Research Analysts
`Lee Kalowski
`212 325 9683
`lee.kalowski@credit-suisse.com
`Catherine J. Arnold
`212 538 6225
`catherine.j.arnold@credit-suisse.com
`Ravi Mehrotra PhD
`212 325 3487
`ravi.mehrotra@credit-suisse.com
`Ari Jahja
`212 325 0767
`ariyanto.jahja@credit-suisse.com
`Ronak H. Shah, Pharm.D., CFA
`212 325 9799
`ronak.shah@credit-suisse.com
`Koon Ching PhD
`212 325 6286
`koon.ching@credit-suisse.com
`
`
`
`11 December 2012
`Americas/United States
`Equity Research
`Biotechnology
`
`Prostate Cancer
`
`COMMENT
`Implications of Zytiga’s Pre-Chemo Approval
`■ JNJ(cid:146)s Zytiga received pre-chemo approval on December 10th (see our
`note (cid:147)Zytiga pre-chemo approved: still no OS(cid:148)). There was considerable
`speculation as to whether Zytiga would hit OS significance with data updated
`since its presentations at ASCO and ESMO this year. We fully expected
`FDA to approve Zytiga for pre-chemo use even without statistically
`significant OS data, as was indeed the case. Notably, the label does include
`an update to the OS data, but statistical significance was not achieved.
`■ Overall survival looks incrementally worse for Zytiga (cid:150) which is good
`for Xtandi -- though we don(cid:146)t think it changes how the products will be
`used. The OS difference was only 5.2 months, which is lower than what we
`(and probably most) were expecting. This missed significance with a p-value
`of 0.0151 (Exhibit 1). The placebo arm also saw median OS increase to 30
`months, worsening the HR from 0.75 to 0.79. (Exhibit 2). The data is a little
`puzzling, but between the strong OS trend, the robust rPFS data (HR of 0.43
`on a median treatment duration of 14 months) and the robust OS benefit in
`the (cid:147)301(cid:148) trial, we don(cid:146)t think the update changes Zytiga(cid:146)s profile all that
`much or even how it is likely to be used.
`■ The tolerability profile looks similar to what was seen in the (cid:147)301(cid:148) trial.
`As was the case in the (cid:147)301(cid:148) trial, Zytiga is associated with liver function
`abnormalities in the pre-chemo setting, underscoring the importance of
`regular LFT monitoring, as has been outlined in the label (Exhibit 3). Cardiac
`failure was also higher with Zytiga (now 2.1% vs 0.7% on placebo). And, of
`course, with the approval in the pre-chemo setting, Zytiga is tied to longer-
`term use of prednisone (all adverse events from the label are shown in
`Exhibit 4).
`■ The approval now marks the first meaningful entry into the urology
`segment of the prostate cancer market since DNDN(cid:146)s Provenge. As per
`JNJ(cid:146)s Q3 call, about 30% of Zytiga has been in the pre-chemo setting (the
`setting for which Zytiga was just approved), but uptake by urologists has
`been negligible, at least per IMS data. With this approval, we now expect a
`more significant push into the urology segment of the market.
`(bullets continue on next page)
`
`DISCLOSURE APPENDIX CONTAINS IMPORTANT DISCLOSURES, ANALYST CERTIFICATIONS, INFORMATION ON
`TRADE ALERTS, ANALYST MODEL PORTFOLIOS AND THE STATUS OF NON-U.S ANALYSTS. US Disclosure: Credit
`Suisse does and seeks to do business with companies covered in its research reports. As a result, 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.
`
`CREDIT SUISSE SECURITIES RESEARCH & ANALYTICS
`
`
`
`
`BEYOND INFORMATIONfi
`Client-Driven Solutions, Insights, and Access
`
`WCK1071
`Page 1
`
`

`
`
`■ While MDVN (OP, TP: $73) is not disclosing how it might change its
`own statistical plan for its pre-chemo (cid:147)PREVAIL(cid:148) trial, the company is
`confirming that it will wait for OS. This is in-line with our expectations and,
`frankly, makes sense, given that (1) Xtandi has a relatively long patent life
`(2) it offers the potential for an OS comparative advantage vs Zytiga,
`especially if that product goes off-patent in around four years and (3) makes
`market entry for downstream competitors all the more challenging. Our best
`guess is that PREVAIL is likely to report out in 2H(cid:146)13 (cid:150) and we expect
`positive results from that trial.
