On May 9, 2012, The Centers for Medicare & Medicaid Services ("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. The decision was a major victory for Cytomedix, Inc. (CMXI.OB) and its autologous blood-derived gel product, AutoloGel.
In the National Coverage Determination ("NDC") memo, CMS proposes coverage of AutoloGel through its Coverage with Evidence Developement ("CED") program. To demonstrated the evidence development, CMS proposes the requirement that all patients receiving AutoloGel be enrolled in a randomized clinical trial 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:
Complete wound healing?
Ability to return to previous function and resumption of normal activities?
Reduction of wound size or healing trajectory which results in the patient's ability to return to previous function and resumption of normal activities?
CMS has outlined the strict requirements for the randomized clinical trial in preliminary NDC proposal found on the www.cms.gov website. However, we are extremely pleased with the preliminary decision. CMS has clearly outlined a path for both access and data collection. We see nothing in here that is an impediment for Cytomedix. In fact, the potential to drive use and coverage by returning patients to previous function or simply reducing wound size or healing trajectory is enormous. Clearly Cytomedix, CMS, physicians, and patients ultimately want to see complete wound healing; but the CMS proposal opens the door for reimbursement with lower hurdles - including quality of life improvements and restarting the wound healing process.
…A Little Background Info…
Cytomedix first filed requesting coverage for AutoloGel for AutoloGel in May 2011. This process dates back over seven years, to when CMS first reviewed and rejected the original NCD application in 2003 based on a lack of significant evidence on safety, efficacy, and cost-effectiveness. Cytomedix tried again in 2007, only to be rejected in early 2008 for essentially the same reasons. The NCD submission in May 2011 culminates over seven years of data collection, case studies, and diligent work by this new management to file for reconsideration.
...Support For Coverage...
Cytomedix took a very different approach to the May 2011 reconsideration filing. Management presented over ten times the data to CMS with this filing compared to the first filing. The company was extremely active in presenting the data for peer-review over the past 24 months. The campaign included both posters and oral presentations as key medical conferences, including:
- The Symposium on Advanced Wound Care and Wound Healing Society (SAWC/WHS) in September 2011 and again in October 2011.
- Publication in ePlasty of Systemic Review and Meta-Analysis on Use of Platelet Rich Plasma Gel in wound healing in September 2011.
- A poster presentation at the 26th Annual Clinical Symposium on Advances in Skin and Wound Care in September 2011.
- Data published in Advances in Skin and Wound Care noting rapid improvement in healing of complex chronic wounds in August 2011.
- Data at SAWC in April 2011 comparing the use of platelet rich plasma (PRP) gel (AutoloGel) and negative pressure wound therapy (NPWT) in the long-term acute care setting.
- Data published in the Journal Advances in Skin and Wound Care in December 2008 that highlighted the economic benefit of AutoloGel when compared to standard of care.
Cytomedix even lobbied for public support - something that was severely lacking last go-round. The coverage analysis process allows for a public comment period. There were 121 public comments on the use of PRP for the treatment of chronic wound healing. We have read all 121 public comments. We consider 118 to be positive, and we note the 3 negative comments were from potential competitors (Organogenesis and SafeBlood).
We believe all the above data was strongly in Cytomedix' favor, and exactly the kind of stuff CMS was looking for. Not only did AutoloGel heal patients faster and more effectively, but it also costs about 60% less than traditional treatment.
…Coverage & Awareness Should Drive Sales…
We believe coverage 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.
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.
...A Partnership Soon...
Cytomedix remains in active discussion with an undisclosed "Top-20 Global Pharmaceutical company" seeking to license AutoloGel for distribution in the U.S. We remind investors that back in October 2011, Cytomedix announced it has received a $2.0 million payment from the aforementioned undisclosed partner for the right to exclusively negotiate to distribute and promote AutoloGel in the U.S. through a dedicated, hospital-based sales force. In early January 2012, Cytomedix announced that talks are continuing, and that another $2.5 million exclusivity payment had been received. The payment buys the undisclosed partner the right to continue the exclusive negotiations to June 30, 2012.
According to management, talks have progressed to the formal negotiation and knowledge transfer stage. If a deal is signed, we expect that Cytomedix will receive a modest upfront payment, development milestones relating to the second-generation AutoloGel device, and a profit-sharing arrangement on future U.S.-based sales of AutoloGel in the chronic wound care market.
We have learned that the potential pharmaceutical partner current has a hospital-based sales force of approximately 100 full-time representatives. This would be an enormous increase in promotion from Cytomedix's current six part-time representatives. This sort of tier-1 promotion 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.
Cytomedix Remains a Top-Pick
Cytomedix remains one of our favorite ideas in small-cap biotech. We have written extensively on the company. We first put investors on notice with this article (Cytomedix Fundamentals Improving) back in September 2011. In February 2012, Cytomedix made A Bold Move To Acquire Aldagen. We believe the announcement of a partnership for AutoloGel has the potential to send the shares significantly higher. The potential for re-listing with NASDAQ or AMEX also intrigues us, as it will open up Cytomedix shares to previously unavailable professional investors. In the meantime, retail investors have the advantage here. We continue to have a target of $3 per share.