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Overview of Key Investment Points for Medivation

Medivation’s (NASDAQ:MDVN) new drug for prostate cancer, MDV 3100, is one of the most promising drugs under development in oncology. The company and the drug are distinctly silhouetted on my radar screen. However, investors must understand that MDV 3100 is still in clinical trials which have to be successfully completed and if all goes well it is unlikely to be commercially available for two years. Before going on, I want to emphasize to the reader that most of the points I will be discussing on MDV 3100 are based on limited Phase I/II clinical data and hypotheses that need to be confirmed in Phase III clinical trials now underway. There is an axiom in cancer drug development that Phase III trial results are never as good as Phase II. Please read the preceding two sentences again before going on.

This report focuses on the how MDV 3100 works and the clinical data that has been seen so far in Phase I/II trials. I also spend time on how MDV 3100 and Johnson & Johnson’s (NYSE:JNJ) new drug abiraterone compare and contrast. I am expecting approval of abiraterone in fifth line treatment of prostate cancer sometime in 2Q, 2011 or 3Q, 2011. In subsequent reports, I will be discussing the commercial opportunities for these drugs.

MDV-3100 is a very intriguing molecule. Prostate cancer has the second highest incidence after lung cancer and because it is slowly progressing, victims can sometimes go through many courses of therapy over years as their disease progresses. MDV 3100 has the potential to be used in every stage of prostate cancer from first line now treated with the hormonal drug Lupron through to fifth line patients in the final stages of the disease who are refractory to the chemotherapy drug Taxoterre. Its mode of action should also allow it to be used in combination with abiraterone, Provenge, LHRH agents like Lupron and chemotherapy. Because it does not require concomitant use of a steroid, it might have a safety advantage over abiraterone. If most things go right in the clinical trials, this drug could be a multi-billion commercial opportunity for Medivation and its partner, the Japanese company Astellas (OTCPK:ALPMY).

There are, unfortunately, a lot of things that can go wrong. There is the potential for some dreadful side effect to occur in the large trials now ongoing that was not detected in the small Phase I/II trial. The side effect profile so far seems acceptable, but we need more data to confirm this. Of concern is that earlier on in its development, MDV 3100 was being used in three patients when seizures occurred. Two of the seizures were witnessed and occurred at doses of 360 mg/day and 600 mg/day. A third seizure which was unwitnessed occurred at 480 mg/day. The company believes that these seizures were most likely unrelated to MDV 3100 or at least not a concern for patients in the Phase III trials that are using a much lower dose of 160 mg/day. The FDA appears to be in agreement as it has allowed Medivation to conduct two Phase III trials. Still, if the judgments of the FDA and the company are wrong and the drug does cause seizures at 160 mg/day, it could be the end of the drug.

I stated earlier, there have been numerous cases in which data stemming from small Phase I/II trials is not duplicated in larger Phase III trials. There is a concern that the 160 mg per day dose of MDV 3100 being used in the Phase III trials may not produce results as promising as the data from the Phase I/II trial which included patients treated at higher doses. In those trials, patients were started at 30 mg/day and ultimately some patients were treated with doses as high as 600 mg/day. It seems that the company may have decided to move to the 160 mg/day dose being used in the Phase III trials to avoid the risk of seizures or other side effects. The question is whether this will also reduce efficacy.

It is important to understand the relationship of abiraterone and MDV 3100. It is not an either/or situation. Because they use different mechanisms of action to control the disease, I believe that the drugs in many cases will be used sequentially or in combination. The success of abiraterone that I am expecting doesn’t dim my view of MDV 3100. Abiraterone was filed in the U.S. on December 12, 2010 for post chemotherapy metastatic prostate cancer. It was given priority review status by the FDA and accelerated assessment in the EU. It should gain approval sometime in the second or third quarter of 2011.

Medivation is conducting a Phase III trial in post-chemotherapy patients called AFFIRM that targets the same patient group in which abiraterone will soon be approved. Interim data on AFFIRM may be released in late 2011 and the full topline data will be presented in 2012. Hence, MDV 3100 is about two years behind abiraterone. A second Phase III trial of MDV 3100 in pre-chemotherapy patients is expected to report interim data in 1H, 2013 so that MDV 3100 is two years behind abiraterone in this key indication as well.

Medivation is also in a late stage pivotal Phase III trial for another drug, dimebon, in Alzheimer's disease. So far, there has been one positive and one negative Phase III trial reported. Medivation and its partner Pfizer (NYSE:PFE) completed enrollment in a third trial called CONCERT in late 2010 and results will be reported in 1H, 2012. The FDA has indicated to the companies that if the CONCERT results are robustly positive, there is a good likelihood of approval.

