Medivation (MDVN) and its partner Astellas have secured FDA approval to expand the use of Xtandi in prostate cancer patients before they're treated with chemotherapy.
Investors widely expected the expansion of the Xtandi label into the "pre-chemo" prostate cancer setting, but it's still welcome news. And the language in the new Xtandi label should help Medivation and Astellas widen their market share lead over Johnson & Johnson's (JNJ) competing prostate cancer drug Zytiga, says healthcare investor David Miller. [He's long Medivation]
Xtandi label also has delay in time to skeletal-related events. $MDVN These are two label claims Zytiga does not have.— David Miller (@AlpineBV_Miller) September 10, 2014
The Xtandi pre-chemo survival data were presented at a medical meeting in January, and were pretty darn awesome.
Medivation shares have been on a monster run this year. The stock was halted Wednesday at $96.89 ahead of the FDA approval announcement.
Recent peer biotech valuations support our adjusted target price using conservative assumptions. At our revised target price of $118, Medivation would be a $10bn company in 2015, which values Xtandi at approximately $22bn (MDNV's 45% of the value). This valuation can be supported by taking the current prevailing revenue multiples for successful large cap biotech companies of 6.6x 2015 consensus revenue, and applying it to our forecast for Xtandi of more than $3.5bn in global sales in 2016. Further upside could come if MDVN captures a multiple consistent with emerging biopharmaceutical businesses, with trade in the 6-9x forward revenue range.