Medivation's Management Presents at Barclays Global Healthcare Conference (Transcript)

Mar.12.13 | About: Medivation, Inc. (MDVN)

Medivation, Inc. (NASDAQ:MDVN)

March 12, 2013 1:30 pm ET

Executives

C. Patrick Machado - Chief Financial Officer, Principal Accounting Officer, Chief Business Officer and Secretary

Analysts

Ying Huang - Barclays Capital, Research Division

Ying Huang - Barclays Capital, Research Division

I guess we should get started because it's already time. So my name is Ying Huang. I'm the U.S. biotech analyst here at Barclays, and we're very pleased to have our next presenting company, which is Medivation. Medivation just launched a new product called XTANDI last year for castration-resistant prostate cancer. And in fact, last quarter, the company already posted more than $50 million in revenues. So we're very pleased to also have Pat Machado, the Chief Financial Officer from Medivation here. And with that, I may just kick off because we're using the so-called fireside chat format today.

Question-and-Answer Session

Ying Huang - Barclays Capital, Research Division

So Pat, I guess, the launch of XTANDI has been quite successful so far. Could you just kind of like walk us through the main drivers behind the success so far in terms of the first full quarter of sales for XTANDI? And what gives you the confidence that the launch will continue to be a success in the marketplace?

C. Patrick Machado

Well, first of all, thanks for having me and thank you, all, for your time this afternoon. I think this drug, as with any other drug, the key factor for success comes down to the data. We reported in our AFFIRM study the largest survival benefit ever seen to our knowledge in prostate cancer of 4.8 months improvement in survival over placebo. And on top of that, from a safety perspective, there were fewer serious adverse events in the treatment arm by in our study as opposed to the placebo arm, which again, for late stage prostate cancer is, again, virtually unheard of. Well I think it's the safety and the efficacy of the product that contributed to the results that we've put up thus far. I think from our perspective, I think people know the initial launch is in post-chemotherapy, prostate cancer patients who were seen largely by oncologists. We have always at Medivation used this drug not as an oncology drug but a urology drug, and the key customer base for us being urologists, which will need the pre-chemo label is really aqueous in meaningful way. But once we do that, which is really where the future growth opportunities come from, we feel that the product is even more differentiated against its competition, given the fact that we don't require concomitant steroids with XTANDI, unlike our primary competitor ZYTIGA. So we're very pleased with the results that we've put up thus far, and we look forward to continuing to expand all the opportunity for the drug as we move upstream.

Ying Huang - Barclays Capital, Research Division

Thank you. And then when you reported the fourth quarter financial results on your earnings call, you mentioned that 98% of both Medicare and also commercial payors were covering XTANDI as of now. So since the commercial launch, has the average co-pay per patient come down? Because there is actually a Bloomberg panel, I think it was done in December last year, showing that the initial ZYTIGA co-pay was around $300, in that range. And then, ever since, it has come down to about $100 to $150 range per month in October of last year. So what are you seeing in terms of the out-of-pocket cost and co-pay for patients on XTANDI therapy?

C. Patrick Machado

So that's a difficult one to answer with data just because it varies widely, depending on the insurance coverage that a particular patient has, whether he has commercial insurance, Medicare, Medicaid or what benefits he has under each of those programs. So I'm not aware of a comprehensive data update that I could rely on to give you a standard answer. It's very volatile amount.

Ying Huang - Barclays Capital, Research Division

Okay, that's fair. You just mentioned that, obviously, that hopefully, with the PREVAIL trial generating positive trial results in the near future, then you might get the pre-chemo label which will serve as important inflection point for the market update for XTANDI in the setting. So I was wondering if you could just comment on what we have seen from the ZYTIGA scripts tracked by IMS, following the signing of the FDA approval pre-chemo label for ZYTIGA. Even though we have seen that the total script number has gone up week by week, but what do you think is different between the different case between your drug and then the ZYTIGA update here?

