Editor's note: This story was originally posted with a headline
that was incorrect because of an editing error. The previous
headline read "No Generic Zytiga Until 2016 Benefits Medivation."
In fact, generic Zytiga will not be available until the late 2020s,
as stated in the story. We regret the error.
It's hard to believe how crowded the prostate cancer marketplace
has become. In 2004, Taxotere (docetaxel, now generic) was the
first new drug to be approved for the disease in decades. Between
2010 and today, there were five new treatments approved - all of
them battling in the metastatic, castrate-resistant prostate cancer
The two biggest sellers in the mCRPC marketplace are
) Xtandi and
Johnson & Johnson's
) Zytiga. Both are oral pills. Both are approved for use after
chemotherapy, but of these two, only Zytiga is approved in the
coveted pre-chemotherapy segment. In the post-chemo segment, data
suggest Xtandi is the better drug. Xtandi also does not need to be
dosed with steroids like Zytiga, which will be a significant
The business of treating prostate cancer is highly segregated.
Urologists control patients up until the patients have symptomatic
disease, at which time the urologist will hand off to the
oncologist for treatment with chemo. Urologists and oncologists
have surprisingly different outlooks on cancer treatment. They also
have completely different ways they earn their money - urologists
earn the majority of their money being surgeons. Oncologists earn
their money by capturing a percentage of the non-oral drugs they
prescribe. This background is critical to understanding which drugs
succeed in the pre-chemo space.
) Provenge has run into business practice and patient acceptance
problems in urology clinics (around 50% of patients offered
Provenge decline it). While it is currently the best-performing
drug (in terms of overall survival hazard ratio), and is typically
cheaper out of pocket for patients than Zytiga or Xtandi, it has
been unable to gain sales traction.
Xtandi is, in my opinion, the best of all the mCRPC drugs -
counting both approved drugs and those currently in clinical
trials. It has a strong survival benefit, PSA reductions, objective
tumor shrinkage, and a benign side effect profile demonstrating
fewer serious adverse events (Grade 3-4) than placebo. Xtandi's
problem is it's not yet approved in the pre-chemo space. Investors
anxiously await the PREVAIL pivotal trial in pre-chemo patients,
with Wall Street broadly assuming the trial will be positive. (I
agree, and believe the PREVAIL data will also show Xtandi is the
clearly superior to Zytiga in pre-chemo patients.)
Johnson & Johnson acquired Zytiga by acquiring Cougar Biotech.
It was a great purchase but for one tiny detail: Zytiga had no
patent life with protection only until June 2016. This isn't just
an issue for JNJ - it's a big deal for
players in the pre-chemo space as it means everyone would be faced
with generic competition in 2016.
Generic Zytiga would be even more serious by what's an unusual
exception in the treatment of cancer. You see, cancer is different
than cell phones. If
) gains market share with its iPhone, someone else loses share in a
1:1 proportion. Not so in cancer. New cancer drugs simply displace
older drugs to later lines. There is some drop-off (something I
called "the Leaky Bucket" when I was writing for Biotech Stock
Research), but the older drugs still get used.
Doctors have learned, however, that Zytiga and Xtandi don't
particularly sequence well. Patients who fail Xtandi don't
typically respond to Zytiga. Patients who fail Zytiga don't
typically respond to Xtandi. This means whichever of these two
drugs is used first will have an outsized revenue advantage over
Both Zytiga and Xtandi are expensive, around $5,500 and $7,500 per
month respectively. Insurers and patients paying 20%+ copays on
these oral drugs would be very motivated to use a cheaper generic.
While most sell side analysts haven't worked generic Zytiga's
impact into their financial models for Medivation, all of them have
worked it into their expectations for the Xtandi PREVAIL data. Buy
siders and sell siders are very focused on Xtandi being
meaningfully better in PREVAIL in order to offset the generic risk
But hold on a second…
In a slice of news that isn't well known, even by companies inside
the mCRPC space, Zytiga won't be going generic in 2016. On July 30,
2013, JNJ secured a new patent for the combination use of Zytiga
and prednisone in the treatment of prostate cancer. This extends
Zytiga's patent life well into the late 2020s and pretty much
erases the threat of generic Zytiga in 2016.
This is big. Even in the unlikely event Xtandi's PREVAIL data are
to the existing Zytiga data in the pre-chemo space, the two drugs
will compete on their merits without concerns about Zytiga going
generic. Which one will win in the pre-chemo space? This requires a
close look at the gatekeepers for these pre-chemo patients -
Urologists are primarily surgeons. What do surgeons learn their
first day in surgeon school? Don't operate on patients taking
steroids. They bleed out. Surgeons, therefore, have a visceral
dislike of steroids. Zytiga is required to be dosed with steroids
to avoid significant cardiac issues. This may seem a small thing,
but in my view, this gives Xtandi a clear leg up.
I'm aware there are some surveys out there showing Zytiga with a
mindshare lead among urologists, but this doesn't bother me. Xtandi
isn't (yet) approved for patients typically treated by urologists
and Zytiga is. It's unsurprising surveys would show some favor for
Zytiga at this stage in the game because that's all the average
Here's the thing, though… Every - not
- urologist key opinion leader I've spoken with over the last two
years has said they'd always prescribe Xtandi first to avoid dosing
steroids - even if the Zytiga and Xtandi had the same efficacy
As Medivation closes in on revealing PREVAIL data before the end of
2013, understanding how urologists look at the drug is important.
The fact JNJ just won a key patent extension into the late 2020s
for Zytiga means price won't get in the way of urologists picking
their favorite between these two oral drugs. I'm fairly certain
that choice will be Xtandi - which bodes well not only for
near-term revenues for Medivation but also the company's effort to
move Xtandi into even earlier stages of prostate cancer.
David Miller is the portfolio manager at