Dimebon also showed encouraging data in a Phase II trial in Huntington’s disease which showed improvement in cognition and memory. This has led to a Phase III trial involving 403 patients called HORIZON that will be reported out in 1H, 2011.

Stock Opinion

I am not inclined to purchase Medivation until I see more data with the 160 mg per day dosage of MDV 3100 that confirms the efficacy shown in Phase I/II and its safety profile, particularly in regard to seizure. This could occur in late 2011 or 2012. My investment interest in Medivation is based solely on MDV 3100.

I have no great hopes for dimebon in Huntington’s disease and Alzheimers’ disease based somewhat on the data seen so far but more so the complexity and poorly understood nature of these diseases. We really don’t understand the causes of these diseases so that much of drug research is focused on chance observations as opposed to targeting specific disease causing mechanisms. I think that most investors agree with my position. If the upcoming HORIZON trial results in Huntington’s disease are negative, there is likely to be a short term headline impact, but I don’t expect much of a lasting effect on the stock. I feel the same about the CONCERT results Alzheimers’ disease which we should see in 1H, 2012.

If I am wrong in my caution and the results of either HORIZON or CONCERT are positive, the stock would have a dramatic surge. I just don’t like the odds of that happening.

MDV 3100 Mechanism of Action Promises Superior Efficacy

Prostate cancer is highly dependent on testosterone for growth. In the early and intermediate stages of prostate cancer, drugs that inhibit the production of testosterone or alternatively its signaling the tumor to grow are the mainstays of therapy. Testosterone is the main male sex hormone that is made primarily in the testes, but is also produced in smaller amounts in the adrenal gland and sometimes in the tumor itself. In order to stimulate cell proliferation, the testosterone molecule:

  1. First binds to a receptor on surface of the prostate cell called the androgen receptor.
  2. Then it forms a biological complex with the androgen receptor which enables it to penetrate into the nucleus of the cell, a process called nucleotranslocation.
  3. Upon entering the nucleus, the testosterone-androgen receptor complex then binds to DNA which causes cell proliferation.

Abiraterone inhibits the synthesis of testosterone while MDV 3100 interferes with the signaling. Their mechanisms of action are quite different. MDV3100 acts at three steps in the signaling pathway.

  1. It inhibits the binding of testosterone to the androgen receptor.
  2. It blocks the movement of the complex formed when testosterone binds to the androgen receptor into the nucleus of the call (see the box called cell nucleus); and
  3. Finally, it blocks the binding of the testosterone-androgen receptor complex to DNA.

Casodex is the drug currently most preferred for interfering with the testosterone signaling pathway. However, it is a weak binder of the androgen receptor and does not affect the translocation of the testosterone androgen complex nor binding of that complex to DNA. MDV 3100 promises to be much more potent than Casodex and could replace much of its usage.

Johnson & Johnson’s Abiraterone Mode of Action

It is not possible to discuss MDV 3100 without comparing it to abiraterone. However, the drugs have very different mechanisms of action and will not necessarily compete head to head. I think that they will be used sequentially and also in combination. Most patients with metastatic prostate cancer will be given both drugs at some point.

Abiraterone inhibits a steroidal enzyme called CYP 17 that is required to synthesize testosterone; hence it reduces the amount of testosterone that is available for signaling the androgen receptor. It works higher up in the biological pathway than MDV 3100. It has a drawback in that its mechanism of action also causes an increase in a class of hormones called mineralo-corticoids including ACTH, which leads to an increase in blood pressure. To offset this side effect, abiraterone must be combined with low doses of prednisone or prednisolone to inhibit ACTH. Unfortunately, prednisone and prednisolone bring with them a laundry list of side effects that are undesirable, especially if they are taken over a long period of time.

Abiraterone Phase III Results in Post-Chemo Patients Were Strikingly Positive

In October of 2010, Johnson & Johnson presented results from an interim analysis of a Phase III trial of abiraterone in post-chemotherapy patients. This was the first time that a testosterone ablation therapy showed efficacy in late stage prostate cancer and the results were striking. The trial included 1,195 patients with metastatic castrate resistant prostate cancer who had failed treatment with one or more chemotherapy regimens, at least one of which contained Taxoterre (docetaxel), the standard of care. Patients were randomized into two groups that received prednisolone/ prednisone combined with either abiraterone or placebo.

The data showed that treatment with abiraterone resulted in a 35% reduction in the risk of death versus placebo (p<0.0001) and significantly increased median overall survival by 14.8 months as compared to 10.9 months with placebo. The trial also showed a significant improvement on the secondary endpoints of median time to PSA progression (10.2 months versus 6.6 months (p<0.0001) and median radiographic progression free survival of 5.6 months versus 3.6 months (p<0.0001). The magnitude of the benefit was significantly better than anything that has been seen with any treatment in this population of prostate cancer patients.