`is positive, National Comprehensive Cancer
`■ Assuming PREVAIL
`Network (NCCN) guidelines likely will put Xtandi ahead of Zytiga. As we
`noted in our email on December 5th ((cid:147)NCCN Prostate Cancer Guidelines
`Updated: Allows for Xtandi Pre-Chemo Use(cid:148)), Xtandi received in the pre-
`chemo setting a category 2a ((cid:147)lower-level evidence(cid:148)), which is the same as
`Zytiga, despite the (cid:147)302(cid:148) data results (both products are category 1 ((cid:147)high-
`level evidence(cid:148)) in the post-chemo setting). Assuming PREVAIL is positive
`on OS, we would expect Xtandi to move to (cid:147)1(cid:148) (cid:150) the same as Provenge (cid:150)
`while Zytiga is likely to remain where it is.
`■ We are not changing our Xtandi forecasts at this time. Between what we
`see as more favorable tolerability and safety, the lack of required prednisone
`and likely better OS data, we continue to believe that Xtandi will capture a
`larger portion of the post and pre-chemo markets (we model 70% market
`share going to Xtandi vs Zytiga). We continue to believe that PREVAIL will
`show a treatment duration of at least the 14 months seen in the Zytiga (cid:147)302(cid:148)
`trial, resulting in upside from current levels.
`■ For DNDN (N, TP: $4), the Zytiga approval marks the imminent entry of
`a competitor in the pre-chemo (urology) setting. But overall, the timing
`and nature of the approval is in-line with our expectations. Last quarter saw
`a substantial decline at the academic setting (-25%) and we don(cid:146)t think this
`approval and label is likely to change that one way or another. We continue
`to believe that Provenge can be used in a niche setting of the mCRPC
`market (cid:150) i.e. very slowly progressing asymptomatic mCRPC patients (cid:150)
`although it remains to be seen what percentage actually fits into this
`category. Crucial for Provenge(cid:146)s future will be for DNDN to finally gain a
`foothold within the community (and especially community urology) setting
`and JNJ(cid:146)s push here won(cid:146)t make it any easier for DNDN. We are not
`changing estimates at this time (cid:150) we forecast flattish revenues in 2013
`overall vs 2012, with some growth thereafter.
`■ For JNJ (N, TP: $71): the Zytiga overall survival data is a slight
`disappointment, however, our (post-2014) Zytiga forecast already implies a
`competitive benefit for Xtandi secondary to not requiring prednisone on
`board. The smaller than expected OS benefit now leaves room for Xtandi to
`have a competitive benefit greater than already projected once PREVAIL
`reads out in 2H(cid:146)13. In-line with this, a key element of our Neutral rating on
`JNJ is predicated on the fact that we expect notable competition to emerge
`for several key therapeutic areas in the next 12 months, keeping the stock
`range bound.
`.
