Here we go, Merrill, looking for something positive in the carnage:
Proposals Would Hurt Remaining US Aranesp Ca Sales 72%:
The Centers for Medicare & Medicaid services is proposing national coverage reimburse.
changes for EPO agents (ESAs) in anemia assoc with cancer. The proposed changes were
posted earlier and are much more restrictive than expected based on last week’s ODAC
panel. But, we believe the proposals are likely to be modified significantly before being
adopted by CMS. If implemented as proposed, remaining US Aranesp sales in oncology
could decline by 72% and 2008 EPS by $0.60. While we are maintaining our projections
until we gain visibility regarding final changes, we est a risk-adjusted fair value of $52-$53.
More Restrictive Than Expected:
The reimbursement proposals exclude patients with MDS, only allows initiation of therapy if
hemoglobin (Hb) is < 9 g/dL for a large majority of patients with cancers that express EPO
receptors, limits the ESA dose that can be used each month, and eliminates use for patients
receiving certain other expensive biologics, such as Avastin and Erbitux.
Unlikely to be Adopted as Proposed:
Because the proposals do not appear to be based on sound scientific rationale, we believe the
extremely restrictive proposals are derived from a political agenda to cut payments for ESAs.
Because too many cancer patients, particularly those without access to transfusions, would be
denied an important therapy, we do not expect the proposal to be adopted as written.
Likely Changes to Proposal:
We believe the proposals will be changed based on comments received during the 30-day
comment period. We do not expect patients will be denied coverage based on a theoretical
concern about EPO-receptors being present on 90% of tumors. However, we do believe
that Medicare will implement a minimum Hb requirement for initiation of ESA therapy,
particularly for patients w/o symptoms.
Worst Case & Most Likely Scenarios:
If the proposals are implemented as written we believe remaining US Aranesp sales in
cancer could decline by 72% & 2008 EPS could decrease by $0.60. The more likely
scenario is that the Hb level needed for initiation of therapy will be set at 9 - 10 g/dL. Also,
breast and head & neck cancer patients could be denied coverage based on studies that
suggest ESAs hurt these patients. |
