Medivation’s Xtandi Threatened by J&J’s New Acquisition Print E-mail
By Brian Wilson - Lead Contributor   
Tuesday, 18 June 2013 09:38
One of the biotech laggards of the year, Medivation (NASDAQ: MDVN) saw a very high volume selloff (-6.78% $47.41/share) yesterday after rival Johnson & Johnson (NYSE: JNJ) announced the acquisition of Aragon Pharmaceuticals – a company that was developing a Phase II metastatic castration-resistant prostate cancer (mCRPC) drug that the market considers a threat to Xtandi - Medivation’s lone pipeline drug. At the time of writing MDVN seems poised for a small rebound, although nothing serious has materialized in early trading.

 J&J’s Zytiga, which already competes with Xtandi for particular mCRPC subindications, has already posed a major threat to other non-chemo drugs in the space although Xtandi may be able to steal a significant portion of Zytiga’s pre-chemo mCRPC patient population from Zytiga given positive results for the Phase III PREVAIL study and additional “saturation” into the market. Also threatened is Dendreon’s (NASDAQ: DNDN) Provenge therapy, which has seen significant sales declines since the market launch of Xtandi. In the most recent quarterly earnings call, these declines were indeed attributed to both Xtandi and Zytiga.

Although PREVAIL isn’t scheduled to be completed until September 2014, the company intends to release an interim analysis of the overall survival (OS) data that has been collected thus far. Wall Street analysts and biopharma investors are generally expecting good results with similar efficacy relative to previous clinical trials, which is why there is a consensus that the $3.6 B company has limited upside at this point. Conversely, there is the notion that a company with limited upside also has limited downside.

But if Xtandi is poised to compete with Zytiga in pre-chemo mCRPC patients, why is the acquisition of another drug in mid-stage development so threatening?

Xtandi (enzalutamide or MDV3100) is a second generation androgen receptor antagonist (inhibitor). The Phase II drug that was acquired along with Aragon – ARN 509, works through the same mechanism of action and has demonstrated strong efficacy in early pre-chemo treatment. Xtandi, which has also established its utility at this stage of patient care, will then have to compete with J&J-backed ARN 509.

Comparative efficacy data isn’t available, although Medivation investors are worried that an ARN 509 & Zytiga pre-chemo pairing can “cover all the bases” for oncologists treating mCRPC patients, knocking Xtandi out of that market. Since Medivation’s valuation seems heavily dependent upon the expansion of Xtandi into the pre-chemo patient population, this would at least limit the stock’s upside and possible send it into a downtrend.

The Takeaway

Medivation, which sells a prostate cancer drug called Xtandi, is attempting to expand the drug’s use into use in prostate cancer patients that have not yet received chemotherapy. This translates into more sales, and more revenue. A portion of this should be baked into the valuation of MDVN.

Johnson & Johnson’s acquisition of a similar, competing drug ARN 509 in mid-stage clinical development threatens Xtandi’s expansion and hence damaged the valuation of Medivation stock. The overhang of ARN 509 may keep MDVN suppressed until the release of OS data from PREVAIL.

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