In an anticipated move, Europe has granted approval to Johnson
& Johnson's (
JNJ
) blockbuster potential oncology drug Zytiga for expanded use in
metastatic castration-resistant prostate cancer (mCCRPC), who have
not yet been treated with chemotherapy but have failed hormone
treatment. A committee last month had recommended the expanded use
of the drug, which until now was limited to patients diagnosed with
both hormone treatment and chemotherapy.
The good news came barely a month after the drug secured FDA
approval for similar indication. We expect these approvals to pave
the way for continued growth in Zytiga sales in the near future.
JNJ's stock has gained traction on the back of these approvals and
is nearing our $75 price estimate.
See our complete analysis for Johnson &
Johnson
Prostate cancer is the most prevalent cancers in men with around
250,000 Americans alone being diagnosed with this cancer each year.
Zytiga is mainly used to treat mCCRPC patients (no longer
responsive to reduction of androgen/testosterone by chemical or
surgical means). While there are many treatment therapies
available, many patients don't respond to them presenting
opportunities for new drugs. This can be witnessed from the fact
that Zytiga sales soared to $700 million in the first nine months
of 2012 from just just $200 million in full 2011 following the
first approval.
Zytiga had previously only been approved for use in patients who
didn't respond to prior chemotherapy and hormone treatment,
limiting eligible patients and consequently revenues. FDA and
European Medicines Agency (EMA) approvals, however, will now open a
bigger market as the drug can now be prescribed to more patients,
bringing in additional revenue. We expect other regulatory agencies
to also follow suit.
On the back of these expected approvals, we believe that Zytiga
has a sales potential of around $1.5 billion, and it can help the
company fend-off some of the anticipated revenue losses. JNJ has
been battling revenue losses in its pharmaceutical franchise due to
patent expiries in recent years. The healthcare conglomerate lost
patent protection for some of its largest selling drugs like
Concerta and Levaquin in 2011, which was followed by, Invega, a
mental disorder pill in 2012. The patent for Aciphex, a heartburn
drug, is set to expire in mid-2013. The drug garnered over $600
millions in the first nine months of 2012. Recent approval for TB
drug Bedaquiline or Sirturo will also bring reprieve for JNJ (Read
Johnson & Johnson Updates: Receives FDA Approval For New
Tuberculosis Drug
).
It may not be a smooth road ahead for Zytiga as Xtandi,
considered the closest rival of Zytiga, received FDA approval in
August, about three months ahead of schedule and will be
aggressively pitched to attract physicians and patients. In studies
Xtandi showed a survival advantage of 5 months compared with
Zytiga's 4.6 months or nearly 10 days even as difference is not
statistically significant. The fact that Zytiga was the only oral
pill, before the approval of Xtandi, also helped in robust growth
of Zytiga. However, Zytiga still has the cost advantage over its
rival. While Zytiga currently costs about $5,500 per
month, Xtandi is priced at $7,450 for a month's dose. And, it
remains to be seen if Xtandi will be able to make a major dent in
Zytiga's potential sales.
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