C. Patrick Machado

So I think, first of all, it's early days to answer that question for ZYTIGA. They just received their pre-chemo approval towards the end of December of last year, so it's very early days for them. I think another factor that needs to be looked at, with respect to their initial days in pre-chemo is the fact that they're a high-priced drug that has a largely Medicare patient population, which presents issues of the doughnut hole that really any drug falls into that category will face, including XTANDI, frankly, for the -- certainly for the post-chemo indication where we're currently approved. I think at the end of the day, the competitive differentiation of our 2 drugs, even before we see the PREVAIL data, which we feel we have an opportunity to show statistically significant overall survival, which of course, ZYTIGA did not in their Phase III study. In addition to any advantage that we may get in terms of data superiority, all of our research indicates that the absence of steroids with our drug in the urology prescriber base is going to be a very compelling advantage. I think if you ask urologists, even assuming you have 2 drugs that are equal in all respects, except the one requires steroids and one does not, the overwhelming preference is for drug that does not require steroids because of the complexity of managing patients that are taking this drug. So we feel that, that will be a big differentiator for us. We also feel that the PREVAIL data gives us an opportunity to further differentiate our profile, relative to our competition.

Ying Huang - Barclays Capital, Research Division

Great. And then if you look at the timeline for ZYTIGA in terms of pre-chemo trials, so it took J&J roughly 22 months between the complete enrollment of that trial and then the interim look, which also resulted in the earlier-than-expected unblinding of the trial. So if you follow that rough math, and also we assume PREVAIL will wait maybe a little longer to ensure you hit the statistical benefit in terms of overall survival improvement here. On the other hand, you also have a larger trial, much larger trial in terms of the enrollment for PREVAIL trial, therefore, which suggests that your event will probably be accumulated faster than what we saw from J&J trial. So if we look at that, when shall we expect the PREVAIL to read out in terms of interim analysis here? Is that the right way to think about it when we look at the rough math by comparing your trial to the J&J's trial in this setting? And also, if that's the case -- also the other question I frequently get from investors is you may want to wait longer to make sure you hit survival, but on the other hand, if you wait too much longer, eventually those curves will converge anyways. So what's a good strategy in terms of unblinding the trial here, and then when should we expect the trial to read out?

C. Patrick Machado

Yes, those are all very good questions. Obviously, our future growth hinges critically on the answer to those questions. Let me give you a little bit of color about our thought process here. So I think that it's obviously a hugely important strategic decision when to conduct interim analysis and you want to be able to do that on the basis of the most wholesome set of data that you have. So our approach with respect to PREVAIL is really the same as it was with respect to AFFIRM. We have the advantage of being able to see all of the data from ZYTIGA's post-chemo study, and we're able to use that in order to calculate the timing for our interim analysis in AFFIRM that enabled us to show quite significant results. We plan to do the same thing for PREVAIL. We've seen the results of the 302 study. We've seen aspects in which their data were a little bit different than what one might have expected going in. For example, the fact that the survival curves did not diverge until about 18 months into the study, which was a little bit odd. It was different than what was seen in 301. So we've taken all of those factors on board and we've made our best guess as to the appropriate metric to use for the AFFIRM -- for the PREVAIL interim analysis. That being said, while we're not commenting on the likely timing, for that, I think the kind of the triangulation strategy that you were following is probably a helpful way to look at things. Since you pointed out the ZYTIGA 302 study finished accruing patients in May of 2010, they conducted their interim in December of 2011, so 18, 19 months after last patient in. They had about 1,100 patients in the study versus 1,700 in ours, so they had quite a bit less power, which would, all else equal, suggest that we could look sooner than they did and still achieve comparable results. Remember, we completed accrual in our PREVAIL study in May of '12 so 18, 19 months for us would be December of this year. On the other hand, we would also expect to see longer survival in the treatment arm in our study than what's the case in ZYTIGA 302. So it's exactly the same as AFFIRM versus the 301 study. Patients live longer on our drug than was the case with ZYTIGA. And assuming that, that is predictive of what's going to happen in pre-chemo, we would expect to see that as well. How much longer? Obviously, that's a question we'd all like to know the answer to. We won't until we get the results from the study. But all else equal, that would push that 18-month timing a little bit further out. So it's a bit of a balancing act. As you correctly pointed out, you want to be taking a look at a time that is both not too soon and not too late. And we've made our best guess in terms of number of events that we're going to be looking for. But in terms of where we think those are going to fall on the calendar, we're going to keep our cards close to the vest on that.