`
`WCK1071
`Page 2
`
`

`
`
`
`11 December 2012
`
`NR
`0.0097
`0.75
`
`18
`421
`400
`412
`387
`
`21
`393
`361
`258
`237
`
`24
`333
`283
`120
`106
`
`27
`175
`153
`27
`25
`
`30
`68
`67
`0
`2
`
`27.2
`
`
`
`36
`0
`0
`
`33
`15
`9
`0
`0
`
`Exhibit 1: OS Data from Label and as Presented at ASCO 2012
`Approved Label
`Data Presented at ASCO - June 2012
`Zytiga (N= 546) Placebo (N=542) Overall Survival
`Zytiga (N= 546) Placebo (N=542)
`Overall Survival
`200
`234 Deaths
`Deaths
`35.3
`30.1 Median Suvival
`Median Suvival
`0.0151
`p-value
`p-value
`Hazard Ratio
`0.792
`Hazard Ratio
`Source: Company data, Credit Suisse estimates
`
`Exhibit 2: OS Curves (cid:150) From Label (Updated Data) and at ASCO
`0
`3
`6
`9
`12
`15
`546
`538
`524
`503
`482
`452
`Zytiga-updated
`542
`534
`508
`492
`465
`437
`Placebo-updated
`546
`538
`524
`503
`482
`452
`Zytiga-ASCO
`542
`534
`509
`493
`465
`437
`Placebo-ASCO
`Source: Company data, Credit Suisse estimates
`
`Exhibit 3: Liver Function Abnormalities From Label
`"301"
`"302"
`All Grades
`Grade 3-4 All Grades
`Grade 3-4
`30.6
`2.1
`41.9
`6.1
`High ALT
`11.1
`1.4
`37.3
`3.1
`High AST
`41.7
`3.5
`79.2
`9.2
`Total
`Source: Company data, Credit Suisse estimates
`
`
`
`
`Exhibit 4: Zytiga AEs from Approved Label
`Zytiga - "301"
`All Grades
`Grade 3-4
`29.5
`4.2
`26.2
`3.0
`26.7
`1.9
`19.0
`0.3
`8.5
`1.3
`17.6
`0.6
`6.1
`0.0
`11.5
`2.1
`5.4
`0.0
`10.6
`0.0
`7.2
`0.3
`6.2
`0.0
`5.9
`1.4
`7.2
`1.1
`3.8
`0.5
`2.3
`1.9
`
`Joint Swelling/discomfort
`Muscle Discomfort
`Edema
`Hot flush
`Hypertension
`Diarrhea
`Dyspepsia
`Urinary tract infection
`Upper respiratory tract
`Cough
`Urinary frequency
`Nocturia
`Fractures
`Arrhythmia
`Chest pain or chest discomfort
`Cardiac failure
`
`Source: Company data, Credit Suisse estimates
`
`Fatigue
`Edema
`Pyrexia
`Joint swelling/discomfort
`Groin pain
`Constipation
`Diarrhea
`Dyspepsia
`Hot flush
`Hypertension
`Cough
`Dyspnea
`Insomnia
`Contusion
`Falls
`Upper respiratory tract
`Nasopharyngitis
`Hematuria
`Rash
`
`Zytiga - "302"
`All Grades
`Grade 3-4
`39.1
`2.2
`25.1
`0.4
`8.7
`0.6
`30.3
`2.0
`6.6
`0.4
`23.1
`0.4
`21.6
`0.9
`11.1
`0.0
`22.3
`0.2
`21.6
`3.9
`17.3
`0.0
`11.8
`2.4
`13.5
`0.2
`13.3
`0.0
`5.9
`0.0
`12.7
`0.0
`10.7
`0.0
`10.3
`1.3
`8.1
`0.0
`
`Prostate Cancer
`
`3
`
`WCK1071
`Page 3
`
`

`
`
`
`11 December 2012
`
`Companies Mentioned (Price as of 10-Dec-2012)
`Dendreon Corp. (DNDN.OQ, $5.04, NEUTRAL[V], TP $4.0)
`Johnson & Johnson (JNJ.N, $70.6, NEUTRAL, TP $71.0)
`Medivation (MDVN.OQ, $55.33, OUTPERFORM[V], TP $73.0)
`
`
`
`Disclosure Appendix
`
`Important Global Disclosures
`Lee Kalowski, Catherine J. Arnold, Ravi Mehrotra PhD, each certify, with respect to the companies or securities that the individual analyzes, that (1)
`the views expressed in this report accurately reflect his or her personal views about all of the subject companies and securities and (2) no part of his
`or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
`
`Price and Rating History for Dendreon Corp. (DNDN.OQ)
`
`Target Price
`Closing Price
`DNDN.OQ
`(US$)
`(US$)
`Date
`29.00
`42.81
`02-May-11
`22.00
`35.84
`03-Aug-11
`14.00
`11.42
`09-Sep-11
`11.00
`6.55
`03-Nov-11
`14.00
`14.17
`30-Jan-12
`13.00
`11.81
`27-Feb-12
`12.00
`8.75
`08-May-12
`6.00
`4.76
`31-Jul-12
`4.00
`4.17
`05-Nov-12
`* Asterisk signifies initiation or assumption of coverage.
