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`One Drug To Rule Them All: Medivation's Xtandi
`To Dominate Prostate Cancer Market
`
`August 05, 2014, 08:51:23 AM EDT By Bay Area Biotech, SeekingAlpha
`Comment
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`Contributor:
`SeekingAlpha
`Market Commentary
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`Shutterstock photo
`By Bay Area Biotech :
`By Evangelos Pazarentzos, Ph.D. and Gorjan Hrustanovic
`The Background
`Medivation (
` ) is a clinical-stage bio-pharmaceutical company operating out of San Francisco, CA.
`MDVN
`Medivation's lead (and currently only) drug is Enzalutamide (Xtandi), an FDA-approved second-
`generation Androgen Receptor ("AR") inhibitor. Enzalutamide is partnered with Astellas Pharma, in
`which MDVN retains 50% of Xtandi profits in the US, and high-teen % royalties in the EU alongside
`pre-determined royalties from Astellas.
`
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`

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`On January 29th, MDVN presented its PhIII PREVAIL data, which showed unprecedented results for
`Castration-resistant Prostate Cancer ((CRPC)) patients in the "pre-chemo" setting. The stock reached
`highs of $85.83 as a result of this news.
`In light of the PREVAIL data, we believe MDVN is one of the most compelling investments in the
`healthcare sector today. Xtandi represents the next step towards translating a new generation of highly
`selective and potent oncoprotein inhibitors to the clinic, and that will ultimately extend the lives of
`thousands of prostate cancer patients.
`The Prostate Cancer Landscape
`Prostate cancer is the leading cause of cancer death in American men. 230,000 men are diagnosed
`each year in the US alone, and 30,000 die each year. The progression of prostate cancer, along with
`the current therapeutic landscape, is outlined below.
`(click to enlarge)
`
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`Importantly, there are significantly more patients in the earlier stages of prostate cancer progression
`than in the later ones, so "front-line" therapies like Casodex see significantly more patients and longer
`duration of therapy, than "end-of-the-line" therapies. The most commonly used agents in the pre-
`
`WCK1065
`Page 2
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`

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`chemo settings are, in order, (in combo with hormones) Casodex (bicalutamide - AZN) and Zytiga
`(Abiraterone - JNJ). The MDVN investment thesis stands on the belief Xtandi will likely expand to the
`front-line settings.
`Casodex (bicalutamide): This is the frontline "hormone-therapy" AR inhibitor, frequently given in
`combination with, or after, LHRH agonists or GnRH antagonists (testosterone deprivation) therapy in
`locally-advanced prostate cancer. Bicalutamide is a "first-generation" AR-inhibitor that was a >$1.3B
`drug for AZN in 2008, though is off-patent now. Even with generic competition since 2008, it has still
`sold ~$300mil last year (2013).
`Zytiga (Abiraterone): Zytiga is a CYP17A inhibitor from JNJ that inhibits CYP17's ability to
`biosynthesize androgens, effectively serving as androgen-deprivation therapy. Thus, Zytiga targets the
`"ligand" presumably responsible for AR activation. Zytiga is currently approved for patients in the post
`hormone, pre-chemo setting. Peak sales estimates have been as high as 4.7B. Sales have been good,
`reaching 1.7B in just its second full year on the market in 2013 and being on track to surpass 2B this
`year with sales for 1H2014 reaching 1.074B. However, sales have been stagnating since Xtandi's rise
`to market, and will likely continue to be negatively affected by Xtandi, especially after the PREVAIL
`data (SEE BELOW). Two months ago, the US patent and trademark office extended a method of use
`patent for JNJ's Zytiga. Zytiga patent extension allows exclusivity for Zytiga until at least 2018, and
`maybe later. When Zytiga goes off patent, presumably cheaper generic alternatives will then be given
`the green light. However, Zytiga's patent extension is actually beneficial for future Xtandi revenue,
`because it will delay cheap generic competition in the space and delay pricing pressure on Xtandi.
` ) : Dendreon's NK-cell therapy is also approved in the pre-chemo setting. However,
`DNDN
`Provenge (
`due to its non-competing MOA and poor acceptance clinically, we will not discuss it as a direct
`competitor to Xtandi.
`To tap into the prostate cancer market, agents typically start clinical investigation in post-chemo
`salvage setting, and then, once they show efficacy, work their way up with subsequent trials. In 2012,
`on the legs of the post-chemo AFFIRM trial, Xtandi was granted approval for the post-chemo setting,
`and the drug has been seeing 30% quarter-over-quarter sales growth, ultimately leading to MDVN's
`first positive-EPS quarter in 4Q13.
`Xtandi will outcompete Zytiga in the pre-chemo CRPC setting
`The major, imminent, question for MDVN is whether Xtandi can outcompete Zytiga in the pre-chemo
`setting. On January 2014, MDVN released the data for PREVAIL, a PhIII study evaluating
`Enzalutamide in the pre-chemo, mCRPC setting. The results were unprecedented, and have provided
`strong support for Xtandi's superiority over the already-approved Zytiga. This is key, since much of
`MDVN's valuation is placed on how it will fare against Zytiga's peak-sales estimates in the pre-chemo
`setting. Current PDUFA for pre-chemo prostate cancer is September 18th. However, given the
`impressive PREVAIL results presented in January, an earlier (and surprise) approval is certainly not out
`of the question. Early approval would in theory lead to quicker and faster-than-anticipated uptake of
`
`WCK1065
`Page 3
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`