Ying Huang - Barclays Capital, Research Division

Okay. That's very helpful, Pat. Still, I know that for your PREVAIL trial, you actually have more patients in terms of the percentage here and coming from x U.S. especially in Europe compared to the J&J trial. Is there any difference that we should think about in terms of the U.S. patients versus European patients here in the CRPC setting?

C. Patrick Machado

So you're correct that we have a predominately x U.S. study, and the biggest reason for that was a strategic one, which is one of the things you are concerned about when running a survival study. It's what's called the crossover effect, where placebo patients in your study leaves the study on progression and take another treatment that could prolong life because there are other life-prolonging treatments available, it's to your advantage to place the study in countries where those treatments are likely to be available less quickly, and that basically means Europe. So with ZYTIGA, as the prime example, their approval, both in pre- and post-chemo occurred sooner in the U.S. than in Europe. The drug is not -- still not available for pre-chemo in Europe, and therefore, that was the reason that we put most of our sites outside of the U.S.. In terms of are the patients different, do they respond differently? Neither AFFIRM 301 or 302 showed any difference. When you did an analysis across geographical regions, the results were very consistent. So we have no reason to expect that the European patients will behave any differently in PREVAIL.

Ying Huang - Barclays Capital, Research Division

Sure. So on your earnings call, you also talked about the joint work plans with Astellas, your global partner, in terms of moving XTANDI into the early stage of prostate cancer, a spectrum here. And then last month at ASCO GU, we also saw some encouraging data from you in the Phase II trial for XTANDI in the hormone-naïve patients. So can you give us a little bit color about how you and also your partner, Astellas, are thinking in terms of those 2 markets, namely the nonmetastatic CRPC patients and also the hormone-naïve CRPC patients? And then what is your strategy in terms of going forward here?

C. Patrick Machado

So obviously, these are 2 huge growth drivers for the business. Moving forward, if you divide prostate cancer into 4 large buckets, we've covered 2 of those with registrational studies already with AFFIRM and PREVAIL. The 2 that we have not yet covered are the 2 that you mentioned, the nonmetastatic CRPC and the hormone-naïve. We consider both of those to be very large, very significant commercial opportunities because there really is a multiplier effect. As you go earlier into the treatment algorithm not only do the number of patients increase, but the time you would expect each patient to remain on treatment also increases because they tend to be younger and healthier and get more benefit from being on treatment. So M0 would be the next earliest. Hormone-naïve would be the earliest of all. As we disclosed in our earnings call a couple weeks ago, we have approved the collaboration budget with Astellas for 2013, which includes funding for upstream development, including registrational development. We consider it to be an absolutely vital corporate objective to extend the use of XTANDI as early in the treatment algorithm as we possibly can. And I think given the data that we've generated thus far, and the fact that we have a very substantial patent life with patents expiring in 2027 in the U.S. and 2026 in Europe and Japan, makes this a pretty compelling investment from a business perspective. The strategy about how to do this, I think, is one that's going to be complex. As we mentioned in the call a couple of weeks ago, these are long, expensive studies, 5 to 7 years, about $150 million to $200 million each. So there are decisions that have to be made carefully. There are also patient populations for which there's no regulatory precedent on endpoint, so regulatory involvement is obviously going to be critical for both of these. But we're committed to pushing XTANDI as far upstream as we possibly can. Our partner shares that strategic objectives and we look forward to being able to share more of the details once those are worked out.

Ying Huang - Barclays Capital, Research Division

And Pat, in terms of timeline, when should we get -- when should we expect to have some more clarity from you and Astellas on this? Is it going to be by the end of this year? Is it going to be midyear?

