Overreacting to a Prostate Cancer Drug?

by Barry Cohen | February 3, 2012 10:58 am

Overreacting to a Prostate Cancer Drug?

Can you still make money in Medivation (NASDAQ:MDVN[1]), or should investors cast their eyes on the stocks of other companies that are also developing promising prostate cancer drugs?

San Francisco-based Medivation has soared more than 26% since Tuesday’s close on news that its experimental drug is not only effective but safe, too. In a Phase III study involving nearly 1,200 patients, the biopharmaceutical firm’s drug, designated MDV3100, boosted survival to nearly five months among men with advanced prostate cancer, with only a small incidence of seizures as a side effect.

Shares of Medivation have more than tripled[2] since results of the drug study were first reported in early November.

Even last month’s demise of a program with Pfizer (NYSE:PFE[3]) to jointly develop the potential Alzheimer’s treatment dimebon has been unable to dampen investor enthusiasm for Medivation.

There’s no question that MDV3100 is a breakthrough in the pharmaceutical industry’s 35-year battle to find an effective way to treat prostate cancer. In a Wall Street Journal[4] article, the results of the drug’s study were called “unprecedented” by Nicholas J. Vogelzang, chairman of the cancer treatment company US Oncology. “This is definitely going to change the way we take care of patients every day in the office,” he added.

But could the zest for Medivation shares be somewhat premature? First, the company isn’t even profitable. Further, consider that its prostate cancer drug won’t be submitted for FDA approval until sometime this year and probably won’t be on the market until 2014.

Also, the tests that buoyed hopes for the treatment were done with men having advanced prostate cancer who had received hormone treatments and chemotherapy. The real payoff is for a drug that works in the much larger population of men with prostate cancer who haven’t received chemotherapy. MDV3100 also is being tested in these patients.

Prostate cancer kills about 250,000 men[5] a year globally and is the second-most common cause of cancer death in men in the U.S., after lung cancer. If MDV3100 gets the FDA go-ahead, it will become one of five new drugs for advanced prostate cancer that have been approved in the past three years. The advances in treating the disease are the impetus behind the market’s growth, which is expected to soar from about $1 billion worldwide today to $4 billion by 20015, according to Morningstar.

The approval of Medivation’s drug is likely to dampen sales of the Johnson & Johnson (NYSE:JNJ[6]) prostate cancer treatment Zytigia, which was approved in the U.S. last year. Unlike J&J’s drug, Medivation’s treatment doesn’t require the patient to also take prednisone — a steroid hormone linked to high blood pressure, weight gain, pain, depression and weakness.

Meanwhile, the Dendreon (NASDAQ:DNDN[7]) treatment Provenge is showing signs of returning to respectability[8]  after suffering a severe beat-down last year.

And in the next four years, at least 10 late-stage trial results for prostate cancer drugs are due for release, Credit Suisse  recently told Barrons[9]. Among them are Osl0-based Algeta’s Alpharadin; Exelixis’ (NASDAQ:EXEL[10]) cabozantinib; and Amgen’s (NASDAQ:AMGN[11]) Xgeva.

Exelixis seems to have gotten a boost from the news about the Medivation drug. Exelixis shares are up nearly 13% in the past two days. At $6, its stock price is still miles away from the $45 it traded at in 2000, but Exelixis is showing signs of recovering from its failure last November to get a binding agreement with the FDA to sign off on the study for cabozantinib.

Analysts overreacted to that letdown, according to an article on Seeking Alpha[12], which said the company is on the right track to select clinical trials that demonstrate the drug’s effectiveness. “The Exelixis product pipeline is rich with promising drugs that attracted alliances from both the pharmaceutical drug developers as well as biotech firms,” the article concluded.

In Medivation’s case now, the overreaction may be overenthusiasm.

As of this writing, Barry Cohen is long PFE and JNJ.

Endnotes:
  1. MDVN: http://studio-5.financialcontent.com/investplace/quote?Symbol=MDVN
  2. Medivation have more than tripled: http://investorplace.com/2011/11/medivation-mdvn-shares-prostate-cancer-treatment-results/
  3. PFE: http://studio-5.financialcontent.com/investplace/quote?Symbol=PFE
  4. Wall Street Journal: http://online.wsj.com/article/SB10001424052970203920204577195372964538152.html
  5. Prostate cancer kills about 250,000 men: http://investorplace.com/2011/11/medivation-mdvn-shares-prostate-cancer-treatment-results/
  6. JNJ: http://studio-5.financialcontent.com/investplace/quote?Symbol=JNJ
  7. DNDN: http://studio-5.financialcontent.com/investplace/quote?Symbol=DNDN
  8. Provenge is showing signs of returning to respectability: http://investorplace.com/2012/01/dendreon-dndn-shares-jump-on-provenge-sales/
  9. Barrons: http://online.barrons.com/article/SB50001424052748703837504577195350812929414.html
  10. EXEL: http://studio-5.financialcontent.com/investplace/quote?Symbol=EXEL
  11. AMGN: http://studio-5.financialcontent.com/investplace/quote?Symbol=AMGN
  12. Seeking Alpha: http://seekingalpha.com/article/318568-circumstances-that-encourage-selecting-specific-biotech-stocks

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