`
`
`Rating
`U *
`N
`
`
`
`
`
`
`
`
`UN D ERPERFO RM
`N EU T RA L
`
`Target Price
`
`Closing Price DNDN.OQ
`
`43
`
`33
`
`23
`
`13
`
`3
`1- May- 11
`
`1- Sep- 11
`
`1- Jan- 12
`
`1- May- 12
`
`1- Sep- 12
`
`Price and Rating History for Johnson & Johnson (JNJ.N)
`
`Closing Price
`JNJ.N
`(US$)
`Date
`65.35
`19-Jan-10
`65.39
`21-Apr-10
`58.01
`04-Jun-10
`57.12
`21-Jul-10
`57.60
`27-Aug-10
`60.60
`26-Jan-11
`60.46
`18-Apr-11
`70.00
`68.20
`11-Sep-12
`71.00
`69.32
`25-Sep-12
`* Asterisk signifies initiation or assumption of coverage.
`
`Target Price
`(US$)
`71.00
`73.00
`69.00
`66.00
`65.00
`63.00
`
`
`Rating
`N
`
`
`
`
`
`R
`N
`
`
`75
`
`70
`
`65
`
`60
`
`55
`1- Jan- 10
`
`N EU T RA L
`REST RICT ED
`
`Target Price
`
`Closing Price JNJ.N
`
`1- Jan- 11
`
`1- Jan- 12
`
`Target Price
`
`Closing Price MDVN.OQ
`
`Target Price
`(US$)
`76.00
`92.00
`90.00
`
`Price and Rating History for Medivation (MDVN.OQ)
`
`Closing Price
`MDVN.OQ
`(US$)
`Date
`27.44
`30-Jan-12
`32.50
`24-Feb-12
`32.76
`29-Feb-12
`35.70
`13-Mar-12
`90.00
`35.28
`14-Mar-12
`115.00
`44.17
`23-May-12
`122.00
`40.82
`04-Jun-12
`120.00
`48.85
`10-Aug-12
`149.00
`54.60
`04-Sep-12
`73.00
`45.70
`11-Nov-12
`* Asterisk signifies initiation or assumption of coverage.
`
`
`Rating
`O *
`
`
`R
`O
`
`
`
`
`
`
`80
`
`60
`
`40
`
`20
`
`O U T PERFO RM
`REST RICT ED
`
`1- Mar- 12
`
`1- May- 12
`
`1- Jul- 12
`
`1- Sep- 12
`
`1- Nov- 12
`
`Prostate Cancer
`
`4
`
`WCK1071
`Page 4
`
`

`
`
`
`11 December 2012
`
`The analyst(s) responsible for preparing this research report received Compensation that is based upon various factors including Credit Suisse’s
`total revenues, a portion of which are generated by Credit Suisse’s investment banking activities
`As of December 10, 2012 Analysts(cid:146) stock rating are defined as follows:
`Outperform (O) : The stock(cid:146)s total return is expected to outperform the relevant benchmark*over the next 12 months.
`Neutral (N) : The stock(cid:146)s total return is expected to be in line with the relevant benchmark* over the next 12 months.
`Underperform (U) : The stock(cid:146)s total return is expected to underperform the relevant benchmark* over the next 12 months.
