Meeting With CMS
On June 8, 2012,
Cytomedix (OTC BB:CMXI) submitted a
public comment to the Centers for Medicaid & Medicare Services (CMS) updating the company’s plans to comply with the proposed Coverage with Evidence Development (CED) for AutoloGel for the treatment of chronic non-healing diabetic, venous, and/or pressure wounds. In this comment, CEO Martin Rosendale outlined the challenges to running a randomized clinical trial (RCT) in wound care, and the desire to obtain the necessary evidence for final reimbursement of AutoloGel through an observation study (a registry).
…A Little Background…
As a reminder, on May 9, 2012, CMS issued a
preliminary decision proposing that platelet-rich plasma (PRP) will be covered for the treatment of chronic non-healing diabetic, venous, and/or pressure wounds. In the National Coverage Determination (NDC) memo, CMS proposes coverage of AutoloGel through its Coverage with Evidence Development (CED) program. To demonstrated the evidence development, CMS proposes the requirement that all patients receiving AutoloGel be enrolled in a randomized clinical trial (RCT) that addresses the following questions (below) using validated and reliable methods of evaluation:
Prospectively, do Medicare beneficiaries that have chronic non-healing diabetic, venous and/or pressure wounds who receive well-defined optimal usual care along with PRP therapy, experience clinically significant health outcomes compared to patients who receive well-defined optimal usual care for chronic non-healing diabetic, venous and/or pressure wounds as indicated by addressing at least one of the following:
1. Complete wound healing?
2. Ability to return to previous function and resumption of normal activities?
3. Reduction of wound size or healing trajectory which results in the patient’s ability to return to previous function and resumption of normal activities?
The preliminary NDC notes that while CMS found no conclusive evidence to support Medicare coverage for AutoloGel, there was also no conclusive evidence that the product lacked a benefit. CMS then emphasized that the safety of AutoloGel was not in question. Therefore, CMS requested “additional data gathered in the context of clinical care” to “further clarify the impact of these items and services on the health of Medicare beneficiaries.”
…What’s RCT To CMS (vs. FDA)…
The key question that remains with respect to the final NDC-CED document, expected on or before August 7, 2012, is what exactly a RCT means in the eyes of CMS. We remind investors that AutoloGel has already received FDA approval. A randomized controlled trial in the eyes of CMS is not the same as in the eyes of the FDA. Cytomedix already answered the FDA’s question of, “Does it work and is it safe?” CMS is now asking, “Should it be covered for Medicare beneficiaries?”
The nuance is important for investors to understand. CMS wants to know how AutoloGel compares to the current (reimbursed) standard-of-care for chronic non-healing wounds. They are interested in seeing if AutoloGel improves the quality of life of Medicare patients beyond what’s currently available under national coverage. Finally, CMS wants to know if it returns people to normal activities at a faster / earlier rate than current therapies. These are not the same sort of efficacy questions the FDA asked, and Cytomedix answered a decade ago.
…Challenges of RCT…
We see a number of challenges to running a post-marketing RCT in chronic non-healing wounds. Firstly, CMS has outlined CED on three wounds types – diabetic ulcers, venous ulcers, and pressure ulcers. Cytomedix believes these biologically distinct wounds have differing etiologies and behaviors, and that it would not make sense to run one RCT to include all three wound types. Secondly, the standards of care, which include use of antibiotics or other systemic drugs, and wound cleanings and dressings, differ between the three wound types. As such, projected outcomes for the three wound types also differ.
Cytomedix also outlines potential challenges to constraining the baseline population for the RCT. A typical RCT for pivotal phase 3 or PMA study might incorporate substantial inclusion and exclusion criteria. Typical exclusion criteria may include age (too old or too young), co-morbidities (peripheral arterial disease, infection, osteomyelitis, cellulitis, corticosteroid treatment, hyperglycemia, liver impairment, renal impairment, bleeding disorders, cancer, renal dialysis, gastrointestinal disease, respiratory disease, severe cardiac disease, diabetes, etc…) wound size and grade (too severe, too large), or use of concomitant medications (immunosuppressive drugs, alcohol/drug abuse, anticoagulants, antiplatelet drugs, vasoactive drugs). However, for CMS, these sort of “real-world” patients should be included in the RCT.
The final challenge that Cytomedix sees with respect to an RCT is defining the endpoints. A typical phase 3 or PMA program will look at a specific primary endpoint at a specific time – for example, complete wound healing at 24 weeks. However, for CMS and “real-world” patients, this may not be practical. As noted above, CMS has suggested that returning to previous function and/or improving quality of life are acceptable endpoints for coverage. For patients with significant wounds and co-morbidities, setting a defined stopping time point may not make sense.
