Shares in Medivation (MDVN) have soared more than 200% on piquant commercial expectations for Xtandi, a prostate cancer treatment co-developed with Japanese drug maker Astellas Pharma (ALPMY). However, reimbursement constraints and renewed competition from Johnson & Johnson’s (JNJ) market-leading Zytiga could quickly dull investor enthusiasm unless interim data from the pivotal late-stage trial PREVAIL will support label expansion in the drug’s usage.
Medivation signed a collaborative deal with Astellas in October 2009 for the development and marketing of Xtandi (enzalutamide). While all costs and sales profits are shared equally in the US, Astellas is responsible for the bulk of all ex-US costs in exchange for up to $577.0 million (remaining) in development and sales milestone payments and annual tiered royalties ranging from the low teens to the low twenties.
Approved by US and European Union regulators in August 2012 and June 2013, respectively, the androgen receptor inhibitor Xtandi’s current labeling is limited to those patients with metastatic castration-resistant prostate cancer (mCRPC) who have previously received the chemotherapy agent docetaxel.
Androgen receptors (AR) play a critical role in the growth and progression of prostate cancers. Mounting clinical evidence suggests that lowering androgen levels alone do not necessarily correlate with overall survival, as the continued progression of prostate cancer cell proliferation is based in the overexpression of and dependence on the androgen receptor and its signaling pathways. Nonetheless, given thousands of patient-years of treatment experience, specialists (notably urologists) continue to use androgen deprivation therapy, such as luteinizing hormone-releasing hormone (LHRH) agonists given in combination with first-generation anti-androgens like bicalutamide, marketed by AstraZeneca (AZN) under the brand name Casodex, to patients with early-stage prostate cancer.
In mCRPC, however, the goal of hormone therapy today is to interfere with the androgen signaling that is critical to the growth of both androgen-dependent and castration-resistant cancer cells.
Although both Zytiga (abiraterone) and Xtandi are designed to inhibit AR cell signaling, they do so by different means: Zytiga works by blocking the action of androgen-AR pathways at pre-receptor binding levels through the inhibition of an enzyme called CYP17 (which plays a central role in allowing the body to produce testosterone from cholesterol in the gonads and adrenal glands); Xtandi induces cancer cell death by inhibiting AR signaling at multiple pathway points, including AR interaction with nuclear DNA and downstream AR receptors (with little evidence of agonist activity – which can lead to rebound resistance).
Approved by the FDA in April 2011, Zytiga is posting eye-popping revenue numbers: The current market leader in the oral androgen receptor inhibitor class, Zytiga delivered total sales in its first full-year of $961 million and is likely to double sales by 2016 (the drug received a label extension for chemotherapy-naive mCRPC in December 2012).
Given the first-to-market advantage of Zytiga – and its expanded labeling – some analysts are beginning to question whether Xtandi can deliver on previously forecasted peak annual sales of $2.2 billion by 2020. Some investment research is in order.
Xtandi US net sales for the second quarter of 2013, as reported by Astellas, grew sequentially an anemic 9.3% to $82.4 million compared to $75.4 million in the first quarter of 2013.
Full-year sales of Xtandi in the US, as reported by management, are forecasted to be in the range of $345 million to $365 million – significantly below investment bank William Blair’s (reduced) guidance of $400 million.
Medivation’s senior management remains upbeat on growth prospects for Xtandi. In fact, chief executive officer David Hung boasted to analysts on the second-quarter earnings call that Xtandi is “quickly becoming the leading therapy in the post-docetaxel market.” Unfortunately, this promulgation lacks veracity:
• Xtandi’s clinical advantages versus Zytiga – dosing without regard to timing of meals or concomitant steroid use and monthly monitoring, such as liver function testing – haven’t proven attractive enough to change physician prescribing habits. In fact, market data available through April continued to show Zytiga held a 57% share of the chemo-refractory mCRPC market, compared with Xtandi’s roughly 30% share.
