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Aragon Pharma's ARN-509 Is No Near-Term Threat to Medivation

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ARN-509 will absolutely be competitive with Medivation's Xtandi... in another decade.

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If I don't miss my guess, Medivation (NASDAQ:MDVN) shares will come under pressure today based upon an 8-K it filed on Monday. The decline, if it happens, reflects a basic lack of understanding of how long prostate cancer drug development takes. Since Medivation's Xtandi is the best-in-class drug for prostate cancer, any serious decline in Medivation's shares may make for a buying opportunity.

Medivation's 8-K noted it was filing an appeal concerning a lawsuit it brought asserting ownership over a drug called ARN-509 created at UCLA – the source of the company's IP for Xtandi. A few traders seem to think ARN-509, currently in development by private little Aragon Pharmaceuticals, is a near-term competitive threat for Medivation's Xtandi.

ARN-509 just started its first Phase II trial. This trial is in earlier stage patients and is not expected to generate data until 2018. ARN-509 is a nice-looking drug based on what I've seen from the Phase I data. It isn't as spiffy as the Aragon executives make it, but no drug is as spiffy as money-seeking executives make it out to be.

That said, ARN-509 will absolutely be competitive with Xtandi… in another decade.

Aragon execs did a conference presentation earlier in 2013 where they really went after Xtandi. Aragon executives certainly have no love for Medivation's executives – after all, Medivation's lawsuit can't be making it easy for Aragon to raise money. So Aragon is motivated to beat on Xtandi. Apparently, investors attending this presentation really ate up the idea that ARN-509 will kill Xtandi, and do it quickly.

So how long before Aragon gets ARN-509 into a position to cause revenue problems for Xtandi? Not soon.

Knowing the prostate cancer space as I do, I also know Aragon's oncology advisers. These doctors will almost certainly advise Aragon to take ARN-509 into the post-chemo indication first. This presents two problems for the thesis that ARN-509 is an imminent Xtandi killer.

First, long before ARN-509 would be approved in post-chemo, Xtandi will be kicking Johnson & Johnson's (NYSE:JNJ) Zytiga's butt in the pre-chemo setting. Xtandi would also be a long way towards the long-term trials generating an approval in castrate-sensitive prostate cancer (CSPC, where the big money is). So even if ARN-509 is approved in the post-chemo indication in five years (which would be record speed), it will not be a competitor to Xtandi.

The second problem is what 95% of people selling Medivation due to ARN-509 don't understand. The current prostate cancer space is generally defined as pre-chemo and post-chemo. This is why both Zytiga and Xtandi could do placebo-controlled trials. ARN-509 won't have that same pathway to approval.

If Aragon wants to take ARN-509 into post-chemo, ARN-509 would either have to be tested in Xtandi/Zytiga failures or go head-to-head with one of them before the FDA will approve the drug. Either way, Aragon isn't remotely prepared to run that sort of trial.

The same situation exists in the pre-chemo space. Aragon could try and slot ARN-509 after Xtandi/Zytiga failures and before chemotherapy. Or, it could try to go head-to-head against Xtandi or Zytiga. Either way, Aragon isn't remotely prepared to run that kind of a Phase III trial.

Aragon management is shamelessly hinting they will launch their first pivotal study in the CSPC space, but this is bluster. The Phase II they just started is only 90 patients and won't read out survival data until 2018. Perhaps Aragon (or whatever pharma buys it) could jump the gun and start a CSPC trial before the full data from the Phase II reads out, but you're still talking not starting that trial until 2016. And any large Phase III trial in the CSPC space will take five to six years to mature.

ARN-509 is probably a real drug, but it's certainly not a competitive threat to Xtandi in the next five years. It's probably not a competitive threat to Xtandi this decade. So if Medivation's stock takes a dive today, it might be a good time to take a closer look at the company.
No position in stocks mentioned

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