Dendreon shares pummeled as Medicare studies coverage

Shares of Seattle biotechnology company Dendreon were slammed in after-hours trading Wednesday after Medicare regulators said they were opening an inquiry on whether to pay for the pioneering prostate-cancer immunotherapy.

Dendreon shares fell $5.64, or 17.5 percent, to $26.69 in after-hours trading on Nasdaq after losing $1.26 during regular trading.

That left the stock at less than half its peak above $55 in the days immediately after the Food and Drug Administration approved the treatment, Provenge, on April 29.

The federal Centers for Medicare and Medicaid Services (CMS), which determines what treatments Medicare covers, said Wednesday it will study "whether or not autologous cellular immunotherapy is reasonable and necessary."

That report is due in March, according to the agency's website.

Dendreon said late Wednesday the inquiry doesn't change existing coverage. Pending conclusion of the CMS study, the company said in a statement, "Medicare beneficiaries are still able to access Provenge and private payers can also still cover Provenge."

The treatment costs $93,000 per patient. In clinical studies, it boosted median survival time by four months, from 22 months in the placebo group to 26 months in the Provenge group.

Investors and analysts were surprised by the CMS announcement, and were trying to get a clearer picture from Dendreon management late Wednesday, said David Miller, CEO of Biotech Stock Research in Seattle.

"This is not something any of us is familiar with," he said. "CMS routinely approves any drug approved by the FDA, certainly with oncology drugs."

Miller, a longtime bull on Dendreon and its drug, said CMS, like the FDA, is prohibited from considering price when it decides whether to approve a drug.

"All they're doing is judging whether the drug is useful for the patient, and it clearly is" in the case of Provenge, he said.

Given the data Dendreon provided for the FDA review, Miller said, "I can't imagine there's any situation where CMS review would be different."

Because almost all prostate-cancer patients are over 65 and covered by Medicare, "it'll be the single largest insurer for Provenge," he said.