After XTANDI's FDA Approval, Medivation Pulls Back Print E-mail
By Brian Wilson, Lead Contributor   
Friday, 16 November 2012 08:13
Investors who had long-term positions in Medivation Inc. (NASDAQ: MDVN) had an incredible 2012, which was sweetened by an early FDA approval for their flagship drug XTANDI (enzalutamide) in the treatment of prostate cancer post-chemotherapy.

The original PDUFA action date for XTANDI's NDA was November 22, 2012 under the priority review designation that Medivation received for the NDA, but the FDA was presumably able to review XTANDI's phase III data quite rapidly. XTANDI was approved on August 31st.

The prolonged rally in MDVN stock can be traced back to a press release on November 3rd, 2011 that had statements from Medivation's partner Astellas that XTANDI (then known as MDV3100) had such exceptionally positive phase III data that was good enough to halt the study early in order to give XTANDI/MDV3100 to the placebo patients. MDVN rallied over 130% on the news, bringing it from a relatively ignored prostate cancer drug company to the developer of a miracle drug.

In terms of its stock performance this year, Medivation has been exceptionally bullish until recently. Using numbers adjusted for the 2-for-1 stock split enacted on September 24th, MDVN started the year at $23.06/share. By the time it was approved, the stock had reached $52.43/share, representing an incredible 127% return in just 9 months. If you calculate the percentage gains just prior to the November 2011 press release about XTANDI's exceptional AFFIRM data, you see that MDVN gave a very impressive 409% return up to this point.

It wouldn't have been shocking to see a sell-the-news reaction to the FDA approval, but MDVN continued up to a 52-week high of $58.83/share on October 5th riding on the release of detailed results from the XTANDI phase III AFFIRM study that brought the drug to an approval.

The AFFIRM study provided some exceptional numbers indeed, like overall survival statistics that showed a median overall survival of 18.4 months in the XTANDI arm versus the 13.6 months in the placebo arm.  Overall survival was the primary endpoint for the phase III study, and as you might expect the improvement in the XTANDI arm was demonstrated with extreme statistical significance (P < 0.0001)

After some extra momentum brought about by the detailed AFFIRM results, which were found to be better than the overall survival results that Johnson & Johnson's (NYSE: JNJ) Zytiga posted in clinical trials by the way, MDVN reached the aforementioned 52-week high of $52.43/share. A combination of buyer exhaustion, a lack of fresh press releases, profit-taking, and a rise in short interest deteriorated the momentum that Medivation had been riding on since late 2011 – which dropped the stock over 22% from its 52-week high.

Medivation has become a bit confusing to trade post-approval, due to two conflicting factors that could drive the stock as we head into 2013.

First is the marketing development of XTANDI, which started on September 13th for certain specialty pharmacies and distributors. Medivation's partner Astellas reported $14.1 million in net product sales in the first 12 business days. Medivation is also waiting on a MAA (the European version of the NDA) decision by the European Medicines Agency, which would allow the drug to be sold to prostate cancer patients in Europe who have already received docetaxel. The company was caught off guard by the early approval of XTANDI, and is in a rush to provide some clarity on its strategy and the progress of XTANDI in the prostate cancer drug market.

The second is the valuation of the company, which has now reached $3.34 billion (and this is after the recent 22% drop.) Since the prostate cancer drug market is roughly $1 billion in size – it's clear that there is a significant amount of market penetration and sales growth priced into the stock at this point. There is also a general consensus that the prostate cancer drug market will grow exponentially in the next few years, due to skyrocketing costs and an aging population. It's clear that there are traders willing to bet against XTANDI's progress though, judging by the increasing short interest on the stock (which reached 4.3 million shares at the end of October.)

The MAA decision on XTANDI is one catalyst that could prove extremely beneficial (or detrimental) to MDVN, but other than that it's a matter of waiting for more financial data to gauge the company's intrinsic worth. If Medivation is going to reverse the current downtrend that interrupted its lengthy 400% rally, we probably need to see an MAA approval or some rapid sales growth for XTANDI in 2013.

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