Phase I/II Results for MDV 3100 are Encouraging

A Phase II trial of MDV 3100 was started in July 2007 in which 140 patients were enrolled; these included both pre-chemotherapy and post-chemotherapy patients. Doses ranged from 30 to 600 mg. per day and showed that the drug was well tolerated at doses up to 240 mg/day. Above that level, side effects began to occur, the most significant of which was fatigue. One of the issues with MDV 300 is that the dosage being used in the Phase III trials of 160 mg/day may not be as effective as the Phase I/II results which included patients treated at higher doses.

Anti-tumor activity was shown across multiple endpoints as can be seen below:

Positive Phase I/II

Published in Lancet

-140 pre-chemo and post-chemo patients

-Doses of 30-600 mg./day: well tolerated to 240 mg/day

-Anti-tumor activity shown across multiple endpoints

Pre-chemo

Post-chemo

≥50% PSA decline

62%

51%

Stabilization of soft tissue metastases

80%

65%

Stabilization of bone metastases

63%

51%

Favorable CTC conversion

75%

37%

Source: Medivation presentation

The drug showed robust responses in several important measures of clinical efficacy in both pre and post-chemotherapy patients. It stopped progression of both soft tissue and bone metastases in a very meaningful percentage of patients. It also caused very significant declines in PSA. While many patients and physicians focus on PSA, most academics feel that it has limited prognostic value at this stage of the disease. What is interesting is the favorable conversion of the number of cancer tumor cells from unfavorable to favorable; the literature suggests that this may be a good prognostic tool for providing a survival advantage.

Medivation believes that one of the most significant predictors of therapeutic benefit may be the number of circulating tumor cells (CTCs) in the blood, which is a measure of tumor burden. High levels of CTCs result in a much worse prognosis. A recent study suggested that survival can be improved by as much as 15 months if the CTC count is favorable To put this in perspective, the best drugs now available for metastatic disease only offer a survival advantage of three or four months. If the CTC count can be favorably maintained or converted from unfavorable to favorable, the median survival can possibly be increased by 15 months.

Conversion of CTCs From Unfavorable to Favorable Correlates with 15 Months Improvement in Median Survival

MDV 3100 Effects on CTCs

Pre-chemo

Post-chemo

Favorable to unfavorable

91%

91%

Unfavorable to favorable

75%

37%

Source: Medivation Presentation

The preceding chart shows the effects of MDV3100 on CTCs. While it should not be taken to mean that MDV 3100 has proven that it increases survival. it should be noted that if patients started with a favorable CTC count, MDV 3100 was able to keep 91% of both pre- and post-chemotherapy patients in a favorable count status. In addition, MDV 3100 was able to convert the CTC count from unfavorable to favorable in 75% of pre-chemo patients and 37% of post-chemo patients. This suggests that MDV 3100 may have the potential to give a significant survival advantage. Future studies will tell.

Comparison of Trial Results of MDV 3100 and Abiraterone: Both Look Great

Medivation in its presentations has compared the published Phase I/II data of MDV 3100 with that of abiraterone in its Phase III trial. Five endpoints were compared. There is always a major risk in comparing data from different clinical trials, but it is interesting, nevertheless, to do this with MDV3100 and abiraterone as in the following table:

Abiraterone Phase III Interim Analysis Positive, Validating Inhibition of Testosterone Signaling In Castrate Resistant Prostate Cancer Compared to MDV 3100 Phase I/II

MDV 3100

abiraterone

PSA decline (50%) at week 12

-Chemo-naive

62%

55-67%

-Post-chemo

51%

36-51%

Soft tissue non-progression

-Chemo-naive

80%

66%

-Post-chemo

65%

77%

Bone scan disease

-Chemo-naive

63%

Not reported

-Post-chemo

51%

59%

CTC Conversion (Unfav. To Fav.)

-Chemo-naive

75%

59%

-Post-chemo

37%

34-41%

Median TTP-PSA (days) by PSAGG-1 criteria

-Chemo-naive

420 days

225-234 days

-Post-chemo

166 days

169 days

* This data is not from head to head trials and should be accordingly viewed with caution.

Source: Medivation presentation

It can be seen that MDV 3100 compares very favorably to abiraterone in all five important measures of effect on tumors. However, I want to emphasize again that these are not head to head trials.

Source: Comparing Medivation's and Johnson & Johnson's Prostate Cancer Drugs