Bayer's Challenge in 2014? For Xofigo to Win Share From Johnson & Johnson's Zytiga

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Bayer (NASDAQOTH: BAYRY  ) is so confident Xofigo can win prostate-cancer market share from Johnson & Johnson (NYSE: JNJ  ) and Medivation (NASDAQ: MDVN  ) this year that it bumped up its original $2.4 billion offer to buy Xofigo's co-developer, Algeta, to $2.9 billion in December.

The closing of that deal nets Bayer full global rights to Xofigo just as sales kick off in the United States and Europe. It's a big and lucrative market, but highly competitive. That means 2014 will be an important year for Bayer in determining whether Xofigo can win business away from Johnson's Zytiga and Medivation's Xtandi, two fast-growing drugs with billion-dollar potential.

A different approach
Bayer hopes Xofigo's more favorable dosing schedule can overcome patient fear over injections and higher prices to win business away from Johnson's oral Zytiga, which is dosed alongside the troublesome steroid prednisone, and Medivation's Xtandi, which isn't dosed with a steroid.

All three drugs effectively improved overall survival versus placebo, but Xofigo may have an advantage given that it's dosed over just six months, rather than the eight months for Zytiga and Xtandi.  

However, Xofigo, which carries a price tag near $70,000 for the full treatment course, is the priciest drug of the three. That may make insurers reluctant to use the drug without fisrt trying Zytiga, which costs roughly $40,000 for a treatment course, or Xtandi, which costs about $56,000. 

Xofigo works differently
Xofigo delivers radium directly to bone tumors in a strategy that reduces damage to surrounding tissue and results in primarily flu-like side effects.

Zytiga targets testosterone production, reducing production from adrenal glands, the testes, and the prostate tumor. The most common side effects patients suffer on Zytiga are flu-like, but additional risks include heartbeat disorders and infection. The dosing alongside prednisone may present additional problems, given that steroids are associated with higher risks of infection.

Xtandi works by preventing testosterone from attaching itself to prostate cancer cells. That effectively starves the tumor. Patients taking Xtandi reported a similar number of side effects as those on Zytiga.

Despite the different approaches, all three drugs successfully extended patient survival during phase 3 trials. Xofigo showed a three-month improvement over placebo. Zytiga and Xtandi showed 3.9- and 4.8-month improvements over placebo, respectively.

A big and growing opportunity
Prostate cancer is the second most widely diagnosed cancer among men, with an estimated 192,000 new cases diagnosed annually in the United States. It's a $12 billion-a-year market expected to grow to $19 billion by 2020.

As a result, Zytiga sales grew more than 75% worldwide to $464 million, as market share in castration-resistant patients climbed to 33% in the third quarter.

However, most of Zytiga's growth occurred overseas. In the U.S., Zytiga sales were roughly $200 million, up just 3%. That suggests that Xtandi, which has only now been launching broadly overseas, may be winning share, given that sales of $109 million were up 32% in the quarter. 

Both Zytiga and Xtandi sales dwarf those of Xofigo, which generated just $17 million in third-quarter sales after winning FDA approval in May.  

But since up to 90% of those with metastatic prostate cancer show signs of having bone metastases, which can significantly affect survival, the market opportunity for Xofigo appears much bigger than its third-quarter sales reflect. 

Fool-worthy final thoughts
Bayer hopes Xofigo doesn't go the way of high-priced injectible Provenge, a drug that hasn't fulfilled its promise for Dendreon (NASDAQOTH: DNDNQ  ) , despite being the only immunotherapy targeting prostate cancer on the market. The injectable comes with a steep $93,000 price tag, which has probably contributed to its inability to win significant market share, and Dendreon has since announced dramatic cost-cutting.

Bayer will need to report sizable sales numbers in 2014 to justify that steep buyout price for Algeta. This year will be particularly telling, as Johnson and Johnson is already entrenched overseas and Xtandi is now selling in those markets, too. As Xofigo enters those markets, investors should be able to get insight into which drug is winning by watching sequential growth rates for all three.

