Looking for a biotech stock with the potential to steal major market share from Johnson & Johnson (JNJ) in a key disease market?
Then it's time to take a look at Medivation (MDVN), a $4 billion biopharmaceutical company based in San Francisco that is projected to turn profitable next year with a breakthrough drug treatment for prostate cancer.
Big Market
The prostate cancer market represents huge commercial potential and Medivation's drug, Xtandi (enzalutamide), is already off to a strong start since its approval by the FDA last August. Launches in Europe and Asia will drive sales further, with projected revenues of $2 to $4 billion over the next five years.
According to the American Cancer Society, prostate cancer is the most commonly diagnosed cancer among men in the U.S., other than skin cancer. It is estimated by the American Cancer Society that about 242,000 new cases of prostate cancer were diagnosed in the U.S. in 2012 with 28,000 men dying from it.
New Life
Medivation's business model is to acquire promising technologies in the late preclinical development phase and develop them quickly and cost-effectively.
The approval and launch of Xtandi is a major milestone for the company which had previously faced failure with the development of another key pipeline candidate, dimebon (Alzheimer's disease and Huntington disease).
The company has consistently presented impressive data on Xtandi. Based on clinical results so far, many institutional research analysts believe Xtandi has blockbuster potential. The drug is currently in several studies including for the pre-chemo setting which would be a big opportunity for Medivation.
Key Partner for Global Reach
As with all up-and-coming small and mid-cap biotech companies with unproven science and little-to-no positive cash flow, a big partner is often required to sustain years of drug R&D. Medivation's 'big brother' is the Japanese drug-maker Astellas Pharma.
Medivation and Astellas have been targeting patients with metastatic castration-resistant prostate cancer (:CRPC). Metastatic prostate cancer that has become castration-resistant is extremely aggressive and this is a key treatment differentiation for Xtandi vs JNJ's drug Zytiga.
The partners are also studying Xtandi in early stage prostate cancer patients (pre-chemo), which could represent a very big market for the candidate. In 2010, the companies initiated a phase III study (:PREVAIL) in chemotherapy-naïve advanced prostate cancer patients with data read-outs expected in the second half of 2013.
With the aid of Astellas, Xtandi gained EU approval in June 2013. Medivation recorded $181.7 million in revenues in 2012 under its collaboration agreements with Astellas and former partner, Pfizer (PFE). While the Pfizer upfront payment of $225 million was recognized through the third quarter of 2012, the $110 million Astellas payment will be recognized through the first quarter of 2014.