preclinical and clinical studies require relatively small amounts of our Antigen Delivery Cassette. To produce commercial quantities of the Antigen Delivery Cassette for Provenge, we have developed manufacturing processes to permit the production of much larger quantities of that protein. To scale-up to commercial levels of production of the Antigen Delivery Cassette used in Provenge, we contracted with Diosynth RTP, Inc., or Diosynth, in March 2001. We have since agreed to modify the original work plan with Diosynth to allow us to progressively designate work to be done in discrete blocks that are negotiated at a specified price. A separate cancellation fee applies in the event that we cancel any such block of work.
Certain blocks of work are already being performed pursuant to the modified agreement. The modification of the agreement allows us greater flexibility in scheduling the availability of Diosynth’s facilities and personnel. We presently intend to continue the work plan to produce the Antigen Delivery Cassette for Provenge at commercial scale to support a BLA filing and subsequent commercial launch.
Final manufacture of Provenge and Neuvenge for our clinical trials of those product candidates is conducted at a small manufacturing facility we operate in Seattle, Washington, and through third party contracts with the Mayo Clinic in Rochester, Minnesota, the American Red Cross in Philadelphia, Pennsylvania, and Progenitor Cell Therapy in Hackensack, New Jersey and Mountain View, California. For the manufacture of Provenge on a commercial scale, assuming Provenge is approved for sale, we plan to construct and own one or more manufacturing facilities in the United States. These facilities will be strategically located to access the largest possible population base. We intend to initiate the design and construction of at least one of these facilities in 2005.
The cell separation devices and related media that isolate the cells for our active immunotherapies from a patient’s blood and other bodily fluids are manufactured by third party contractors in compliance with cGMP. We plan to use third party contractors to produce commercial quantities of these devices and media for Provenge, assuming Provenge is approved for sale.
The manufacture of a dose of Provenge or our other active immunotherapies begins with a standard cell collection process called leukapheresis. The resulting cells are then transported to a manufacturing facility,
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processed and returned to a health care provider for infusion into the patient. We rely upon blood banks, hospitals and other health care providers to perform leukapheresis for our clinical trials. We have an agreement with Gambro Healthcare, Inc. to act as the primary provider of leukapheresis services nationwide through its network of kidney dialysis centers.
The patient cells derived from the leukapheresis process are transported to a manufacturing facility where final manufacturing of Provenge occurs before it is then transported to a health care provider for infusion into the patient. For our clinical trials, we use a variety of carriers to fulfill these transportation needs. If Provenge is approved for sale, we intend to consolidate a substantial portion of our transportation needs with one or more third party carriers or transportation systems managers. We are presently in discussions with multiple parties to fulfill our commercial transportation needs.
We intend to link our transportation network, manufacturing facilities, leukapheresis providers, patients and physicians through an information technology system that allows for timely, efficient and cost effective production of Provenge on a commercial basis, assuming Provenge is approved for sale. We are in the process of building the information technology infrastructure and designing the required systems for the commercial launch of Provenge. We may rely on one or more third party contractors to assist us in the development of these systems.
SUPPLIERS AND RAW MATERIALS
We currently depend on single-source vendors for some of the components necessary for our active immunotherapy candidates. For Provenge, we have contracted with Diosynth to assist us in the scale-up to commercial level production of the antigen used in its preparation. We currently do not have a long term contract for the commercial manufacture of the antigen with Diosynth.
INTELLECTUAL PROPERTY
We protect our technology through numerous United States and foreign patent filings, trademarks and trade secrets that we own or license. We own or license issued patents or patent applications that are directed to the solutions and devices by which cells can be isolated and manipulated, our Antigen Delivery Cassette, antigen-presenting cell processing, immunostimulatory compositions, and our monoclonal antibody and small molecule product candidates. We have filed foreign counterparts to these issued patents and patent applications in a number of countries.
We also own or license issued patents or patent applications acquired in our acquisition of Corvas that are directed to potential pharmaceutical compounds such as rNIF and protease inhibitors and modulators, to methods of making the compounds and to methods for treating specific diseases using the compounds. For many of these issued patents or applications, foreign counterparts are filed in a number of countries.
We intend to continue using our scientific experience to pursue and patent new developments to enhance our position in the cancer field. Patents, if issued, may be challenged, invalidated or circumvented. Thus, any patent that we own or license from third parties may not provide adequate protection against competitors. Our pending patent applications, those we may file in the future, or those we may license from third parties may not result in issued patents. Also, patents may not provide us with adequate proprietary protection or advantages against competitors with similar or competing technologies. We are also subject to the risk of claims, whether meritorious or not, that our active immunotherapies infringe a patent owned by a third party. If a lawsuit making any such claims were brought against us, we would assert that the patent at issue is either invalid or not infringed. We may not be able to establish non-infringement, however, and we may not be able to establish invalidity of the other party’s patent. If we are found to infringe a valid patent, we could be required to seek a license or discontinue or delay commercialization of the affected products, and we could be required to pay substantial damages, which could materially harm our business.
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We also rely on trade secrets and unpatentable know-how that we seek to protect, in part, by using confidentiality agreements. Our policy is to require our officers, employees, consultants, contractors, manufacturers, outside scientific collaborators and sponsored researchers and other advisors to execute confidentiality agreements. These agreements provide that all confidential information developed or made known to the individual during the course of the individual’s relationship with us be kept confidential and not disclosed to third parties except in specific limited circumstances. We also require signed confidentiality agreements from companies that receive our confidential data. For employees, consultants and contractors, we require confidentiality agreements providing that all inventions conceived while rendering services to us shall be assigned to us as our exclusive property. It is possible, however, that these parties may breach those agreements, and we may not have adequate remedies for any breach. It is also possible that our trade secrets or unpatentable know-how will otherwise become known to or be independently developed by competitors.
COMPETITION
The biotechnology and biopharmaceutical industries are characterized by rapidly advancing technologies, intense competition and a strong emphasis on proprietary products. Many entities, including pharmaceutical and biotechnology companies, academic institutions and other research organizations are actively engaged in the discovery, research and development of products that could compete directly with our active immunotherapy product candidates. For example, we believe that companies, including Cell Genesys, Inc. and Therion Biologics Corporation, are developing cancer vaccines for the United States market that could potentially compete with Provenge, assuming Provenge is approved for sale. These competitors may succeed in developing and marketing cancer vaccines that are more effective than or marketed before Provenge. Other products such as chemotherapeutics, antisense compounds, angiogenesis inhibitors and gene therapies are also under development and could potentially compete with our products.
Our competitors include major pharmaceutical companies. These companies have significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing. In addition, our competitors may c