C. Patrick Machado

So we have, as we disclosed a couple of weeks ago an approved 2013 budget that has dollars allocated to these activities. So my expectation would be you'd be hearing about it this year.

Ying Huang - Barclays Capital, Research Division

And then, can you remind us a little bit about where things are in terms of patent lawsuit between you and UCLA and also Aragon here?

C. Patrick Machado

So first of all, I just want to make clear, this really is not a patent lawsuit, right? So this doesn't affect the XTANDI intellectual property in any respect. It is a contract and fraud lawsuit based on a research collaboration that we had with UCLA that produced both XTANDI and the Aragon compound. So we filed suit in 2011 alleging both breach of contact claims and fraud claims. The judge ruled in Aragon's favor late last year on the contract claim. The fraud claims are still alive. The way that, that works in California is you can't appeal until you preceded the trial on all the remaining claims. So the next step for us it to go to trial on the fraud claims, which is likely to occur in the second quarter. And then following the decision on that, we will appeal the entire matter, including the contract claim.

Ying Huang - Barclays Capital, Research Division

And then assuming you go through this process you definitely will appeal, and then that goes to the Supreme Court of California?

C. Patrick Machado

So the next step is the Appeals Court of California. And this would be a group typically of 3 judges who would be reviewing the matter completely independently. So there's not -- they don't give any discretion at all to the trial judge's findings. They consider the facts completely new. So that would be the next step in the process.

Ying Huang - Barclays Capital, Research Division

Okay, and then in terms of guidance from Astellas, I know that you guys are running the U.S. trial, which is the STRIVE trial and then Astellas is running the TERRAIN trial in Phase II. So when should we expect some sort of data from both trials?

C. Patrick Machado

So I can really only comment on the STRIVE trial because that's the one that we're operationalizing. So I think most of you probably know, we initiated that study only very recently. I believe it was August of last year we're seeking to enroll 400 patients who have failed Lupron into a study that would be randomized XTANDI versus bicalutamide or Casodex. So while we've not given formal guidance on when we expect to complete accrual, this is in essence the same patient population that we recruited for PREVAIL. With the exception that STRIVE does not require a metastatic disease, nonmetastatic patients are eligible for STRIVE as well. And in the PREVAIL study, we enrolled 1,700 patients in about 20 months. So that gives you some sense of the time frame for enrolling studies like this when Medivation is operationalizing.

Ying Huang - Barclays Capital, Research Division

And then maybe we can dive into the size of the commercial market here because I think there's a lot of confusion amongst investors, how big really is the so-called pre-chemo CRPC market is. There are few ways to look at it. You can look at obviously J&J's ZYTIGA run rate because ZYTIGA has been improved in both pre-chemo and also post-chemo CRPC setting. And then the other way is to look at obviously the scripts written by the doctors on Casodex. I think last year, it was around 600,000 scripts in the U.S. market base tracked by IMS. So really, what's a good way to size up the pre-chemo CRPC market here?

C. Patrick Machado

So we clearly think the latter is the best way to do it. Casodex is the gold standard drug that physicians are reaching for today in patients who have failed Lupron. That is exactly the position we want XTANDI had to be in, to be the first agent physicians reach for after a patient has failed Lupron. If we are successful in advancing into the hormone-naïve population, we'll even be a step ahead of that. We'll be the first agent doctors reach for before Lupron. But the immediate strategy is first step after Lupron. That's a place currently occupied by Casodex. So to us, that's the best indicator of the opportunity. Every patient for whom a doctor is prescribing Casodex is a patient for whom that doctor could be prescribing XTANDI, and we want them to. So in terms of sizing that opportunity, we consider that to be the most pertinent fact.

Ying Huang - Barclays Capital, Research Division

And then maybe we can spend the rest of the time talking about your commercialization effort right now for XTANDI since the approval. So I guess you mentioned on earnings call last quarter that 90% -- probably 98% of all scripts of XTANDI are being written by medical oncologists even though this drug probably will be a preferred drug in the hands of urologists. So how many oncologists and then how many urologists are you targeting right now? And then when do you think that mix will change?

