After demonstrating encouraging results in its clinical trials earlier this month, Johnson & Johnson (NYSE:JNJ) has filed applications with the U.S. FDA and the EU’s European Medicines Agency (EMA) to extend the use of its metastatic prostate cancer drug, Zytiga, to patients who have not yet been treated with chemotherapy, but have failed hormone treatment. Currently, the drug is approved for patients who have been diagnosed with both hormone treatment as well as chemotherapy.  In separate clinical trials, the drug showed strong results in eliminating early stage tumors in metastatic prostate cancer patients.
We have a $74 price estimate for JNJ, which is nearly 10% above the market price largely based on the its long-term outlook.
Zytiga is used in the treatment of prostate cancer, one of the most prevalent cancer in men with around 218,000 Americans being diagnosed each year. The drug blocks the production of androgen hormone (which increases tumor growth) in testicles and adrenal glands. Compared to other drugs, Zytiga also blocks the hormone production inside the tumor itself. 
JNJ has a very modest position in the oncology drug market and, with products like Zytiga, we can expect it to present a better showing in this market, going forward. If the company’s request for broader marketing of the drug is approved, this may boost its patient base for the drug, which in turn will accelerate its other pharmaceutical sales. Zytiga grossed around $200 million in 2011 in sales, and analysts are already seeing a $1 billion sales potential for the drug.Notes:
- Johnson & Johnson files for new Zytiga approval, Bloomberg, June 15 2012 [↩]
- J&J’s Zytiga Helps Eliminate Early-Stage Prostate Cancer, Bloomberg, May 18 2012 [↩]