July 12, 2010

Buying Opportunities? Dendreon; Antisoma


On July 1st CMS announced that Dendreon’s Provenge® will undergo a National Coverage Determination (NCD). Quoting CMS:

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.

Although Medicare carriers will cover Provenge while the NCD is ongoing, this news led to a 6% drop in Dendreon’s share price to $30.42 and represents a 45% fall since the $55 high when Provenge was approved in May. It is hard to imagine that a product that improves median survival by 4 months is not reasonable and necessary. The Social Security Act which governs CMS coverage does not include any provision that cost-effectiveness is a determinant of coverage. However, with the limited tools they can use i.e. NCD, CMS tried to limit coverage of Provenge when they saw the threat of a new budget busting drug get approved. CMS has indicated that a preliminary decision regarding coverage will be made March 30, 2011 and that a final decision will be made June 30, 2011.

The move by CMS to institute an NCD with Provenge claim it was triggered by informal inquiries. In general, companies avoid applying for an NCD and seek CMS coverage via the regional Medicare Carrier (companies contracted by CMS to process claims) when the first claims move through the system.  Coverage decisions for new drugs at the Medicare Carrier are made by the carrier’s Medical Advisory Committee (MAC). MAC is composed of physicians who decide whether a treatment is reasonable and necessary. Since drug costs are borne by CMS and not the carrier, MAC decisions are a more straight forward route to gaining coverage.

I would be very surprised if Dendreon made the “informal” inquiry about an NCD. More than likely, the cost of Provenge has landed on CMS’s radar—$93,000 for a course of treatment. The NCD gives CMS the ability to strictly define which patients are covered. The Provenge pivotal study included patients with metastatic disease and evidence of progression, but the study excluded patients with liver, lung or brain metastasis and patients with moderate to severe pain or those who were using narcotics to control pain.  In other words the study  excluded patients with rapidly advancing disease.

Barring any radical reinterpretation of “reasonable and necessary” we can expect the NCD decision to be positive, but coverage will likely be limited to this clearly defined patient population—a patient population that is still very large and capable of driving block-buster revenue for the company.  Consider that there are over 2 million men in the U.S. living with prostate cancer and 32,000 annual deaths. Treatment of only 11,000 patients with Provenge can achieve up to $1 billion in annual sales. Buying call options expiring in 2012 might be something to consider.

The biotechnology company, Antisoma, has been on a wild ride recently—their share price fell from £31.75 pounds  to £8.00 on March 29th after reporting disappointing news about its lead product ASA404 in NSCLC after a futility analysis showed that it would be unable to improve survival. The stock is currently at £5.75 and the market cap is £36 million.

However, what drew my attention to the company were the results of its compound AS1411. In a randomized, multicenter, phase 2 trial comparing AS1411 at 2 dose levels with cytarabine vs cytarabine alone in relapsed and refractory AML,the Complete Response (CR) rate and CRp  Complete Response rate without platelet recovery in patients was a total of 19% and 21% in the AS1411 containing arms vs 5% in the cytarabine alone arm. The study was small with only 59 patients divided between the 3 arms for the assessment of efficacy. A survival benefit was also suggested when the complete responders were examined for survival duration. The addition of AS1411 to cytarabine did not increase toxicity.

Considering the drop in Antisoma’s share price, the positive indications from AS1411 and the low market cap could present a buying opportunity. Antisoma is looking to license the product out pending the completion of a randomized phase 2b study of AS1411 +/- cytarabine examing duration of responses and survival. According to my sources there is interest from several pharma companies to make a deal.