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Read/Post Comments (5) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 18, 2014, at 4:25 PM, tscohen wrote:

    There's a lot of good information here, but some of it is confused. I have a feeling the initial part of the discussion focuses on Zytiga and Xtandi in a post-chemo environment. The costs stated are considerably lower than those patients would incur in the pre-chemo environment. For example, you quote a cost of $40,000 for Zytiga. However, in the pre-chemo environment, the treatment is for 14 months, and at $5,700 per month, not including the co-administered prednisone and monthly blood tests needed to monitor liver functions, that's almost $80,000 for the treatment. Xtandi costs roughly $7,500 per month, pre-chemo, so even a 10-month treatment would cost the patient $75,000.

    You also mention overall survival. In the pre-chemo environment, Zytiga did NOT achieve a stat sig OS in its Phase 3 pivotal trial. And Xtandi's preliminary readout of median OS is roughly half that of Provenge's (the latter's is a median of 4.1 months). So, yes, Provenge does have a cost of $94,000 for three treatments at weeks 0, 2, 4 (that is, given over a period of one month), but of the three drugs you mentioned, Provenge has the highest median OS of any approved treatment. In fact, based on post facto analyses of the three Phase 3 Provenge studies Dendreon performed, if a patient's PSA reading is 22.1 or less, the median OS following Provenge is 13.1 months.

  • Report this Comment On January 20, 2014, at 9:22 AM, MTherami wrote:

    This article contains some blatantly FALSE statements. Whether done intentionally or simply through sloppy investigation, they need to be addressed. Here are some notes on the errors that I've noticed in this piece:

    FALSE: "Zytiga and Xtandi showed 3.9- and 4.8-month improvements over placebo, respectively."

    TRUE: Zytiga halted its Phase III clinical trial and did not reach the end-point and is therefore unable to report a statistically significant overall survival (OS) benefit versus a placebo therapy. Regarding the median OS, even the Zytiga website specifically states "...the difference was not statistically significant".

    TRUE: The XTANDI Phase III PREVAIL clinical trial found that treatment with enzalutamide (XTANDI) resulted in a calculated point estimate for median overall survival of just 2.2 months. These are the latest figures reported in Q4 of 2013.

    When it comes to overall survival (OS) benefit, neither Zytiga nor XTANDI compare to Dendreon's Provenge (which the author seems to disregard), which in a Phase III clinical trial demonstrated a statistically significant median OS of 4.1 months. Even Xofigo's median OS was just 3.6 months, 12% less than that of Provenge.

    Furthermore, the author of this piece provides very misleading information concerning the cost of the various treatment options. The author claims that the treatment period for Zytiga and XTANDI is only 8 months. The treatment period with these therapies is far more than 8 months in many instances, increasing the costs significantly. Ultimately, the overall costs of the various treatment options for metastatic castration-resistant prostate cancer are actually very similar.

    If the author intended to provide a truly thorough analysis, he should have also noted that Provenge takes only one (1) month to fully administer. As a result, patients are exposed to side effects over a much shorter time period when taking the Provenge immuno-therapy treatment versus the other treatments noted above which also tend to have harsher side effects.

    Finally, in Q4 of 2013, Provenge demonstrated 10%+ quarter-over-quarter growth, indicating that the new marketing campaign launched in the second half of 2013 for this immunotherapy is reaching patients and doctors. The future of treatment for metastatic castration-resistant prostate cancer is likely a combination therapy approach in which Provenge will be administered during the first month, followed then by treatment with either Zytiga, XTANDI, or Xofigo over the next 6 - 18 months. Clinical trials are currently underway to verify if such combination therapies will yield overall survival (OS) benefits that are greater than using only one of the treatment options.

    In the combination / sequencing approach, there are several reasons why it is critical that Provenge be administered first. As Provenge has the greatest statistically significant median overall survival (OS) benefit, using Provenge first ensures that patients will be immediately be receiving the most effective treatment available as supported by Phase III clinical trial data. Second, Provenge study data indicates that a patient's immune system response lasts for years after Provenge is first administered. Finally, Provenge is not effective when used immediately after therapies such as Zytiga. If Zytiga is administered first, patients will have to wait until the treatment is fully purged from the body before Provenge can be given, otherwise the immune system benefit is not recognized.