…Ironing Out The Details…
In late June 2012, Cytomedix met with CMS face-to-face to iron out these details. Cytomedix would like to conduct the RCT in the form of an observations study – essentially a registry. Observation studies can be large, have wide inclusion criteria, include all patient types, and still be well-controlled and designed. In fact, an extensive, validated registry in wound care already exists and can be adapted to a CED decision. We believe that Cytomedix is in the process of incorporating these changes and plans to present them to CMS in August 2012. This may come after the final CMS decision on CED set for August 7th. However, August 7th is just when CMS plans to tell Cytomedix “Yes or No”, there is no set timeframe on “How”. The finalized protocol for the observation-RCT may not be finalized until September or October 2012.
A Partner Waiting
Many, if not all, of the questions raised above as to what the final NCD-CED document will look like in August, and what the final protocol for the observational-RCT will look like in September / October, are the same questions that Cytomedix’s undisclosed “Top-20 Global Pharmaceutical company” would like answers to before they enter into a broad licensing and supply agreement for AutoloGel. Accordingly, on July 2, 2012, Cytomedix announced that the
exclusivity period for negotiating a deal on AutoloGel, which was set to expire on June 30, 2012, has been extended to August 30, 2012. This is the second time the exclusivity period has been extended. To date, Cytomedix has received $4.5 million in non-refundable exclusive negotiation payments from this yet undisclosed partner.
We expect that many of the above questions will be answered after the CED document comes out on or before August 7, 2012. Cytomedix notes that current negotiations with the pharma partner are centered on the material terms and provision of a distribution agreement. This would be a short-term agreement for the simple distribution of AutoloGel through the partner’s sales force. We expect this deal will be signed in late August 2012, and that Cytomedix will immediately look to distribute AutoloGel through the partner’s sales force once signed. Under this initial distribution agreement, Cytomedix will retain control of AutoloGel and book all revenues. Cytomedix will pay the partner a royalty based on sales made using their hospital-based sales force of approximately 100 full-time representatives. This will be a significant step-up in promotion for AutoloGel, as Cytomedix currently promotes the product with six part-time representatives.
The sort of tier-1 promotion that the pharmaceutical partner could bring coupled with CMS reimbursement could cause AutoloGel sales to soar in the coming years. AutoloGel posts sales of only $390K in the 2011. With significant promotion and CMS coverage, peak sales could eclipse $50 million.
This initial period will give Cytomedix a chance to continue working with CMS to finalize the design protocol for the observations-RCT. Once the final protocol for the observational-RCT has been set, we expect that the deal will move to a full licensing and supply agreement, where the pharmaceutical partner will take over booking revenues of AutoloGel and pay Cytomedix a profit-share (royalty) on sales. We expect that this agreement will come with a modest upfront payment (we model $3 million), plus development milestones relating to the second-generation AutoloGel device (U.S. 510(k) application planned during the second half of 2012).
Coverage & Awareness Should Drive Sales
We believe CED could be a meaningful driver of AutoloGel sales. There are approximately 2.0 million pressure ulcers and 1.5 million diabetic foot ulcers each year in the U.S. where AutoloGel and its physiologically relevant concentration of platelet-rich plasma could be an effective product. However, approximately half of these are in patients covered by Medicare / Medicaid, and non-coverage has been a significant impediment for uptake.
The market for products addressing chronic wounds in the U.S. is estimated to be $2.3 billion annually. There are over 6 million wounds (primarily diabetic foot ulcers, venous leg ulcers, and pressure ulcers) treated each year. Platelet rich plasma (PRP) products like AutoloGel represent only a small fraction of the market share. There are dozens of alternative therapies that compete with AutoloGel, some of them commodity types of products that have established habitual use patterns or set provider contracts to encourage standardized use.
There is virtually no government business for AutoloGel now. Instead, management has been focusing on private pay procedures, but the lack of a national coverage decision on the product has limited uptake in this area as well. CMS coverage not only kicks open the door to Medicare / Medicaid, it also meaningfully expands private pay coverage as well.
Cash
Cytomedix exited the second quarter 2012 with $8.4 million in cash and equivalents. The company has allocated $4.7 million of this cash to fund the clinical development of ALD-401 in the active RECOVER-Stroke phase 2 trial and related matters. We have confirmed with management that enrollment in RECOVER-Stroke remains on track. We see the current cash balance as sufficient to fund operations well into 2013.
As noted above, if a licensing deal with a larger pharmaceutical company is signed for AutoloGel, it would come with a modest upfront payment. We currently model $3.0 million, which would bring the total upfront consideration for AutoloGel to $7.5 million. Management has noted the deal will also include a “significant milestone payment” for the approval of the next-generation AutoloGel device. Cytomedix is nearing the filing of a 510(k) application for AutoloGel 2.0 in the U.S. The potential addition of $3.0 million in cash sometime over the next 2 to 3 months will further strengthen the company’s cash balance. The potential for another milestone (our guess is $5 million) for AutoloGel 2.0 in 2013 or 2014 should help reduce the company’s need for future dilutive financings.