Medivation (NASDAQ:MDVN) shares tumbled in February when it warned sequential sales growth would slow this year, a promise the company kept when it reported its first-quarter earnings last week.

Medivation's only commercialized drug is the prostate cancer therapy Xtandi, which it co-markets with Astellas (NASDAQOTH:ALPMY). Xtandi sales jumped 65% year-over-year to $124 million in the first quarter, but sales slipped slightly from the $126 million notched in the fourth quarter.

Although the sequential dip sent shares lower, key catalysts could spark sequential revenue growth again later this year. Since Xtandi's overseas sales are ratcheting higher, and the Food and Drug Administration is expected to make a decision on expanding Xtrandi's label later this year, let's take a closer look at Medivation and its first-quarter performance.

MDVN data. Source: YCharts.

Capturing the market
Currently, Xtandi is only approved for post-chemotherapy metastatic castration resistant prostate cancer, or mCRPC. That means Xtandi competes head-to-head with Johnson & Johnson's (NYSE:JNJ) blockbuster drug Zytiga.

So far, it's been a competition that Medivation is winning.

Johnson's Zytiga won approval for use in the post-chemo indication in April 2011, quickly displacing prior generation therapies thanks to impressive results in trials. Those trials showed that Zytiga improved patients overall survival by nearly four months versus placebo.

Medivation and Astellas' Xtandi got the FDA green light more than a year later, in August 2012. That approval followed an early halt to its phase 3 trial after interim analysis showed that overall survival for Xtandi patients improved by nearly five months versus placebo.

Xtandi has been winning market share from Zytiga in post-chemotherapy patients ever since, and Medivation reports that in the first quarter Xtandi became favored over Zytiga by oncologists and urologists in this indication for the first time.

By the numbers
Xtandi's position in the post-chemotherapy market has matured, suggesting that quarterly growth will be slow in the U.S. until the FDA makes a decision on its use in the pre-chemotherapy patient population this fall.

As a result, the company is guiding investors to expect mid-single-digit sequential U.S. sales growth in the second and third quarter. Although Xtandi's U.S. post-chemotherapy market opportunity is slowing, its overseas sales are accelerating.

Sales in the U.S., which are split evenly between Medivation and Astellas, totaled $124.5 million, down slightly from the fourth quarter; however, sales outside the U.S., where Astellas spearheads marketing and pays Medivation royalties, jumped from $36 million in the fourth quarter to nearly $48 million in the first quarter. That 33% jump came thanks to growing use in Europe, where Xtandi won approval last summer, and approvals in new markets.

As a result of the year-over-year jump in U.S. revenue, royalties on growing sales overseas, and sales and approval milestone payments, Medivation recorded $87 million in revenue during the first quarter, up from $46 million a year ago.

Upcoming catalysts
Medivation's single-digit sequential growth forecast jumps to double digits exiting 2014 on assumptions that Medivation and Astellas will receive FDA approval for Xtandi's pre-chemo use in September.

In addition to the potential U.S. decision, Astellas has also filed for approval in pre-chemo patients in Europe, where it could receive approval in the fourth quarter, and Japan, where it may win approval in 2015.

If agencies in those countries approve Xtandi in the pre-chemo population, the total market opportunity increases substantially.

Prior to receiving FDA approval in pre-chemo mCRPC patients, U.S. sales of Johnson's Zytiga were $136 million in the third quarter of 2012. After receiving that approval in December 2012, U.S. Zytiga sales jumped to $161 million in the first quarter of 2013, and sales  have continued to climb, reaching $229 million in the first quarter of 2014.

Outside of the mCRPC indication, Medivation and Astellas think Xtandi may also be able to carve out sales as a treatment for non-metastatic prostate cancer and breast cancer, too.

The company is enrolling non-metastatic prostate cancer patients in a phase 3 trials and is enrolling ER+ and triple negative breast cancer patients in two separate phase 2 trials.

Foolworthy final thoughts
Thanks to improving demand in the post-chemo setting, Medivation boosted its 2014 Xtandi sales guidance by $40 million to $540 to $575 million. It also updated its guidance to reflect a 10% reduction in expected spending  this year, a move that positions it better for profitability while giving it room to ink collaborations.

Xtandi is gaining ground overseas and is likely to win FDA and EU approval in pre-chemo by year-end. That suggests Medivation and Astellas may enjoy revenue tailwinds in 2015 as Xtandi wins market share from Johnson's Zytiga.

 

Todd Campbell owns shares of Medivation. He owns E.B. Capital Markets, LLC, whose clients may or may not have positions in the companies mentioned. Todd also owns Gundalow Advisors, LLC, whose clients do not own positions in the companies mentioned. The Motley Fool recommends and owns shares of Johnson & Johnson. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.