    Based on the glaring inaccurate information found in this piece, I would expect that Motley Fool would issue an update containing the necessary corrections.

  • Report this Comment On January 24, 2014, at 9:06 PM, boogie wrote:

    It's true that Provenge did increase the median OS pre-chemo by (net gain) 4.1 months, however both of you are forgetting that both Zytiga and Xtandi trials were stopped early due the benefit to the patient and it would not have been ethical to continue the patients on placebo.

    Xtandi is the only product to meet both it's co-primary endpoints of OS and PFS in the pre-chemo setting. Beside OS does not mean as much in the pre-chemo setting because there are now five products clinically proven to extend OS. Which simply means, when a patient progresses he moves to the next option (bone pain- Xofigo), then Taxotere, then Jevtana, then Zytiga, etc....

    PFS (delaying disease progression) is the most important in the asymptomatic to minimally symptomatic patients. Provenge did not improve PFS in any of their trials. Which may be why they have contacted J.P. Morgan and Chase looking for a buyer, and doing sequential studies with Xtandi right now. They will let Xtandi do all the work to the disease, and come back and say, see it does work.

    Lastly, median anything (OS, PFS, etc.) that one guy in the 50th percentile I feel is a way Pharma gets a lot of products approved. The hazard ratio is a much better indicator (risk of an event occuring) which includes most all patients in of a trial. Provenge- 0.77 OS, Zytiga- 0.79 OS, and Xtandi- 0.70 OS. You can't compare one trial to another, but it's human nature to do so. At the end of the day, it's what the physician and patient feel is the best course of action for their disease, and often times, simply if there are non-profit foundation copay support for that treatment option.

  • Report this Comment On January 25, 2014, at 11:55 AM, MTherami wrote:

    First of all, everyone knows that the Zytiga and XTANDI studies were halted early. This was justified for XTANDI, which had delivered statistically significant overall survival results. However, the halting of the Zytiga study was highly controversial, as the OS results were NOT statistically significant (J&J acknowledges this fact on the Zytiga website). There is NO statistically significant evidence that the median OS benefit delivered by Zytiga is any higher than that of a placebo. J&J was widely criticized by many who believed that J&J prematurely halted the study to avoid the possibility of losing billions of dollars in revenue if the study was completed and the Zytiga OS benefit was found to be no greater than that of a placebo. The halting of the Zytiga study may have been motivated by solely by profit potential,

    As for XTANDI, yes a statistically signifcant radiographic progression free survival (rPFS) benefit was recognized versus the placebo in the PREVAIL trial. However, the calculated point estimate for median overall survival for XTANDI was only 2.2 months. Provenge's statistically significant median overall survival benefit is 4.1 months --- nearly DOUBLE that of XTANDI. rPFS is certainly important, but to suggest that it is more important to a patient than overall survival (OS) is an absurd statement.

    Ultimately, sequencing therapies with different approaches to attacking metastatic castrate-resistant prostate cancer will likely become the standard form of care in the future. As treatment for mCRPC moves in that direction, Provenge will become the therapy applied during the first month of treatment (for the reasons noted in my previous comment above). The Provenge immunotherapy will then be followed with either hormone therapies or radiopharmaceuticals (ie Xofigo) for a period of approximately 8 - 18 months. In this way, a patient's body will be pre-programmed to use his own immune system to fight mCRPC in the coming months / years, while hormore or radio therapy treatments are applied to fight the disease in other ways.

  • Report this Comment On March 21, 2014, at 4:58 PM, wolfwork wrote:

    In a way more telling for telling for Xofigo is that Bayer is about to start another pIII trial evaluating the combination of Xofigo and Zytiga in mCRPC patients. I think Bayer recognizes they aren't going to take market share away from either Zytiga or Xtandi and wants to grow sales by being an add-on product.

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Todd Campbell

Todd has been helping buy side portfolio managers as an independent researcher for over a decade. In 2003, Todd founded E.B. Capital Markets, LLC, a research firm providing action oriented ideas to professional investors. Todd has provided insight to a variety of publications, including SmartMoney, Barron's, and CNN/fn.

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