The Pink Sheet
August 10, 2011
Disappointing Provenge Sales Stir Doubts About Demand
By Emily Hayes
Dendreon Corp. withdrew its yearly sales forecast for the new prostate cancer immunotherapy Provenge on August 3, shocking Wall Street, and raising concerns about whether the high-profile company had hit a speed bump - or mountain.
Sales for the ground-breaking therapeutic cancer vaccine amounted to $51 million in the second quarter, below the street's consensus of $58 million, leading the company to pull its guidance for the year of sales of $350 million to $400 million. Management chalked up the problems to reimbursement and physician education hurdles, but Wall Street punished the stock severely amid suspicions that bigger, long-term issues related to demand, are at play. Following a wave of panic selling, Dendreon stock traded at $11.70 on Aug. 4, down more than 65% from about $36 at the close of Aug. 3.
Approved in April 2010, Provenge is indicated for asymptomatic or minimally symptomatic prostate cancer that is metastatic and resistant to standard hormone treatment. Dendreon hit the ground aggressively, launching the drug at the price of $93,000 for a treatment regimen to much fanfare in the press and on Wall Street. The price cheered investors but angered some payers, who questioned whether such high pricing was sustainable for society ('Provenge Poised For Broad Coverage, Despite Grumbles On Price,' 'The Pink Sheet,' May 24, 2010).
In an interview, Oliver Sartor, medical director at the Tulane University Cancer Center, noted that some patients are unsure about the benefits of Provenge. In a trial supporting approval, the therapy was shown to boost median survival by about four months.
Demonstration of a survival benefit is a high bar in oncology. But, as is the case with other immunotherapies, Provenge may not actually shrink tumors ('Provenge Nod Lifts Spirits And Stocks But Sets High Bar For Success, 'The Pink Sheet,' May 17, 2010). This has caused some uncertainty among patients, Sartor said, adding "Patients want to know: 'Is it working for me?' Then when they find out there is no [tumor] response, they are less enthusiastic."
Because the drug does not delay disease progression during treatment, the time to when patients would need to move on to chemotherapy is likely to be the same as for patients not treated with Provenge, observed Decision Resources analyst Rachel Webster in an interview.
Explaining Reimbursement Hurdles
At the time of approval, the company said it expected demand would exceed supply and questions arose about capacity for Provenge's complicated manufacturing process ('Dendreon Set To Ship Provenge Within A Week,' 'The Pink Sheet' DAILY, April 29, 2010). Each dose of Provenge is prepared using the patient's own cells. Immune cells are altered using a process called leukapheresis, and activated immune cells are delivered back intravenously. The therapy is given in three infusions over one month.
The revisions in the sales forecast were largely due to reimbursement issues and also challenges in educating doctors to identify the appropriate patient population, CEO Mitchell Gold said on a call with analysts. The company's initial, rosier projections were based on take-up in academic centers, whereas 70% of the eligible patients are treated by community providers, who have proven more difficult to reach.
Moreover, while Dendreon planned carefully for the manufacturing logistics, the complex administration process has been a hurdle for physicians.
Unlike treatment with an off-the-shelf drug, this personalized therapy requires a number of administrative steps, Sartor noted. The provider needs to coordinate dates with Dendreon, as well as the infusion center, and typically arrange for the placement of a catheter. The scheduling work is burdensome and not compensated, which presents a barrier for private practices, he said.
"Coordination requirements are considerably more than for a typical drug," Sartor said.
Provenge's treatment protocol also is hindering fast adoption, the company said. Providers need to cover the $93,000 treatment cost upfront, and then await reimbursement. This is a particular problem in the community setting because, unlike other treatments given over several months, the Provenge regimen takes place within the span of a month, so there's no time to spread out the cost. Furthermore, many prostate cancer patients are treated by urologists who are less familiar with infusion therapy than oncologists. Many community providers are prepared to give treatment, but they are inclined toward treating one or two patients at a time and testing the reimbursement process, execs said.
"This cost density coupled with concerns related to a more restrictive reimbursement label has heightened customers' awareness and anxiety relating to reimbursement," said Gold.
At the end of June, the Centers for Medicare and Medicaid Services issued a national coverage decision in favor of reimbursement for labeled indications, a move that affects Medicare patients, who make up three quarters of the eligible patient population. CMS decided not to include a list of criteria used in the trial supporting approval, which was a positive development for the drug ('Medicare Provenge Decision Addresses Treatment Eligibility Criteria,' 'The Pink Sheet' DAILY, June 30, 2011). And since July 1, Provenge has had a product specific reimbursement code, which greatly simplifies the reimbursement process. However, only about one quarter of doctors are aware of the changes in reimbursement, execs said.
Gold acknowledged the problem. It's difficult to predict how long it will take to educate physicians and gain their confidence in today's positive reimbursement landscape, he said, adding "I can tell you it's the top priority for our commercial organization to pursue."
Dendreon's sales force is on the road, making sure physicians know about the recent positive changes in reimbursement, the company said. Physician interest in Provenge is strong, with more than 265 accounts infusing Provenge, which was better than expected, the company said. It is on track to have 500 accounts by the end of the year.
But whereas the company expected that one or two patients per month per account would be treated, the actual figure is only 0.8 per month. Providers will need to be educated in screening to identify those who could benefit from treatment, execs asserted.
Doubts On Demand
But as analyst Mark Schoenebaum of ISI Group observed, "management credibility has been badly damaged, given the woefully inaccurate guidance they provided." Dendreon's plans to cut costs, including staff, in response to the setback further rattled analysts, who worried that bigger and more long-term issues than merely a lack of education about the changes in the reimbursement landscape are at play.
If the problems will be addressed in the near term, reasons for cutting staff aren't clear, pointed out Chris Raymond, an analyst at Robert W. Baird & Co., who was on the call.
The "lack of urgency" on the part of physicians to find patients who could benefit from the drug suggests that demand is weak, Schoenebaum concluded. The restructuring suggests a "fundamental shift" in the way the company is viewing demand for the drug, he said.
Going forward, the company's options include significantly lowering the price of the drug, which seems unlikely, and offering a more generous payment plans to take the cash outlay pressure off providers, the analyst said.
Making It In A Changing Landscape
While there is a lack of FDA-approved drugs for this patient population prior to chemotherapy, a number of inexpensive off-label treatments are available and have been used for decades with some success, Sartor noted.
Meanwhile, the treatment landscape is changing fast with other drugs newly approved and many in the pipeline. Johnson & Johnson's oral drug Zytiga (abiraterone) was cleared in May for patients after chemotherapy ('Dendreon Defends Provenge's Stake Against Arrival of Abiraterone,' 'The Pink Sheet,' May 9, 2011). During the Dendreon call, analysts noted that Zytiga had achieved $60 million in sales in its first two months on the market.
Results from a Phase III trial of Zytiga in earlier-stage patients prior to chemotherapy are "eagerly awaited," Decision Resources' Webster commented. If results are positive, the drug would be targeted at the same patient population as Provenge.
"Zytiga could hit Provenge hard," she said.
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