Source: Medivation,

What: The potential to add a second commercial product to its lineup someday caused shares in Medivation (NASDAQ:MDVN) to zip 13% higher last month, according to Capital IQ.

So what: On Dec. 21, Medivation announced that it's kicked off a mid-stage study of MDV9300 in relapsed or refractory diffuse B-cell lymphoma (DLBCL).

The 180-person trial's primary endpoint is overall response rate, and because there are limited treatment options for relapsing/recurring DLBCL, Medivation believes that a positive outcome in the phase 2 study could result in an expedited approval by U.S. and EU regulators.

If eventually approved, then Medivation could leverage experience gained from successfully commercializing its prostate cancer drug, Xtandi, to market MDV9300. Since winning approval in 2012, Xtandi has become one of the most widely used weapons against prostate cancer, bringing in global sales of $518 million in the third quarter alone.

Now what: MDV9300 is intriguing because it targets the PD-1 pathway also targeted by recently approved and fast-selling cancer drugs made by Merck & Co. (NYSE:MRK) and Bristol-Myers Squibb (NYSE:BMY). In 2014, Merck & Co. won FDA approval of Keytruda, its PD-1 inhibitor, for use in melanoma and an approval in non-small-cell lung cancer, followed last October. Similarly, Bristol-Myers Squibb's Opdivo hit the market for use in melanoma in 2014, and it notched approvals in NSCLC and kidney cancer last year.

Because of stellar results in clinical trials, sales of Keytruda and Opdivo have taken off, with the two racking up revenue of $160 million and $305 million in the third quarter, respectively. Research into the use of PD-1 inhibitors in additional cancers has industry watchers thinking this class of drugs could generate $35 billion in peak annual sales at some point.

Clearly, that's an enormous market opportunity, but Medivation's drug is behind the curve in terms of development, and if it's approved, it will face stiff competition. Arguably, Keytruda and Opdivo's head start may, or may not, matter, depending on MDV9300's trial results, so this is far from a slam dunk.

Overall, MDV9300 and another recently acquired clinical-stage cancer drug, talazoparib, a PARP inhibitor under development for BRCA positive cancer, are part of Medivation's strategy to use Xtandi's cash flow to diversify revenue across multiple therapies. If it can accomplish that goal with these drugs, then Medivation could still offer investors plenty of upside. For that reason, it may be worth considering it for long-haul portfolios.