` *Relevant benchmark by region: As of 10th December 2012, Japanese ratings are based on a stock(cid:146)s total return relative to the analyst’s coverage universe which
`consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the most attractive, Neutrals the less attractive, and
`Underperforms the least attractive investment opportunities. As of 2nd October 2012, U.S. and Canadian as well as European ratings are based on a stock(cid:146)s total
`return relative to the analyst’s coverage universe which consists of all companies covered by the analyst within the relevant sector, with Outperforms representing the
`most attractive, Neutrals the less attractive, and Underperforms the least attractive investment opportunities. For Latin American and non-Japan Asia stocks, ratings
`are based on a stock(cid:146)s total return relative to the average total return of the relevant country or regional benchmark; Australia, New Zealand are, and prior to 2nd
`October 2012 U.S. and Canadian ratings were based on (1) a stock(cid:146)s absolute total return potential to its current share price and (2) the relative attractiveness of a
`stock(cid:146)s total return potential within an analyst(cid:146)s coverage universe. For Australian and New Zealand stocks, 12-month rolling yield is incorporated in the absolute total
`return calculation and a 15% and a 7.5% threshold replace the 10-15% level in the Outperform and Underperform stock rating definitions, respectively. The 15% and
`7.5% thresholds replace the +10-15% and -10-15% levels in the Neutral stock rating definition, respectively. Prior to 10th December 2012, Japanese ratings were
`based on a stock(cid:146)s total return relative to the average total return of the relevant country or regional benchmark.
`Restricted (R) : In certain circumstances, Credit Suisse policy and/or applicable law and regulations preclude certain types of communications,
`including an investment recommendation, during the course of Credit Suisse’s engagement in an investment banking transaction and in certain other
`circumstances.
`Volatility Indicator [V] : A stock is defined as volatile if the stock price has moved up or down by 20% or more in a month in at least 8 of the past 24
`months or the analyst expects significant volatility going forward.
`Analysts(cid:146) sector weightings are distinct from analysts(cid:146) stock ratings and are based on the analyst(cid:146)s expectations for the fundamentals and/or
`valuation of the sector* relative to the group(cid:146)s historic fundamentals and/or valuation:
`Overweight : The analyst(cid:146)s expectation for the sector(cid:146)s fundamentals and/or valuation is favorable over the next 12 months.
`Market Weight : The analyst(cid:146)s expectation for the sector(cid:146)s fundamentals and/or valuation is neutral over the next 12 months.
`Underweight : The analyst(cid:146)s expectation for the sector(cid:146)s fundamentals and/or valuation is cautious over the next 12 months.
` *An analyst(cid:146)s coverage sector consists of all companies covered by the analyst within the relevant sector. An analyst may cover multiple sectors.
`Credit Suisse’s distribution of stock ratings (and banking clients) is:
`
`Global Ratings Distribution
`Versus universe (%)
`Rating
`42%
`Outperform/Buy*
`39%
`Neutral/Hold*
`15%
`Underperform/Sell*
`3%
`Restricted
`*For purposes of the NYSE and NASD ratings distribution disclosure requirements, our stock ratings of Outperform, Neutral, and Underperform most closely
`correspond to Buy, Hold, and Sell, respectively; however, the meanings are not the same, as our stock ratings are determined on a relative basis. (Please refer to
`definitions above.) An investor’s decision to buy or sell a security should be based on investment objectives, current holdings, and other individual factors.
`Credit Suisse(cid:146)s policy is to update research reports as it deems appropriate, based on developments with the subject company, the sector or the
`market that may have a material impact on the research views or opinions stated herein.
`Credit Suisse’s policy is only to publish investment research that is impartial, independent, clear, fair and not misleading. For more detail please refer
`to Credit Suisse’s Policies for Managing Conflicts of Interest in connection with Investment Research: http://www.csfb.com/research and
`analytics/disclaimer/managing_conflicts_disclaimer.html
`Credit Suisse does not provide any tax advice. Any statement herein regarding any US federal tax is not intended or written to be used, and cannot
`be used, by any taxpayer for the purposes of avoiding any penalties.
`
`Of which banking clients (%)
`(54% banking clients)
`(48% banking clients)
`(44% banking clients)
`
`Price Target: (12 months) for Dendreon Corp. (DNDN.OQ)
`Method: Our $4 target price for DNDN is derived from a discounted cash flow modeled to 2020 using a terminal growth rate of -5% and a discount
`rate of 10%.
`Upside risk to our $4 target price include an accelerating launch trajectory, greater realized cost cutting than we model and successful
`commercialization in the EU; downside risk include: a launch trajectory below our expectations, greater competition than we anticipate and
`a higher cost base than we currently model.