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`Xtandi in the pre-chemo setting, leading to significantly higher revenues that will likely surpass the
`conservative FY2014 guidance. Of note, in the post-chemo setting, Xtandi received approval approx.
`9 weeks early (9-10 weeks prior to September 18th could have been early July so decision is
`anticipated any time now). Ultimately, the market share question will come down to physician (both
`urologist and oncologist) choice and awareness. However, this choice is much more clear than MDVN's
`current market cap reflects. We will go over a few scientific reasons for Xtandi's superiority over Zytiga
`in the next section, but there are now also significant clinical data to support this point. Here's why:
`Physicians, when presented with two treatment options will assess two things that will dictate which to
`use first: 1). Safety and 2). Efficacy. Enzalutamide edges out Zytiga in both.
`Effectiveness: Even though cross-trial comparisons should be taken with a grain of salt (no direct trials
`have been initiated comparing Zytiga and Xtandi directly in the pre-chemo setting), here is a table
`comparing commonly measured metrics in the respective pre-chemo Phase III trials:
`
`By all metrics, Enzalutamide outperforms. Similar retrospective cross-trial analysis has already been
`performed for the post-chemo trials. A poster presented at 2013 Genitourinary Cancers Symposium (J
`Clin Oncol 21, 2013 suppl 6; abstr217) compared the analysis from the respective Phase III trials and
`concluded in a cross-trial comparison that Enzalutamide indeed outperformed Zytiga. Their conclusion
`stated: "In this indirect comparative effectiveness analysis, [Enzalutamide] appears to be more effective
`than [Abiraterone] in time to PSA progression, rPFS, and PSA response. OS was not different".
`However, OS is hard to interpret since both studies had significant patient cross-over.
`Safety and Convenience: Enzalutamide is more convenient (1 pill type/day) while also having a
`favorable safety profile to Zytiga, particularly given CRPC's patient population. Zytiga suffers two major
`drawbacks (i, ii), and one minor one ((
`III
` )):
`i). Steroids. Zytiga must be taken with steroids (prednisone), Enzalutamide does not. These steroids
`are associated with adverse events that many physicians find unfavorable.
`ii). Cardiovascular risk. Zytiga may have higher cardiac (hypertension) adverse events. Enzalutamide is
`generally considered safer for patients with pre-existing cardiac or hypertension problems. An update
`from ASCO 2014 notes that Zytiga's hypertension risk is 2x higher than Enzalutamide's. The average
`age of a prostate cancer diagnosis is 66, so it is largely an elderly population disease. Elderly
`populations in the US are likely to have cardiac and/or hypertension problems, so this will likely impact
`physicians' prescription choices in favor of Xtandi.
`iii). Diet. Zytiga comes with diet restrictions, largely due to the prednisone.
`Moreover, previous concerns of seizures associated with use of Xtandi seem to not be an issue with
`recent data updates from Xtandi.
`
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`Page 4
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`

