April 21, 2011 / 4:43 PM / 8 years ago

BUY OR SELL-Can Medivation's cancer drug revive its health?

* Bulls say prostate cancer drug has high success chance

* Bears say company’s pipeline has no value left

By Esha Dey

WASHINGTON, April 21 (Reuters) - Drug developer Medivation Inc MDVN.O was badly hurt when its key drug, Dimebon, failed in clinical trials for two major uses and investors are now pinning their hopes on its experimental prostate cancer drug.

While some analysts believe the cancer drug, MDV-3100, can propel Medivation shares to new heights, others say the drug stands little chance commercially against a rival treatment being developed by Johnson & Johnson (JNJ.N) that has demonstrated greater benefits in late-stage studies.

The company’s stock plummeted after disappointing Dimebon data for Alzheimer’s disease was released in March of 2010, but it has regained some of its value since then.

Should investors buy into the company while the stock is still cheap, or should they cut losses now and quit?

CANCER DRUG TO REVIVE CO

After Dimebon also failed to work against Huntington’s disease, Medivation’s fortunes rest almost entirely on the success of MDV-3100 with some analysts encouraged by that drug’s data and expecting it to be a success.

“Long term clinical data, to date, have been strong and we believe that odds of approval are 65 percent,” Roth Capital Partners analyst Andrew Vaino said.

Vaino said Medivation will split revenue with its Japanese partner, Astellas Pharma Inc (4503.T), and said U.S. sales of MDV-3100 could exceed $500 million by 2018.

The development of MDV-3100 is following closely on the heels of J&J’s abiraterone. J&J’s drug had glowing results in late-stage trial and is being touted as a potential big seller. [ID:nLDE69A1MU]

However, instead of viewing that as a setback for Medivation, some analysts said abiraterone’s success bodes well for MDV-3100 as the two drugs work in a similar manner.

“The MDV-3100 program has a high likelihood of success, given its efficacy and safety profile so far, its well documented mechanism of action and, finally, abiraterone’s success to date,” Global Hunter Securities analyst Kimberly Lee said.

“Medivation has the same trial design, same endpoints. Only Medivation has a little higher number of patients.”

Testosterone is the fuel on which prostate cancer cells grow and both drugs target that pathway. However, while MDV-3100 blocks the receptor for testosterone so cancer cells cannot respond to it, abiraterone stops the synthesis of testosterone.

Comparing the two drugs, Hapoalim Securities analyst Jon Lecroy noted one clear advantage for Medivation’s medicine.

“While Johnson’s drug has a side effect of blood pressure elevation, Medivation’s drug does not have one,” he said.

The company is expected to announce interim results from the drug’s late-stage trial later this year. According to Thomson Reuters consensus data, it is expected to reach sales of $108.1 million by 2015, while abiraterone is estimated to earn about $456.3 million.

PIPELINE HAS NO VALUE

Dimebon is dead and the prostate cancer drug is lagging far behind its closest competitor — it is time for investors to run, some analysts say.

“It is not our view that MDV-3100 cannot succeed against placebo in vacuum; it is instead our strong view that MDV-3100 can only succeed clinically in a world without abiraterone,” Brean Murray Carret & Co analyst Jonathan Aschoff said.

“MDV-3100 is weaker than abiraterone, and the trial they are doing is harder,” Aschoff said.

The trial enrolled substantially more European patients, who could be harder to treat due to advanced disease given poor screening in Europe, he added.

He has a price target of $6 on the stock and said it was only based on Medivation’s cash value.

The stock currently trades at around $20 about half of where it was before Dimebon failed in the closely watched Alzheimer’s study last year March. (Reporting by Esha Dey; additional reporting by Krishnakali Sengupta in Bangalore; editing by Andre Grenon)

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