Dendreon Cancer Drug Faces Pivotal Medicare Review

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Dendreon Corp. is relying on a decision by Medicare to help generate $1.75 billion a year for the prostate cancer drug Provenge, the company’s only product.

An advisory panel is expected to vote tomorrow on whether there is adequate evidence that Provenge extends life, a ruling that may lead the agency to pay for the drug, said Robyn Karnauskas of Deutsche Bank in New York. With reimbursement, Provenge would generate $1.75 billion in 2014 sales for the Seattle-based biotechnology company, according to the average estimate of four analysts compiled by Bloomberg.

Provenge was cleared for sale on April 29. The shares have fallen 29 percent since then on concerns Medicare may decide not to pay for coverage because of the drug’s $93,000 cost and inconsistency in study results. Three of four people recommended for the drug are eligible for the U.S. health plan, the company has said. An affirmative finding may boost shares 60 percent within 12 months, according to a survey of nine analysts.

“There’s been a lot of fear around this panel,” Karnauskas said in a telephone interview. “It’s a stock people are afraid to own.”

Dendreon rose 41 cents, or 1.2 percent, to $35.87 at 4 p.m. in Nasdaq Stock Market composite trading, the only 1 of 20 stocks on the AMEX Biotechnology Index to gain today. The shares are up threefold since the last survival data were reported on April 28, 2009 and may reach $57.56 within a year, according to the average estimate of analysts surveyed by Bloomberg.

Earlier Rejection

The Food and Drug Administration rejected Provenge in 2007 against the recommendation of an advisory panel after one of two studies failed to show a benefit. The agency granted approval this year for use in advanced prostate cancer based on a third study in 512 patients with a median survival of 25.8 months on the drug, compared with 21.7 months on a placebo.

The survival benefit in Medicare-eligible patients was more than six months. Provenge reduced the risk of death by 22.5 percent in the study. An independent technology assessment released ahead of this week’s meeting concluded the data from Dendreon’s three trials “are consistent with longer overall survival” in patients approved for Provenge.

While price isn’t supposed to be an issue when deciding reimbursement, it’s unusual for the agency to question coverage so quickly after approval, said Howard Liang, an analyst at Leerink Swann & Co. in Boston.

“It’s probably related to the high cost of the drug,” Liang said in a telephone interview. “If this were a very cheap drug or a very important use for a narrow population maybe” Medicare wouldn’t have asked for an advisory review of the drug.

Attacking Cancer Cells

Provenge is the first medicine that trains the body’s immune system to attack cancer cells as it would a virus. The therapy involves extracting white blood cells from a patient, mixing with vaccine components and then delivering the combination as an infusion. Treatment lasts one month with three doses each given two weeks apart.

Advisers to Medicare, the U.S. health plan for the elderly and disabled, will meet in Baltimore to discuss Provenge. Katherine Stueland, Dendreon’s vice president of corporate communications and investor relations, declined to comment about the meeting.

Prostate cancer will be diagnosed this year in 217,730 U.S. men and lead to 32,050 deaths, according to the American Cancer Society. Symptoms typically start when patients have less than a year to live. Of more than 1 million men with the disease, about 70,000 qualify for Provenge, according to Karnauskas, who recommends buying the shares.

Panelists’ Views

The Centers for Medicare and Medicaid Services will ask the panelists on a scale of one to five how confident they are in the evidence showing the drug significantly improves survival, controls symptoms and avoids side effects of therapy.

A vote of at least three in favor of survival benefits would be a victory for Dendreon, according to Cowen & Co. analyst Eric Schmidt, who recommends buying the shares.

“If yes, CMS will have to reimburse Provenge for patients who fit the label,” Schmidt said in an e-mail from New York.

Analysts who estimated $1.75 billion in sales for 2014 have considered only the FDA-approved uses in their estimates in anticipation that Medicare won’t pay for broader, “off-label” use in men whose cancer hasn’t spread.

No cure exists for advanced prostate cancer that has spread outside the prostate gland. Patients are often given hormone therapy or chemotherapy drugs such as Paris-based Sanofi-Aventis SA’s Taxotere.

The agency is scheduled to release its draft coverage proposal by March 30 and a final decision by June 30. While 14 of 15 regional Medicare contractors are paying for Provenge in the interim, Dendreon has said it can’t meet demand for the drug until new plants open next year.

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