L O S A N G E L E S | S A N F R A N C I S C O | N E W Y O R K | B O S T O N | C H I C A G O | M I N N E A P O L I S | M I L W A U K E E | S E A T T L E
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`July 14, 2015
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`David M. Nierengarten, Ph.D. (415) 274-6862
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`Medivation (MDVN - OUTPERFORM): Zytiga Market Share Decline Accelerates from
`Last Quarter
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`Robert Driscoll, Ph.D. (415) 274-6863
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`Dilip Joseph (415) 273-7308
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`Price: $108.50
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`12-Month Price Target: $138
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`JNJ reported another quarterly decline in market share for Zytiga in its 2Q15 earnings call. Zytiga’s share is now
`28.6%, down approximately 1.7 pp on a sequential basis. In 1Q15, Zytiga’s share fell to 30.3%, down 1.2 pp from the prior
`quarter. Overall, US sales of Zytiga remained flat at $255M, compared with $253M and $255M in 1Q15 and 4Q14,
`respectively.
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`JNJ also implicated continued strong growth for Xtandi sales in Europe, with lower sales of Zytiga. JNJ management
`commented, however, that Zytiga achieved strong growth in Asia and Latin America, which we believe also represents a
`significant growth opportunity for Xtandi. Full year ex-US sales of Zytiga were $291M, down 11% (up 8.6% excluding a
`negative F/X impact of 19.6%).
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`In May, MDVN management reiterated full year guidance provided in February of US Xtandi sales of $1.05B to
`$1.125B, despite the apparent Q1 sales miss that was partly due to seasonality associated with Medicare Part D
`coverage. We are currently estimating Q2 Xtandi collaboration revenue of $152.4M, vs. $155M consensus, including split
`revenue from total US Xtandi sales of $257.3M. MDVN’s partner Astellas will report results on its earnings call July 31.
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`• We would recommend buying shares of MDVN ahead of earnings, in light of recent weakness. We expect continued
`accelerated growth of Xtandi in the pre-chemo CRPC setting, driven by positive data from the TERRAIN and STRIVE trials.
`Recent MDVN share price weakness may be attributable to lower than expected reported IMS/Symphony captured sales.
`However, in our experience, these captured sales of Xtandi are often poorly representative of actual sales.
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`• Reiterate OUTPERFORM rating and PT of $138. We arrive at our $138 price target by applying a 6x multiple to 2019 US
`Xtandi sales split added to 15x our estimated ROW royalties, discounted by 15% annually.
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`• Risks to the attainment of our price target include failure of Xtandi to gain broad acceptance among urologists and greater
`than expected competition from abiraterone or other prostate cancer therapies.
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`Wedbush Securities does and seeks to do business with companies covered in its research reports. Thus, investors should
`be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should
`consider this report as only a single factor in making their investment decision. Please see page 2 of this report for analyst
`certification and important disclosure information.
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