Although physician enthusiasm for Xtandi remains high in the post-chemo setting mCRPC, a confluence of issues could prove problematic to Xtandi gaining any material ground against Zytiga. In particular, post-launch experience is showing that Zytiga’s approved labeling to be used in a broader clinical spectrum of prostate cancer and Xtandi’s aggressive cost (average wholesale price of $7,450 for a 30-day supply is roughly 28% more expensive than Zytiga) may hinder Xtandi’s reimbursement and uptake -- especially in economically-depressed countries in the EU, like France, Greece and Spain.
Given such dynamics, market share growth in the post-chemo setting mCRPC in Europe will likely come at the expense of future profitability. For example, Astellas received approval to sell Xtandi in England only after agreeing to a steep 40% discount from list price, according to Barclay’s Capital.
Chief financial officer C. Patrick MacHado told analysts on the quarterly call that “Xtandi continues to have widespread coverage in the U.S. with more than 99% of both Medicare and commercial plans” covering the drug. Though “technically” true, channel checks show Zytiga is positioned more favorably on insurance company formularies with national footprints: No plan will currently reimburse patients for the use of Xtandi in a chemo-naïve setting, hiding behind the legalese that such use is still “experimental”; BlueCross BlueShield requires prior authorization before it will reimburse Xtandi; and, Aetna (AET) insists on “a documented resistance or intolerance to prior therapy with Zytiga.”
Of the 3,700 or so specialists who are prescribing Xtandi, management readily admits that most are oncologists -- who predominantly see patients with advanced disease. Given that 70% - 90% of patients choose a treatment during the first visit to an urologist after a positive biopsy, according to a 2011 NCI survey, Medivation needs to expand uptake among these specialists, too.
With uncertain sales and payers restricting access, this one-product/one use biotech needs a growth catalyst to justify exorbitant valuation metrics, such as a forward PE ratio of 104 and a price-to-sales ratio of almost 19.
Plans for wider access across the mCRPC landscape will likely be determined by an ongoing trial called PREVAIL, which is evaluating Xtandi against placebo in 1,717 men with mCRPC who have failed androgen deprivation therapy but have not yet received chemotherapy. Enrollment was completed in May 2012 and the planned interim analysis is anticipated before year-end 2013.
The co-primary endpoints are radiographic progression-free survival and overall survival (OS). All eyes will be watching the latter data point, as Zytiga did not demonstrate statistical significant extension of OS in the pivotal trial submitted for its chemo-naïve indication. Even without improvement in OS, Zytiga still “prevails;” its market share in the first-quarter of 2013 in this patient group grew from 15% to 20% (at the expense of bicalutamide and docetaxel).
Xtandi is also being studied as a treatment in a small group of (60) metastatic breast cancer patients who have failed at least two prior hormonal therapies.
Some research speculates there might be correlation and causality on the baseline use of corticosteroids and step-care use of AR inhibitors in progression of prostate cancer – prednisone use is thought to lead to an upstream increase in androgen production (even in castrated men thought to be “hormone insensitive”); while long-term use Zytiga might lead to drug resistance, at least in part, on increased intra-tumor CYP17 activity or through an as-yet undefined mutation of AR signaling pathways.
Ultimately, the future could be bright for the use of Xtandi throughout the progression of the disease -- even before hormone treatment. Absent a better understanding of disease progression, for now the survival of Xtandi and Medivation depend on event outcomes: How much longer patients live on the drug compared to how many die earlier without it.
David J. Phillips, a contributing editor at YCharts, is a former equity analyst. His journalism has appeared in Bloomberg BusinessWeek, Forbes, and Kiplinger's Personal Finance. From 2008 to 2011, David was a reporter for CBS News Interactive. He can be reached at firstname.lastname@example.org. Read the RIABiz profile of YCharts. You can also request a demonstration of YCharts Platinum.
More From YCharts