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`Healthcare | Biotechnology
`Biotechnology
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`Zytiga FourthQuarter Sales Imply Xtandi Strength
`
`On Tuesday morning, January 22, 2013, Johnson & Johnson (JNJ $72.87) reported
`fourthquarter earnings. Zytiga sales in the United States trended down during
`fourth quarter for the first time since its launch in May 2011, while international
`
`We believe the decreased sales of Zytiga in the fourth quarter were largely due to
`Xtandi’s U.S. launch in September. And since Xtandi is not yet approved or launched
`in Europe or other territories outside the United States, Zytiga’s international sales
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`We currently estimate Medivation booking Xtandi sales of $17.4 million versus
`consensus of $16 million for fourth quarter of 2012. For 2013, we are the Street
`high at $175.7 million for Medivation’s U.S. revenue booking versus consensus of
`
`We believe the following two issues will be interesting to watch in first quarter
`2013 for Zytiga, Xtandi, and Provenge of Dendreon.
`
`
` Will Zytiga U.S. sales rebound in first quarter 2013 after the label extension
`
`sales growth continued. In 2012, Zytiga U.S. sales were $100 million in first quarter,
`$113 million in second quarter, $136 million in third quarter, and $114 million in fourth
`quarter. In contrast, Zytiga international sales maintained the growth trend in 2012,
`posting $100 million in first quarter, $119 million in second quarter, $129 million in third
`quarter, and $150 million in fourth quarter.
`
`continued to grow. This trend implies relative strength of Xtandi in the marketplace
`against Zytiga in the post‐chemo mCRPC (metastatic castration‐resistant prostate cancer)
`setting, as well as off‐label in the chemo‐naïve setting, in our opinion.
`
`$136.9 million. Medivation books one‐half of Xtandi’s U.S. net sales as part of the
`agreement with partner Astellas.
`
`in December? Zytiga obtained approval for the chemo‐naïve mCRPC setting in
`the United States in December. Such label extension should boost growth of
`Zytiga sales in the United States; however, such growth might also be
`counteracted by off‐label use of Xtandi in the same setting. Therefore, the growth
`trend of Zytiga in first quarter 2013 will be an interesting parameter to watch for
`Xtandi off‐label use, as well.
`starting first quarter? Provenge posted a 4.7% growth in fourth quarter2012,
`reversing the negative growth trend for the previous two quarters. It is therefore
`important to see whether this turnaround could sustain going forward. The
`urology segment is what Dendreon focused its commercial efforts on, and it is
`the fastest‐growing segment for Provenge. With Johnson & Johnson starting to
`market Zytiga in urologists’ offices with virtually the same label as Provenge, it
`will be interesting to watch whether Provenge growth could sustain during first
`quarter and beyond. Provenge posted roughly $81.6 million in net sales in fourth
`quarter 2012 and needs to grow to $100 million per quarter for Dendreon to
`cash‐flow breakeven.
`+1 212 237 2758
`+1 212 237 2741
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`kxu@williamblair.com
`fpetti@williamblair.com
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`Medivation, Inc.
`
` January 22, 2013
`
`MDVN (NASDAQ)
`Symbol:
`Price:
`$55.66 (52‐Wk.: $25‐$59)
`Stock Rating:
`Company Profile:
`Price Target:
`$67.00
`
`Symbol:
`DNDN (NASDAQ)
`Price:
`$6.31 (52‐Wk.: $4‐$17)
`Stock Rating:
`Underperform
`Company Profile:
`Price Target:
`$4.00
`
`
`
`
`Outperform
`Aggressive Growth
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`Dendreon Corporation
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`Aggressive Growth
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`
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` Will Zytiga flooding urologists’ offices affect Dendreon’s Provenge sales
`
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`Y. Katherine Xu, Ph.D.
`
`Filippo Petti
`
`
`
`Please consult the last page of this report for all disclosures.
`William Blair & Company, L.L.C. receives or seeks to receive compensation for investment banking services from Dendreon
`Corporation and Medivation, Inc. Investors should consider this report as a single factor in making an investment decision.
`
`WCK1061
`Page 1
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`William Blair & Company, L.L.C.
`Key risks to our Outperform rating and attainment of our price target for Medivation include failure to meet efficacy endpoints
`for the Phase III and Phase II programs of enzalutamide, unforeseen safety issues of enzalutamide in longer‐term studies,
`setbacks in clinical and business development, and financing risk.
` Key risks to our Underperform rating for Dendreon include better‐than‐expected uptake of Provenge in the U.S. market;
`failure of clinical studies and regulatory approval from competitive agents such as Zytiga (abiraterone), Xtandi (enzalutamide),
`and Prostvac; straight approval in the European Union; and commercial uptake on the continent better than our expectations.