`
`Zytiga achieved worldwide sales of 1.7B in 2013, and is expected to obtain 2.5B in 2014, with peaks
`sales at approx. 4.6B in 2017. In JNJ's 1Q14 conference call, they reported that Zytiga was in control of
`34% of the mCRPC market. If we look at US sales of Xtandi and Zytiga in the last 3 quarters of 2013,
`we see a 30% increase in quarter-over-quarter sales of Xtandi, yet a rather stagnating picture for
`Zytiga. Keep in mind, these figures are all prior to the PREVAIL data in January, which are likely to
`shift these trends in Xtandi's favor even more. Physician sentiment is skewing heavily in Xtandi's favor,
`with some reports placing the Xtandi/Zytiga split at 70/30 market share.
`It is also important to note that there is strong rationale for the combination use of Zytiga and Xtandi
`together. Indeed, there is an investigator sponsored trial assessing the combination in the pre-chemo
`setting. When looking at Zytiga vs. Xtandi, most patients will likely end up seeing both during the
`course of their prostate cancer treatment. However, due to cross-resistance, the treatment given first
`will likely see a much longer duration of treatment than the second (which = significantly higher sales).
`We believe Xtandi will overwhelming be the frontline therapy choice, here's why:
`A potential mechanism of resistance to AR inhibition is expression of AR-V7. AR-V7 promotes
`resistance to both Zytiga and Xtandi. However, in a small sample size of Xtandi/Zytiga naïve patients,
`25% of Xtandi-resistant patients developed ARV7 whereas 51% of Zytiga-treated patients developed
`ARV7. Since presence of ARV7 would make a patient cross-resistant to both therapies (thus sequential
`therapy would not work), this data provides rationale for Xtandi use before Zytiga and reinforces our
`previous points (see above) about the rationale of using Xtandi as a superior drug to prevent cross-
`resistance with a potential paradigm of treatment as shown below: Xtandi -> Zytiga > Zytiga -> Xtandi.
`In reality, we believe that in time both drugs will be given to patients either in succession, or in
`combination. However, since cross-resistance does indeed occur with these two agents, whichever one
`is prescribed first will likely see the longer treatment duration, which will translate to higher sales.
`Working its way up (STRIVE/TERRAIN) to the front-line setting
`MDVNs future success vs. Zytiga in the pre-chemo setting is currently underappreciated, but this is far
`from where the story ends. It is currently in PhII trials assessing its utility in the front-line setting directly
`against bicalutamide (Casodex). These trials are TERRAIN in the EU and STRIVE in the US. Data for
`TERRAIN is expected mid-summer 2014 (soon), while STRIVE is seeing rapid enrollment with data
`expected in mid-summer 2015 and thus represent significant upcoming catalysts for MDVN.
`In oncology, the mechanisms of resistance to therapy can teach us a lot about the primary drivers of
`disease. It is well known that the AR is the primary driver of disease in the vast majority of prostate
`cancers, however this is also proven by the fact that the majority of bicalutamide resistance consists of
`rescue of AR signaling, despite presence of drug. So, why is Xtandi clinically more effective than
`Casodex?
`1. Xtandi was discovered in Casodex-resistant cells and the specific steps that were taken towards
`its discovery are nicely presented in several reviews Expert Opin Drug Discov. 2014
`Jul;9(7):837-45
`2. During pre-clinical development, Enzalutamide was found to be much more effective in killing
`AR-overexpressing cells compared to Bicalutamide
`3. Mechanisms of resistance to Casodex almost always include AR-centric alterations.
`Enzalutamide is a second-generation androgen-receptor inhibitor (bicalutamide is the first) that
`has 100x more potency against the AR in vitro than bicalutamide. Moreover, Enzalutamide has
`the unique ability to not only bind to the AR with stronger affinity, but it does so in such a way
`
`WCK1065
`Page 5
`
`

`
`that it prevents multiple steps in the AR activation pathway. Not only does Enzalutamide prevent
`binding of ligand (testosterone) to AR, but it also inhibits both the nuclear import of AR and DNA-
`binding of AR (below).
`
`If successful, these trials would not only suggest Xtandi as the drug of choice after hormone therapy,
`but significantly increase the sales and value of MDVN. If TERRAIN data are sufficiently impactful, the
`market share that Xtandi will have access to will far surpass just the pre-chemo segment and spill into
`the much larger front-line setting. The question is, will Enzalutamide have success when directly
`compared to Bicalutamide? As it stands, Xtandi's TERRAIN and STRIVE trials will likely ultimately
`succeed.
`Expanding the clinical utility of Enzalutamide:
`Active research is ongoing on Enzalutamide to define and combat therapy resistance. Combination
`therapy trials (Xtandi + another agent) are already underway, and are likely to extend the clinical utility
`and treatment duration of Xtandi. Of note, Sawyers et al. have identified glucocorticoid receptor ((GR))
`upregulation as a frequent and clinically targetable mechanism of resistance to Enzalutamide (Figure
`3).
`
`WCK1065
`Page 6
`
`

