China's Sanpower takes on expensive Provenge manufacturing with Dendreon deal

Dendreon started out with three manufacturing sites but sold one in New Jersey to Novartis in 2012.

The bankruptcy of Dendreon in 2014 stemmed in large part from the costs of the very complex manufacturing processes required to produce and deliver its personalized immune stimulator drug Provenge for prostate cancer. Now it is Sanpower Group, a Chinese conglomerate with businesses that range from electronics to novelty retailer Brookstone, that will take ownership of Dendreon and its two U.S. manufacturing facilities and that process.

Biologics plants in Union City, GA, and Seal Beach, CA are part of the what Sanpower gets with its $820 million buyout of Dendreon from Valeant Pharmaceuticals that it announced last week. Valeant had acquired Dendreon out of bankruptcy in 2015 for $400 million as part of an acquisition spree but having run into its own financial difficulties, Valeant decided to sell it to pay down debt.  

Of course Sanpower also gets Provenge. In announcing the deal last week, the Chinese company said that “After the completion of the acquisition, Sanpower Group plans to accelerate Provenge sales penetration in the United States and also align its own resources to introduce Provenge to China and other major markets in Asia.” Rates of prostate cancer have grown significantly in China in the last two decades the company pointed out.

Healthcare is one of the five areas on which Sanpower has focused its attention with assets in home care, genetic testing and precision medicine, among others. Sanpower says that it is the world's largest operator of cord blood banking. 

“The acquisition of Provenge is an important step in the area of precision medical treatment for Sanpower Group. The big data from its cord blood bank provides the foundation for precise medical care. The acquisition of Provenge has allowed the group to expand its umbilical cord blood bank from the basics to its practical application, and has taken a strategic step in further laying out precise medical care” the company said in its announcement.  

When Provenge was first approved in 2010, Dendreon had three plants but after a few years of weak Provenge sales, sold one in New Jersey to Novartis in 2012 for $43 million. The two plants it still has are a 180,000-square-foot facility in Seal Beach near Los Angeles, and a 160,000-square-foot operation in Union City near Atlanta.

The company has said its facilities were strategically located because Provenge is made with live cells and needed a turnaround time of three days between when white blood cells were drawn, sent to one of the plants to identify the specific immune cells for use and processing and returned and infused into an appropriate patient with castration-resistant prostate cancer. The process, which cost patients or payers $93,000, had to be done three times and the logistics of that were tracked by a team in Seattle.

It is an expensive process. At one point, Dendreon's costs of sales were 77%. After further automating in 2013, it cut that to 53%; that compares with about 10% for most biotechs. It was trying to reduce it further when it filed for bankruptcy. At the time, Suisse analyst Lee Kalowski said he doubted any company that took on Provenge could make any any more cheaply.

It is now Sanpower’s turn to see what it can achieve. While it didn’t lay out specific plans last week, a Sanpower spokesperson did say in an email that, “In regard to the manufacturing scale, we have no intention to change it for the time being.”