C. Patrick Machado

So we are currently targeting, on the oncology side, there's about 5,000 to 8,000 oncologists in the U.S. I think we're targeting pretty to close to half of those. On the urology side, there's about 8,000. We're targeting 2,000. It's a little more on the urology side because our label is post-chemo. And most urologists, as you know, don't see post-chemotherapy patients. When a patient is ready for chemo, they get referred to the oncologists and typically stay there for their end-of-life care. So it's only a small fraction of urologists that see post-chemo patients. So that's where we need to be with the post-chemo label. So while we're calling on these doctors, consistent with our expectation, they don't constitute large percentage of our prescriber base just yet because they're typically on-label prescribers. So we would anticipate that changing when we get the PREVAIL data and get the label in pre-chemotherapy disease.

Ying Huang - Barclays Capital, Research Division

And then I guess we have time for the last question. That is you're also conducting a very early Phase I study for XTANDI in breast cancer right now. So can you describe maybe the threshold there in order for you to take this coming forward. What do we have to see from the Phase I trial? And then what's the scientific rationale behind the XTANDI as a, I guess, drug for breast cancer therapy?

C. Patrick Machado

Yes, yes, it's a good question. So we do have an ongoing Phase I dose escalation study in breast cancer, about 60 patients. We've already dose escalated to the 160-milligram dose, which is the same dose we're using for prostate cancer, and we will be expanding out that dose. In terms of what we need to see to take the next step that the drug is safe and well tolerated. So this is obviously the first time we've studied the drug in women. We have no reason to believe that biologic response would be any different in women than in men. But we haven't tested that so we needed to prove it and that's what we're going about doing in the study. In terms of the mechanistic rationale, this all came about as a result of some pre-clinical work that we published. It was 2011. It's known that about 70% of prostate cancers express the androgen receptor. Even though testosterone is not the major fuel for breast cancer, estrogen obviously is. So there was rationale for studying XTANDI in AR-driven prostate cancers because we obviously block the androgen receptors. So we worked on a collaboration with some researchers with the University of Colorado testing XTANDI and AR-driven breast cancer cell lines where we fully expected it to work. And also in estrogen receptor-driven cell lines where we fully did not expect it to work because we know the drug doesn't block the estrogen receptor. The data that we got from the experiments shows that the drug worked very well in both cell lines. Now mechanistically how it's working in the ER-driven cell lines steps into the realm of theory. We don't know precisely yet. One theory is that the way that androgen signals is conserved with estrogen in terms of the nuclear translocation to DNA binding, there may be some commonality in that, that the drug is hitting, but this is all theory we don't know. But what we did now is when you take the AR-driven cell lines, feed them estrogen, they proliferated rapidly. When you fed them estrogen and also XTANDI, they flatlined. So that was the nonclinical rationale for exploring the drug in both populations, which is what we're doing.

Ying Huang - Barclays Capital, Research Division

Okay. I guess maybe can we bring the slide up for the IR's questions for the audience? We might have I think 1 or 2 questions from the audience here. All right. It's very simple to use this. You just press number 1, 2 or 3 on the keypad and then hit the green button to send your answer.

Okay. So the question is, what will the total global sales for XTANDI be in this year 2013: choice #1, $200 million to $250 million; #2 is $250 million to $300 million; 3 is $300 million to $350 million; and then 4 is $350 million to $400 million; the last answer, 5, is greater than $400 million for this year?

[Voting]

Ying Huang - Barclays Capital, Research Division

Interesting, I guess we got kind of like a normal distribution. So 25% of the audience thinks it will be $200 million to $250 million. 17% audience think it will be $250 million to $300 million. And then 25% of audience think it will be $300 million to $350 million. And then 33% think it will be greater than $400 million. I guess, well, we'll see the answer.

C. Patrick Machado

If not, you can call our marketing department.

Ying Huang - Barclays Capital, Research Division

Okay. Do we have another question or not at this time? No? Okay, with that, let me just thank Pat for his time. Thank you very much.

C. Patrick Machado

Thank you.

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