Medivation Trial Finds Alzheimer Treatment Improves Condition

One of our favorite stocks on our 10 Bagger List is Medivation (MDVN). The company’s mission is to identify and perform the early development of medical technologies with a life changing potential. MDVN intends to (1) acquire early stage biomedical technologies that can be developed through phase-II of the clinical trial process, (2) outsource the clinical research, (3) following the successful completion of the phase-II trials, sell or partner the development of these technologies with larger organizations that have greater financial strength and more experience at commercialization, and (4) finally, distribute the proceeds of the sale or licensing income directly to shareholders.

Medivation is currently developing two newly acquired technologies through wholly owned subsidiaries.

Medivation Neurology

This subsidiary owns issued patents in the US, Europe and Hong Kong for Dimebon and certain related compounds to treat neurodegenerative diseases. At present, the company jointly owns a patent application for the use of Dimebon for the treatment of Huntington’s Disease which will expire in 2026 and for the treatment of Alzheimer’s disease which will expire in 2021.

Alzheimer ’s disease

Alzheimer’s disease is the leading cause of dementia and is characterized by the progressive loss of memory, thinking (cognitive function) and the ability to perform the activities of daily living (global function). The Alzheimer’s Association estimates that Alzheimer’s disease affects approximately 4.5 million people in the US and that that number will grow to 16 million by 2050. Total annual Alzheimer’s related expenditures in the US will exceed $100 billion with the average lifetime cost per Alzheimer’s disease patient equal to $174,000.

MDVN management estimates that the current Alzheimer’s disease therapeutics being marketed constitute more than $3.2 billion per year; this in spite of the fact that none of the drugs approved by the FDA has been proven to prevent or change the underlying process of brain deterioration--they have only slowed the worsening of loss of cognitive and global functions. Hence, there appears to be room for improvement in this large and growing pharmaceutical market.

Huntington’s Disease

Huntington’s Disease is a rare, always fatal disease caused by a specific genetic mutation for which there is no approved treatment. It is associated with brain cell death and is characterized by progressive loss of coordination, the ability to walk and cognitive degeneration which eventually leads to death 10 to 20 years from initial diagnosis. According to the Hereditary Disease Foundation approximately 30,000 US patients suffer from Huntington’s Disease with an additional 150,000 genetically at risk.

Typically, the patient will suffer between 10-20 years before the disease becomes fatal. If it is assumed that the annual cost of drug therapy per patient is $30,000 which is low for orphan drugs, the market for this application of Dimebon would be $900 million. At present, there is no other approved treatments for Huntington’s Disease.

Medivation Prostate Therapeutics

This subsidiary holds an exclusive world wide license to two patent applications through 2026 on a series of compounds (MDV 3100) whose uses are in treatment and prevention of disease, the most important of which is prostate cancer. According to the American Cancer Society, prostate cancer is the second most diagnosed cancer among men. It estimated that approximately 232,000 new cases of prostate cancer were diagnosed and 30,000 men died of prostate cancer in the US in 2005. US drug sales in 2005 for the treatment of prostate cancer was approximately $2.7 billion; only one drug is available for advanced stage (hormone refractory) prostate cancer.

Recent Developments

Yesterday, Medivation released data from its latest Phase II trial on Dimebon (for the treatment of Alzheimer’s). To summarize the findings: (1) patients treated with Dimebon showed statistical improvement in all five endpoints [measurements of the mental acuity of the patients] at the end of 12 months, (2) the improvement at the end of 12 months was more than at the end of 6 months--in other words, Dimebon didn’t just stabilize the patients' condition, it improved it over time. No other drug currently available or that we know to be in testing has been able to do anything beyond just stopping the progression of Alzheimer’s and (3) patients on Dimebon experienced fewer serious side effects than those on the placebo. We think that these results are impressive and judging by the company’s stock price action yesterday so did other investors. Clearly, the Dimebon for Alzheimer’s part of this story is in tact.

As all this relates to Medivation’s stock price, it is not unreasonable to assume that the market value of the Dimebon applications upon which the company is working in excess of several hundred million dollars. With 25 million shares outstanding, a sale at $200 million would result in a dividend of $8 a share, $400 million, $16 a share, etc.

On the other fronts, the Dimebon for Huntington’s Disease PhaseI/IIa study has begun; results should be available later this year. The initial Phase I/IIa trial of MDV3100 for hormone refractory prostate cancer should begin in the second quarter of 2007.

Disclosure: Author has a long position in MDVN

MDVN 1-yr chart

Comments

[Tom B:]

Having considered the structure of Dimebon, I am underwhelmed.

2008 Jan 14 09:01 AM