`
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`2 | Y. Katherine Xu, Ph.D. +1 212 237 2758
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`William Blair & Company, L.L.C.
`William Blair & Company, L.L.C. was a manager or co‐manager of a public offering of equity securities for Medivation, Inc. within the prior 12
`months.
` William Blair & Company, L.L.C. is a market maker in the security of Dendreon Corporation and Medivation, Inc. and may have a long or short
`position.
` Additional information is available upon request.
`
`
`Medivation Inc. (MDVN)
`Current Rating: Outperform
`Jan 18, 2010 - Jan 18, 2013
`Previous Close: $54.94
`9/15/11 - I-O - PT:$17.50
`
`11/3/11 - PT:$21
`
`2/13/12 - PT:$46
`
`3/14/12 - R - PT:$46
`
`3/23/12 - O - PT:$46
`
`$60
`
`$50
`
`$40
`
`$30
`
`$20
`
`$60
`
`$50
`
`$40
`
`$30
`
`$20
`
`Dendreon Corp. (DNDN)
`Current Rating: Initiation
`Jan 18, 2010 - Jan 18, 2013
`Previous Close: $6.31
`9/15/11 - I-U - PT:$8
`
`2/13/12 - PT:$9
`
`2/27/12 - PT:$8
`
`7/31/12 - PT:$5
`
`11/5/12 - PT:$4
`
`$10
`
`$0
`
`12/31/12
`12/30/11
`12/31/10
`
`Source: William Blair & Company, L.L.C. and FactSet Legend: I = Initiation, RI = Reinitiated, @ = Analyst Change PT = Price Target
`
`Current Rating Distribution (as of 12/31/12)
`Coverage Universe
`
`Percent
`
`Inv. Banking Relationships*
`
`
`
`Percent
`
`5/8/12 - PT:$48
`
`6/26/12 - PT:$59.509/4/12 - PT:$67
`
`$10
`
`$0
`
`12/31/12
`12/30/11
`12/31/10
`
`Source: William Blair & Company, L.L.C. and FactSet Legend: I = Initiation, RI = Reinitiated, @ = Analyst Change PT = Price Target
`
`
`
`
`
`9
`Outperform (Buy)
`
`62
`
` Outperform (Buy)
`2
`Market Perform (Hold)
`
`33
`
`Market Perform (Hold)
`0
`Underperform (Sell)
`
`1
`
`Underperform (Sell)
` *Percentage of companies in each rating category that are investment banking clients, defined as companies for which William Blair has
`received compensation for investment banking services within the past 12 months.
` Y. Katherine Xu attests that 1) all of the views expressed in this research report accurately reflect his/her personal views about any and all of the
`securities and companies covered by this report, and 2) no part of his/her compensation was, is, or will be related, directly or indirectly, to the
`specific recommendations or views expressed by him/her in this report. We seek to update our research as appropriate, but various regulations
`may prohibit us from doing so. Other than certain periodical industry reports, the majority of reports are published at irregular intervals as deemed
`appropriate by the analyst.
` Stock ratings, price targets, and valuation methodologies: William Blair & Company, L.L.C. uses a three‐point system to rate stocks. Individual ratings
`and price targets (where used) reflect the expected performance of the stock relative to the broader market (generally the S&P 500, unless
`otherwise indicated) over the next 12 months. The assessment of expected performance is a function of near‐, intermediate‐, and long‐term
`company fundamentals, industry outlook, confidence in earnings estimates, valuation (and our valuation methodology), and other factors.
`Outperform (O) – stock expected to outperform the broader market over the next 12 months; Market Perform (M) – stock expected to perform
`approximately in line with the broader market over the next 12 months; Underperform (U) – stock expected to underperform the broader market
`over the next 12 months; not rated (NR) – the stock is not currently rated. The valuation methodologies used to determine price targets (where
`used) include (but are not limited to) price‐to‐earnings multiple (P/E), relative P/E (compared with the relevant market), P/E‐to‐growth‐rate (PEG)
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` Company Profile: The William Blair research philosophy is focused on quality growth companies. Growth companies by their nature tend to be more
`volatile than the overall stock market. Company profile is a fundamental assessment, over a longer‐term horizon, of the business risk of the company
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`Fundamental risk is approximately in line with the broader William Blair universe; Aggressive Growth (A) – Fundamental risk is higher relative to
`the broader William Blair universe.
`3 | Y. Katherine Xu, Ph.D. +1 212 237 2758
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`William Blair & Company, L.L.C.
` The ratings, price targets (where used), valuation methodologies, and company profile assessments reflect the opinion of the individual analyst and
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`4 | Y. Katherine Xu, Ph.D. +1 212 237 2758
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`WCK1061
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