Ustekinumab PDUFA Could Kick Start Medarex Revival

As one of six products that the European regulator recommended for approval last Friday, Johnson & Johnson’s (JNJ) new psoriasis treatment Stelara (ustekinumab) appears to have slipped under the radar with a somewhat surprising lack of official comment either from J&J or Medarex (MEDX), the antibody company set to record decent royalties on sales of the drug.

The European recommendation for Stelara follows a unanimously positive verdict by an FDA advisory committee in June, and as such, the PDUFA decision for the drug due on December 3 looks as much of a formality as is possible to predict in a year of unprecedented delays and U-turns by the US regulator. As J&J’s second most valuable pipeline candidate the final outcome is significant for the pharma giant, and approval could also help breathe some life back into Medarex’s shares which hit a five-year low of $4.33 last week, less than current per share levels of cash and marketable securities.

Nailed on certainty?

Predicting the direction of PDUFA verdicts is an increasingly fraught and risky business. The FDA’s massively surprising final decision in August to reject Schering-Plough’s Bridion (sugammadex), following a similarly positive advisory committee review and European approval, is testimony to this fact (Schering-Plough's sugammadex dealt surprising blow, August 1, 2008).

Whilst the parallels with Sugammadex are clear, all the signs so far point to approval, especially considering the extremely positive outcome of a head-to-head trial for Stelara against one of the market-leading psoriasis treatments, Wyeth and Amgen’s Enbrel (J&J's head-to-head gamble pays off, September 19, 2008).

Although the FDA’s recent track record in meeting PDUFA deadlines has not been great, the fact the action date has already been delayed by three months to review additional data submitted by J&J raises hopes that this deadline for Stelara could yet be met.

With consensus forecast sales of $1.3bn in 2014, the drug is worth $3.34bn to J&J, according to EvaluatePharma’s NPV Analyzer. Representing 4% of J&J’s total product NPV of $82.3bn, the future commercial success of Stelara is clearly important to the growth prospects of the group’s pharmaceutical division.

Turnaround for Medarex

Medarex licensed its UltiMAb antibody technology to J&J in 1997, which was used to develop Stelara, and another potential blockbuster in J&J’s pipeline, arthritis drug golimumab. With blockbuster forecasts for both antibodies, Medarex’s estimated 2.5% royalty on sales is clearly a significant growth and value driver for the company.

Although most analysts and investors focus on the potential commercial success of ipilimumab as a growth driver for Medarex’s shares, approval for Stelara and golimumab and subsequent realisation as to the value of this royalty stream could help kick start a turnaround for the biotech.

Approval for Stelara would also provide formal validation of Medarex’s antibody technology platform, representing the company’s first antibody to reach the market.

Stelara and golimumab have a combined NPV of $1.3bn, significantly ahead of Medarex’s current enterprise value of $318m.

With a total product NPV of $1.89bn, Medarex appears significantly undervalued at current share price levels and is clearly suffering the same fate as many biotech stocks in recent months.

At such valuations Medarex must be even further in play as a potential acquisition target for any number of big pharma companies seeking a mature and proven antibody technology platform.

With Bristol-Myers Squibb (BMY) missing out on ImClone Systems (IMCL) to Eli Lilly (LLY) and already Medarex’s partner for ipilimumab, BMS is a clear potential bidder (BMS's alternatives to ImClone, October 7, 2008).

However, with the mixed and mainly disappointing data so far on ipilimumab suggesting Medarex has not actually handed out rights to its crown jewels, often seen as a barrier to external suitors considering a bid, it would be surprising if some big pharma companies are not currently sizing up Medarex.

Disclosure: no positions

Comments

[nova:]

A company's enterprise value is a bogus number invented by the Wall-Street feeble-minded geniuses.

IMO, in the past, Medarex always had very poor and extremely corrupt management. Being familiar with Bristol's clinical capabilities, BMY is looser. It almost killed ImClone. Only Merck KGaA Erbitux clinical program saved ImClone and converted Erbitux into a super blockbuster.

It is pity that for so many years, Medarex was unable of developing and marketing ant single drug.

2008 Nov 29 02:31 PM