Xtandi, Medivation’s key drug
Xtandi’s sales totaled $1.9 billion for Astellas Pharma during fiscal 2015. Medivation (MDVN) shares all profits or losses equally with Astellas Pharma on US net sales of Xtandi. On sales outside the US, it receives a royalty in the low teens to the low 20s as a percentage of net sales of the drug.
The company plans to increase Xtandi’s revenues by implementing enhanced penetration of the drug in the oncology and urology spaces, coupled with increased duration of the drug therapy.
Medivation’s non-GAAP (generally accepted accounting principles) collaboration revenue amounted to $695.4 million in fiscal 2015, translating to a 79% annual jump.
Xtandi’s oncology prescriptions grew annually by ~40% in fiscal 2015. Similarly, the drug’s overall treatment duration over past three years has grown significantly. In fiscal 2013, the average treatment duration was less than four months, which increased to about eight months in fiscal 2015.
In the United States, prostate cancer is the second-leading cause of cancer death in men. According to the American Cancer Society, “Approximately 181,000 new cases of prostate cancer will be diagnosed, and 26,000 men will die of prostate cancer in the United States in 2016.”
With an increasingly aging population, the prevalence of prostate cancer is expected to rise. This could lead to growing sales for the drug.
Market competition for Xtandi
Patients who are treated with Xtandi or Johnson & Johnson’s (JNJ) Zytiga entirely capture the metastatic castration-resistant prostate cancer (or mCRPC) and the novel hormonal therapy (or NHT) markets. During the fourth quarter of 2015, Xtandi passed Zytiga in terms of the number of prescriptions written.
Xtandi possesses the potential to become a blockbuster drug. Although it has captured market share from its competitor, Zytiga, Johnson & Johnson is not waiting to lose to Medivation. The giant pharmaceutical company bought Aragon Pharmaceuticals for its innovative prostate cancer drug ARN-509. The drug is currently in phase 3 trials, and the study is estimated to be completed by fiscal 2019.
Industry-specific factors such as pricing pressure, pipeline approval, and volume uptake contribute toward the company’s share price performance. To avoid such direct exposure, investors may wish to consider broad-based exposure via an ETF. To gain diversified exposure to Medivation, investors may wish to invest in the iShares Russell Mid-Cap Growth ETF (IWP). Medivation accounts for 0.25% of IWP’s total holdings.