`
`
`Figure 3. Taken from Sawyers publication, Cell 2013 PMID:24315100. Correlative clinical data showing
`GR-upregulation which they describe that leads to resistance to Enzalutamide in most patients
`screened.
`These findings have led to the initiation of clinical trials testing GR-inhibitors (such as CORT's
`Mifepristone) in combination with Enzalutamide in both prostate cancer and breast cancer.
`There are currently 35 clinical trials with Enzalutamide for several indications and several stages of
`prostate cancer. However, the readouts for these trials are not for some time, and by that point, we
`believe Xtandi's role in the prostate cancer market will be well defined.
`Breast Cancer and Bromodomains
`A portion of Triple-Negative Breast Cancers ((TNBC)) are thought to be driven by AR signaling. Thus,
`Xtandi is also being explored in two PhII trials in this patient population. Although there is strong
`scientific rationale for success in this unmet need, the market is not placing/pricing in significant value
`to this indication. This is likely due to the fact that Zytiga has tried and failed in this indication. In fact, it
`is hard to come by an analyst report even mentioning these trials since the prostate cancer prospects
`are dominating Xtandi dialogue. However, we believe that, given Xtandi's more direct MOA on the
`target, likelihood of success is much higher.
`
`
`Figure 4. Example of one of the numerous pre-clinical data for efficacy of Enzalutamide in breast
`cancer indications. Enzalutamide inhibits proliferation of breast cancer cells while bicalutamide does not
`(obtained from Breast Cancer Research 2014, 16 :R7 doi:10.1186/bcr3599
`Further potential upside rests in MDVN's recently announced partnership with Oncofusion and their
`Bromodomain targeting inhibitors. These candidates represents MDVN's first pre-clinical candidates
`since the launch of Xtandi. Although this family of inhibitors has tremendous potential, we do not
`attribute any value (in terms of an investment thesis) to these compounds quite yet. However,
`developments or IND/PhI's with this pipeline are definitely something to watch out for and consider, and
`will likely provide further upside.
`Valuation and Projections
`
`WCK1065
`Page 7
`
`

`
`The market of prostate cancer is currently at 27B and is expected to reach 50B by 2017 (with 17B in
`the diagnosis and screening segment, and 14.3B for surgery and radiation, and approx. 15-20B left for
`therapeutics like Xtandi to compete for).
`The pre-chemo market category itself is expected to be ~9.5B by 2021. Xtandi is expected to capture
`the largest portion of this market for the reasons mentioned above. We believe this will amount to a
`75/25 split favoring Xtandi, projecting Xtandi as high as 7B/yr by 2021.
`This high projection for Xtandi will be driven by positive results from the STRIVE/TERRAIN trials, which
`should begin to solidify Xtandi as the frontline therapy option among Urologists. In June, Stifel noted
`that a survey of urologists showed that they prefer Xtandi over Zytiga by a 4-3 margin, a ratio that will
`likely increase significantly with STRIVE/TERRAIN data. Likewise, Citigroup has recently conducted a
`similar survey and reported "very favorable" results for Xtandi, and went on to raise 2015 sales
`estimates to 1.75B.
`We believe fair valuation of MDVN (taking into account the current peak sales estimates) in the
`pre/post-chemo settings is about ~5B. However, with addition of the 400,000 patient hormone
`sensitive/refractory market (i.e. the patient population in STRIVE/TERRAIN), this could well double the
`future sales of Xtandi. Thus, positive STRIVE/TERRAIN data combined with ever-increasing sales of
`Xtandi will ignite a rapid increase in MDVN share value, which likely lead to a 11B market cap by this
`time next year (which would represent about 3x of our peak sales estimate, 7B (3.5B of which going to
`MDVN)).
`Disclosure: The author is long MDVN. The author wrote this article themselves, and it expresses their
`own opinions. The author is not receiving compensation for it. The author has no business relationship
`with any company whose stock is mentioned in this article.
`See also VCA Inc. - Take A Second Look At This Veterinary Stock on seekingalpha.com
`The views and opinions expressed herein are the views and opinions of the author and do not
`necessarily reflect those of Nasdaq, Inc.
`
`This article appears in: Investing , Stocks
`
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