Photocure reported total revenue of NOK39.3m for Q217, representing 11% growth over Q116. This was driven by 10% year-on-year growth of revenues from Hexvix/Cysview (NOK37.6m vs NOK34.2m).
Exhibit 1: Q217 Hexvix/Cysview sales
|
Revenue (NOKm) |
Y-o-y |
Q-o-q |
Units |
Y-o-y |
Q-o-q |
Hexvix sales Nordic |
11,676 |
10% |
20% |
2,390 |
3% |
5% |
Cysview sales US |
10,942 |
55% |
9% |
1,370 |
37% |
7% |
Total own sales |
22,618 |
28% |
14% |
3,760 |
13% |
6% |
Partner sales |
14,996 |
-9% |
-10% |
11,012 |
-6% |
-8% |
Total Hexvix/Cysview |
37,614 |
10% |
3% |
14,772 |
-2% |
-4% |
Sales were especially strong in the US, where revenues grew 55% compared to Q216. End user unit sales were also strong, growing 37%, driven by an increase in the number of permanent blue light cystoscopes installed (currently 93, up from 83 at the beginning of the year) and by an increase in the usage per centre. Nordic sales finally recovered from weakness related to a reorganisation of hospitals in the Copenhagen region and were also helped by strong sales in Norway. Revenues in the Nordic region increased 10% compared to last year and a very strong 20% sequentially. These strong Q217 results have helped Nordic revenues turn positive for the year-to-date, increasing 3% compared to H116. Results in partnered areas were strongly affected by a loss of reimbursement in France so that now hospitals must bear the additional cost of the product. This move is somewhat perplexing as the new French National Guidelines for bladder cancer, which were introduced in November 2016, recommend the use of blue light cystoscopy for the first bladder resection in almost all patients. In addition, growth in the relatively new markets of Australia and Canada was hampered by the delayed placement of scopes and reimbursement issues. Year-to-date however, partner sales are only down 2% (up 1% in constant currencies) compared to H116.
Exhibit 2: Hexvix/Cysview in-market sales
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SG&A for Q2 was slightly higher than recent quarters at NOK36.8m (compared to NOK33.5m in Q1). SG&A will likely increase in 2017 and 2018 due in large part to an increase in the number of salespeople in the US. This will enable them to penetrate additional metropolitan areas, lay the groundwork in preparation for the surveillance market launch and take advantage of improving reimbursement.
R&D expenses were down (to NOK4.2m from NOK8.5m), mainly due to a NOK4.0m write-down of Nedax lamp inventory (the lamp is associated with the Visonac product) in the first quarter. Also on the R&D front, the company announced that it has filed a supplemental NDA for approval of Hexvix/Cysview in August in the surveillance setting, with approval expected in 2018. As a reminder, sales may have significant upside if the product successfully expands into the US bladder cancer surveillance market, which has 1.4m procedures per year, compared to its current market of 300,000 transurethral resection of the bladder tumour (TURBT) procedures.
US reimbursement issues resolving
Currently, Medicare does not separately reimburse centres for use of the BLC with Hexvix/Cysview procedure, but instead bundles it with the total reimbursement for TURBT procedures so any additional cost related to the product is absorbed by the centre. This has had a direct impact on the availability of BLC with Hexvix/Cysview in the US.
The issue could be potentially resolved as of 1 January 2018 thanks to a new rule proposed by the CMS that would create a new code for Blue Light Cystoscopy, which would improve reimbursement for the procedure in most situations to a level where the cost of the product would be covered. Effectively, for CPT codes 52204, 52214 and 52224, if blue light cystoscopy is used, they would qualify for reassignment to the higher ambulatory payment classification (APC) of APC 5374 from APC 5373. The company believes this will result in a $1,000 increase in reimbursement for the CPT codes 52204, 52214 and 52224. Based on CMS procedure figures (see Exhibit 3), this would affect 54% of procedures.
Exhibit 3: CPT codes used with Hexvix/Cysview
CPT Code |
Description |
APC |
Number of procedures (2015) |
% of Total |
52204 |
Biopsy of the bladder using an endoscope |
5373 |
36,566 |
18.3% |
52214 |
Destruction of tissue in the bladder, bladder canal (urethra) or surrounding glands using an endoscope |
5373 |
21,950 |
11.0% |
52224 |
Destruction of (less than 0.5 centimeters) growths of the bladder and bladder canal (urethra) using an endoscope |
5373 |
49,492 |
24.8% |
52234 |
Destruction and/or removal of (0.5 to 2.0 centimeters) small growths of the bladder using an endoscope |
5374 |
31,586 |
15.8% |
52235 |
Destruction and/or removal of (2.0 to 5.0 centimeters) medium growths of the bladder and bladder canal (urethra) using an endoscope |
5374 |
36,026 |
18.0% |
52240 |
Destruction and/or removal of large growths of the bladder using an endoscope |
5374 |
24,340 |
12.2% |
Total |
|
|
199,960 |
100% |
Source: CMS. Note: The procedure numbers only include those reimbursed by medicare and not by commercial payers.
Importantly, in the explanatory text, the CMS has admitted that blue light cystoscopy benefits patients:
“We believe that blue light cystoscopy represents an additional elective but distinguishable service as compared to white light cystoscopy that in some cases may allow greater detection of bladder tumours in beneficiaries relative to white light cystoscopy alone.”
As bladder cancer is definitely a cancer of the elderly, with 73.4% over the age of 65 at the time of diagnosis (median age is 73 years) according to the National Cancer Institute, Medicare is the key third-party payer and this is a major win for the company. We do not believe this will be a controversial rule change, so there is a high likelihood that it will be included in the final rule in Q417 (after the comment period ends in September) and implemented on 1 January 2018.
