Curative Technologies Inc. shares tumbled sharply on Fridaybefore recovering to close down $2.50 at $7.50 after VectorSecurities analyst Peter Drake said the company's earningscould be hurt by changes in reimbursement for Procuren.

Procuren is a wound healing formula consisting of a naturallyoccurring complex mixture of growth factors that promotes thegrowth of skin, soft tissue and blood vessels.

The Health Care Financing Administration, which is in charge ofMedicare reimbursement, had made no formal determinationregarding Procuren prior to 1991. Last year, as use of Procurenthrough CTI's wound care centers became more widespread,HCFA decided to leave the reimbursement decision in thehands of local intermediaries, Drake wrote.But about a month ago, HCFA convened a physicians panel toprovide guidance to the intermediaries on the definition ofProcuren. "Our industry sources indicate that the conclusions ofthis physicians panel were that Procuren is a biologic agent,and since it is self-administered, should not receive Medicarereimbursement," Drake wrote.

"Since 50 percent of CTI's Procuren sales come from Medicarepatients, we believe a national change in Medicare'sreimbursement policy could have an adverse impact on ourrevenue and earnings outlook for CTI in the 1992-1993 timeframe," he wrote.Drake said earnings could fall 30 cents to 60 cents per share in1992, 1993 and 1994, although he hasn't officially changed hisestimated gains of 5 cents in 1992, 75 cents in 1993 and $1.50in 1994.

However, he said, he still rates the stock (NASDAQ:CURE) a"buy" and even under worst-case assumptions said it wouldstill be fairly valued in the $16-$20 range a year from now.

Drake told BioWorld the company "has a lot of options tomodify the way Procuren is administered and billed tocircumvent this issue."

CTI has indicated for a long time that Procuren's Medicarereimbursement status would be a risk factor, said RussellWhitman, chairman, president and chief executive of the EastSetauket, N.Y., company.

"In the opinion of the company and its counsel, the definition of'drug' and 'biological' in the Medicare statutes is such thatProcuren shouldn't be classified as either and therefore shouldbe coverable," said Whitman. "We've made Medicare aware ofour position on the law and the definition, and we hope it willbe coverable. We've also outlined a number of other ways itcould be covered -- for example, as a physician service."

Curative has been following a preemptive strategy, Whitmansaid, renegotiating agreements at its wound care centers so thatits revenues don't depend on reimbursements. The company isconfident it can renegotiate all those deals, he said.

"If we can get reimbursement on top of that, it will be evenbetter," said Whitman. "But we'll get good margins evenwithout reimbursement." -- Karen Bernstein

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