SAN FRANCISCO ( TheStreet) -- Medivation ( MDVN) and its partner Astellas will soon announce results from a phase III study of the prostate cancer drug Xtandi. This is a very important study for Medivation because a positive outcome is likely to transform Xtandi into a blockbuster cancer drug. As you might expect, Wall Street is paying close attention, waiting anxiously for the companies to announce results. Here's an FAQ on what to expect from the Xtandi study, known as PREVAIL: Xtandi is already approved to treat prostate cancer, so remind me why this PREVAIL study is important? You're right, the FDA approved Xtandi in August 2012 to treat men with advanced prostate cancer, specifically those with cancer that no longer responds to chemotherapy. If you want to be hip to the lingo, these are "post chemo" prostate cancer patients. The PREVAIL study is being conducted in "pre chemo" prostate cancer patients. These men have less advanced disease and have not yet been treated with chemotherapy. Less advanced prostate cancer means more patients to treat and a more lucrative commercial market opportunity for Medivation and Astellas? Bingo. Medivation has guided to 2013 Xtandi sales in the range of $345-365 million, based only on treating post-chemo prostate cancer patients. If the PREVAIL study is positive and Xtandi wins an expanded FDA approval for pre-chemo prostate cancer, Xtandi sales are likely to be on a billion-dollar run rate by the end of 2014. Peak sales in prostate cancer could be in the $3 billion range. The drug is also being studied in breast cancer. Medivation's market value already tops $4.3 billion, so.... Yeah, I get what you're saying. Substantial, future Xtandi sales are baked into Medivation's stock price already.
How much, exactly, is hard to say. This doesn't mean Medivation shares won't move higher on positive PREVAIL results, but investor expectations are high. Alright Adam, what do your hedge fund investor buddies want to see from the PREVAIL study to make them happy about Medivation? Here we go. For starters, it's easiest to think about Xtandi relative to its major prostate cancer competitor, which is Johnson & Johnson's ( JNJ) Zytiga. Zytiga is already approved for pre-chemo prostate cancer based on data from a phase III study which demonstrated a five-month median survival benefit (Zytiga 35.3 months vs. 30.1 months for placebo) and an overall survival hazard ratio of 0.79. That's your basic comparison for Xtandi in the PREVAIL study. Whoa! Slow down, sport. What the heck is a hazard ratio? Oops, sorry. I got lost in jargon. Let's step back a moment. Median overall survival, expressed in weeks or months, is relatively easy to understand. Median means middle, so in cancer drug studies, median overall survival is the length of time that half the patients are still alive.
Median overall survival is a very commonly used barometer of a drug's efficacy, however, it's not ideal. The preferred way to measure survival is by calculating a hazard ratio, which compares survival of all patients on the drug being studied compared to survival of all patients on placebo or some comparative treatment. A hazard ratio of 1 means survival, or the risk of death, is the same for both arms of the study. A lower hazard ration (less than 1) equates to an improvement in survival, or a reduction in the risk of death. As I said above, J&J reported a survival hazard ratio of 0.79 for the Zytiga pre-chemo study, which means patients treated with Zytiga had a 21% reduction in the risk of death compared to placebo. (1 - 0.79 = .21) I feel smarter already. Thanks. So, if Xtandi brings home a survival hazard ratio of less than 0.79 in the PREVAIL study, it's a win? Call the Xtandi bogey a hazard ratio of 0.75 or less, which would be meaningfully better than Zytiga. An Xtandi hazard ratio of 0.75 would also imply a median overall survival benefit of 8-10 months compared to placebo (assuming the placebo arm comes in with a median overall survival in the range of 26-30 months.) That would be a nice improvement over the five-month median survival benefit seen with Zytiga. One more important point to keep in mind: J&J's Zytiga must be given with a steroid, while Xtandi does not. Urologists, who treat a majority of prostate cancer patients, hate giving steroids. This is a big advantage for Xtandi. What if Xtandi doesn't reach median overall survival when the results are announced? Hmm. I think you're smarter than you're letting on. You raise a good point. We may not get median overall survival in the Xtandi arm but that would be a plus, not a minus, as long as the hazard ratio is strong. You've written 700-plus words on Xtandi so far and no mention at all of biostatistics and p values. How is that possible? Okay, now you're mocking me. We definitely want to see a statistically significant p value attached to the Xtandi results, which would be another point of differentiation from Zytiga. You may not remember, the Zytiga survival benefit was not statistically significant, although to be fair, the statistical miss did not deter FDA from approving the drug anyway for pre-chemo prostate cancer patients. Same can be said for Xtandi in the unlikely event that the survival benefit comes back with an errant p value, although it won't make investors very happy. When will Medivation and Astellas announced results from the PREVAIL study? Official guidance is "before the end of the year," but I suspect the end of September or October is more likely. That's just a hunch. How can you write a story about prostate cancer and not mention Dendreon (DNDN) or Provenge? Who? What? -- Reported by Adam Feuerstein in Boston. Follow @AdamFeuerstein