Earlier today, Medivation (MDVN +0.00%) and its marketing partner Astellas said their PREVAIL trial had indeed prevailed.
Investors have been eagerly awaiting the interim results from the PREVAIL trial testing their prostate cancer drug Xtandi in patients who haven't yet received chemo. Xtandi is currently only approved after prostate cancer patients are treated with a chemotherapy, typically Sanofi's Taxotere.
But the big money is in the pre-chemo setting. Dendreon's (NASDAQ: DNDN) Provenge has struggled there, but its market cap before the fall tells you just how big the pre-chemo market is. Dendreon had a market cap of more than $5 billion -- and higher at times -- before investors figured out that doctors weren't interested in prescribing Provenge.
Johnson & Johnson's (JNJ 0.64%) Zytiga, on the other hand, has been selling like hot cakes since it was given approval in the U.S. and EU in the pre-chemo setting. In the third quarter, sales of Zytiga were up 73% at constant currencies to a whopping $464 million. It's not hard to see how sales could hit $2 billion next year.
Great data
The most important number in the PREVAIL data is the 30% reduction in risk of death that Xtandi provides compared to a placebo. Johnson & Johnson's Zytiga, by comparison, produced a 21% reduction in risk of death in the clinical trial in the same pre-chemo setting. Dendreon's Provenge produced a 23% reduction in risk of death in the large study used to gain approval.
Xtandi also extended progression-free survival, a measurement of how long it takes for a tumor to start growing again or for the patient to die (whichever comes first), by about 10 months or more compared to a placebo. It could be even more -- the median progression-free survival for the Xtandi group hasn't been reached yet.
More than half of the patients in both study arms are still alive, so a true median survival can't be calculated, either. Overall survival provides a very clean number because it's easy to say the drug extends survival by X number of months compared to the control group. But median survival is based on a single patient, the one in the exact middle of the data set, so it isn't particularly relevant for most patients.
Doctors are much more interested in the reduction in risk of death noted above, which is calculated from the hazard ratio. That measurement takes into account all the patients in the trial, making it the one that doctors are more likely to care about.
Valuing Medivation
With a market cap of $4 billion, Medivation looks fairly priced to me. Yes, there are a lot of sales already priced into the drug, but the data is so solid, it seems reasonable to assume the companies can get the drug approved for pre-chemotherapy treatment and take a sizable chunk of Zytiga's market share. If Xtandi hits sales of $2 billion, of which Medivation will get around half of the profits, there's plenty of room to run higher in a few years.