`
`Risk:
`
`Prostate Cancer
`
`5
`
`WCK1071
`Page 5
`
`

`
`
`
`11 December 2012
`
`Risk:
`
`Price Target: (12 months) for Johnson & Johnson (JNJ.N)
`Method: Our $71 target price for JNJ is based on a Sum-of-the-Parts analysis, using peer averages in related consumer, devices and pharma
`businesses to assign value to each of JNJ’s business units. The combined peer group consists of about 20+ companies. and the analysis
`results in application of a blended multiple of 12.9x JNJ’s 2013 earnings.
`Key upward risks to our $71 target price include more aggressive deal-making or capital deployment by the company, and deterioration of
`macro environment leading to a flight to safety. Downward risks to our target price include conservative use of cash, and an improvement
`in the the macro environment leading to greater appetite for risk.
`Price Target: (12 months) for Medivation (MDVN.OQ)
`Method: Our Price Target of $73 is derived from a discounted cash flow modeled to 2020 followed by a terminal growth up to patent expiry and no
`further cash flows.
`Risks to our $73 target price include delay in or lack of approval in either the post or pre-chemo indication or lower penetration than we
`assume.
`
`Risk:
`
`Please refer to the firm’s disclosure website at www.credit-suisse.com/researchdisclosures for the definitions of abbreviations typically used in the
`target price method and risk sections.
`See the Companies Mentioned section for full company names
`The subject company (DNDN.OQ, JNJ.N, MDVN.OQ) currently is, or was during the 12-month period preceding the date of distribution of this report,
`a client of Credit Suisse.
`Credit Suisse provided investment banking services to the subject company (JNJ.N, MDVN.OQ) within the past 12 months.
`Credit Suisse has managed or co-managed a public offering of securities for the subject company (MDVN.OQ) within the past 12 months.
`Credit Suisse has received investment banking related compensation from the subject company (JNJ.N, MDVN.OQ) within the past 12 months
`Credit Suisse expects to receive or intends to seek investment banking related compensation from the subject company (DNDN.OQ, JNJ.N,
`MDVN.OQ) within the next 3 months.
`As of the date of this report, Credit Suisse makes a market in the following subject companies (DNDN.OQ, JNJ.N, MDVN.OQ).
`Credit Suisse has a material conflict of interest with the subject company (MDVN.OQ). A Credit Suisse analyst involved in the preparation of this
`report has a long position in the common stock of MDVN
`Important Regional Disclosures
`Singapore recipients should contact Credit Suisse AG, Singapore Branch for any matters arising from this research report.
`The analyst(s) involved in the preparation of this report have not visited the material operations of the subject company (DNDN.OQ, JNJ.N,
`MDVN.OQ) within the past 12 months
`Restrictions on certain Canadian securities are indicated by the following abbreviations: NVS--Non-Voting shares; RVS--Restricted Voting Shares;
`SVS--Subordinate Voting Shares.
`Individuals receiving this report from a Canadian investment dealer that is not affiliated with Credit Suisse should be advised that this report may not
`contain regulatory disclosures the non-affiliated Canadian investment dealer would be required to make if this were its own report.
`For Credit Suisse Securities (Canada), Inc.’s policies and procedures regarding the dissemination of equity research, please visit
`http://www.csfb.com/legal_terms/canada_research_policy.shtml.
`As of the date of this report, Credit Suisse acts as a market maker or liquidity provider in the equities securities that are the subject of this report.
`Principal is not guaranteed in the case of equities because equity prices are variable.
`Commission is the commission rate or the amount agreed with a customer when setting up an account or at any time after that.
`For Credit Suisse disclosure information on other companies mentioned in this report, please visit the website at www.credit-
`suisse.com/researchdisclosures or call +1 (877) 291-2683.
`
`Prostate Cancer
`
`6
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`

`
`
`
`11 December 2012
`
`References in this report to Credit Suisse include all of the subsidiaries and affiliates of Credit Suisse operating under its investment banking division. For more information on our structure, please use the
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