Dendreon Corporation (DNDN) received a huge boost today when the Centers for Medicare and Medicaid Services (CMS) proposed to pay for its lead prostate cancer vaccine Provenge.
Provenge was approved in the US in April last year and is marketed since May 2010. It is currently reimbursed by all 15 local Medicare contractors.
CMS issued the proposed decision memo for Dendreon’s potential blockbuster vaccine, Provenge, after conducting a scientific review of the evidence provided. The agency believes there is enough evidence to justify reimbursement for the approved label of the vaccine. CMS believes Provenge leads to improvement in health outcomes for men with advanced, castrate-resistant prostate cancer (CRPC) and is clinically necessary, as per CMS. The agency did not propose to cover off-label use of the vaccine at the national level due to insufficient evidence.
However, CMS will give its final decision on the matter in June 2011. Last year the CMS Medicare Evidence Development & Coverage Advisory Committee (MEDCAC) reviewed the safety and efficacy of Provenge use, both labeled and unlabelled, on health outcomes of patients with advanced prostrate cancer. The panel supported reimbursement for on-label use only. The MEDCAC demonstrated a high level of confidence in the survival benefit of Provenge.
We believe the positive panel recommendation and the proposed decision memo could lead to Medicare reimbursement in 2011. Reimbursement of the vaccine by Medicare is crucial for the commercial success of Provenge as it is primarily meant for men older than 60 who are dependent on Medicare for their treatment.
Unlike traditional vaccines that prevent diseases, Provenge treats by stimulating the body’s own immune system to attack cancer cells. It is the first product in the new therapeutic class known as active cellular immunotherapies (ACI). Prostate cancer is the most common non-skin cancer, affecting approximately 2 million men, in the US.
There are products currently under development for the treatment of prostate cancer, which could pose a competitive threat to Provenge. Such examples include AstraZeneca’s (AZN) oral pill zibotentan, Johnson and Johnson’s (JNJ) oral abiraterone and Medivation Inc’s (MDVN) MDV3100.
Our Recommendation
We believe that the launch of Dendreon’s potential blockbuster drug, Provenge, has been impressive. Successful commercialization of Provenge is crucial for the financial performance of Dendreon as it can drive Dendreon to profitability. We are encouraged by the FDA approval for the NJ facility expansion and CMS’ proposed decision to reimburse Provenge for on-label usage, which could subsequently spur sales at Dendreon.
However, we remain concerned about the company’s dependence on Provenge and the lack of a robust pipeline. We believe Dendreon has little to fall back on if Provenge is not commercialized successfully. The continuous up tick in operating expenses also keeps us on the sidelines.
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