Prostate cancer is the most common form of cancer among men, and two companies - Medivation (NASDAQ:MDVN) and Johnson & Johnson (NYSE:JNJ) - are leading the charge with their experimental new treatments. These two will highlight their findings at The American Society of Clinical Oncology (ASCO), a meeting which has quickly become one of the most important events of the year.
From an investment standpoint, the momentum in cancer drug stocks has emerged well ahead of the May 18th deadline as investors pile on the bets over who will reign supreme. The new drugs in focus are Medivation’s MDV-3100, and Johnson and Johnson’s abiraterone, both of which are set to present critical phase III data results at any time prior to or during the meeting.
Of the two, the highest potential and most promising data from early to mid-stage trials belongs to Medivation, as the company is on the verge of becoming one of the most sought after oncology companies, and whose product could be a medical breakthrough when comparing its results to currently available options. These developments have led to many analysts upgrading the company’s short-term price target to well beyond $24 a share.
The profit potential for anyone entering this target market is truly staggering. Development of new therapies and drugs for prostate cancer is likely to supplement, rather than substitute, the prevailing drugs or therapies, such as chemotherapy, radiation therapy, hormonal therapy and surgery, and propel sales in global prostate cancer therapeutics market to $4.8 billion by 2015. Growth in prostate cancer therapies can be attributed to the increase in the number of prostate cancer incidences in men over the age of 60. Given the longevity of an average individual, and the rapidly aging world population, the risk of prostate cancer stands tall. Statistics reveal that an estimated 1.4 million new invasive cancer cases were diagnosed in the US alone in the year 2008.
Comparing Medivation’s MDV-3100 vs. Johnson & Johnson’s abiraterone
Men diagnosed with advanced prostate cancer who have not yet been treated with chemotherapy lived a median 420 days with MDV-3100 before their disease progressed again, according to a Phase I/II trial with partner Astellas Pharma Inc. This compares very favorably with Johnson & Johnson’s experimental prostate cancer drug abiraterone, which in a Phase III trial reported in October, showed patients lived 234 days before the disease progressed.
“Abiraterone has the most robust data seen to date,” said Medivation CEO David Hung, “and we’re well-positioned right behind them.”
Medivation and Astellas have four additional trials planned or under way for MDV-3100: two Phase III studies with a total of 2,900 patients, and two mid-stage trials.
A strong showing in those trials could help Medivation’s drug line up as the first in a line of treatments to combat prostate cancer that has spread to other parts of the body but hasn’t yet faced chemotherapy, Hung said.
“The pre-chemo opportunity is many times larger than the post-chemo opportunity,” Hung said, since there are more men diagnosed with prostate cancer who haven’t gone through chemotherapy and they live longer.
According to Wall Street analyst, Larry Smith,
MDV 3100 has the potential to be used in every stage of prostate cancer from first line now treated with the hormonal drug, Abbott’s (NYSE:ABT) Lupron through to fifth line patients in the final stages of the disease who are refractory to the chemotherapy drug, Sanofi-Aventis’ (NYSE:SNY) Taxoterre. Its mode of action should also allow it to be used in combination with abiraterone, Dendreon’s (NASDAQ:DNDN) 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).
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From the above comparison, it is noticeable that MDV-3100 performs very favorably to abiraterone in most of the five important measures of the effect on tumors.
Medivation also maintains a healthy balance sheet, with nearly $207.8 million cash and equivalents which should see it continuing to fund operations well beyond 2012.
Upcoming FDA Catalysts
The company expects to report top-line results on Dimebon from its phase III HORIZON (Huntington disease) study in the first half of 2011. Meanwhile, Medivation continues to evaluate Dimebon in the CONCERT study, which is being conducted with patients suffering from mild-to-moderate Alzheimer’s. Robust results from this study, along with data from an earlier study, could be enough to support Dimebon’s approval for mild-to-moderate Alzheimer’s disease. Results from the CONCERT study are expected in the first half of 2012.
Medivation and partner Astellas finished enrolling patients for the phase III AFFIRM study (advanced prostate cancer) in Nov 2010. The companies initiated another phase III study (PREVAIL), which is being conducted in chemotherapy-naïve advanced prostate cancer patients. The initiation of this study triggered a $10 million milestone payment from Astellas.
Medivation and Astellas also intend to commence two new studies with MDV3100 in the first half of 2011. While one trial will be a head-to-head phase II study between MDV3100 and AstraZeneca’s (NYSE:AZN) Casodex (bicalutamide), the other study (phase II) will be conducted in hormone-naïve patients. Top-line results from AFFIRM should be out in 2012. However, results could be presented in 2011 itself if an interim analysis is conducted. All information via Zack’s Investment Research.
- 2/16/11 – Global Hunter Securities maintains a ‘Buy’ on Medivation, raises PT from $19 to $24
- 11/30/10 – Wedbush assumes coverage on Medivation with a Outperform. PT $25
The target for Medivation is set to $25 based on the Ascending Triangle pattern that has formed over the last three months, which is confirmed by the decreasing volume as accumulation by institutions and mutual funds is present before the breakout. The relative strength index (RSI) has also broken out of the symmetrical triangle formation, thus, heavy buying pressure can be expected as money flows back into the equity in anticipation of upcoming catalysts.
A ‘golden cross’, whereby the 50-day moving average and the 200-day moving average cross in a positive manner has occurred, and often spells higher prices moving forward for the equity. There is strong support at the $16.23 (50-day MA) level with light resistance at the $17.50 level which should be broken within the next few trading sessions. Both MACD divergence and full stochastic look eerily similar to early December and February, when the stock saw strong gains of well beyond 30% in a matter of two weeks, respectively.
The point and figure chart also forecasts a move towards the $22.50 level in the short-term, as the bullish behaviour is expected to continue.
Disclosure: I am long MDVN.