Dendreon shares fell $5.64, or 17.5 percent, in after-hours trading last night after Medicare officials said they looking into whether to pay for Provenge. "We are opening this national coverage analysis to determine whether or not autologous cellular immunotherapy is reasonable and necessary under sections 1862(a)(1)(A) and/or 1862(a)(1)(E) of the Social Security Act," CMS says. And as the Seattle Times notes, that left the stock at less than half its peak above $55 just before the FDA approved the prostate-cancer immunotherapy.
A Roth Capital Partners' research notes says that the reaction represented a misunderstanding of "something that is considered standard operating procedure and we believe that this is a clear buy on weakness event for Dendreon's shares." A Leerink Swann note is of a same mind, saying it is unlikely that CMS won't cover Provenge.
If CMS decides to cover Provenge, it would help increase the number of patients eligible and potentially prompt private insurers to do the same, Dow Jones reports. However, a denial could severely stifle the expensive product's growth. The Provenge question also could be viewed as a test of healthcare reform, Dow Jones says. The government's costs from the treatment could rise significantly when the 32 million currently uninsured Americans are expected to join the nation's healthcare system in 2014.
However, Beth Steindecker and Ira Loss of Washington Analysis express doubt in a research note "that the agency would eventually issue a non-coverage decision for the vaccine or even place severe restrictions beyond the FDA approved indication and label for use in metastatic, hormone-refractory prostate cancer patients."
They add "since CMS' actual posting cites examining whether autologous cellular immunotherapy for the treatment of metastatic prostate cancer is reasonable and necessary, whatever CMS decides could affect usage of a rival prostate cancer vaccine in development--Biosante's (BPAX-$2) GVAX vaccine--were it to be approved by the FDA."
"Dendreon welcomes the opportunity to continue our discussions with CMS about how Provenge will be provided to Medicare beneficiaries, particularly given the survival benefit and safety profile of Provenge," the company says in a statement. "We plan on continuing to work closely with CMS during this process to ensure patients with advanced prostate cancer have broad access to Provenge."
A proposed decision memo due date is set for March 30, 2011, while a final ruling is due June 30, 2011, according to CMS.