Johnson & Johnson (NYSE:JNJ) should be bracing itself for early competition for its prostate cancer drug Zytiga as Xtandi, considered the closest rival of Zytiga, has been approved three months ahead of schedule. Both drugs will now compete to get a bigger share of the prostate cancer market as Xtandi has shown survival advantage over Zytiga. ((J&J’s Zytiga gets early challenge from Medivation’s new pill, FiercePharma, Sep 4 2012))
Prostate cancer is one of most prevalent cancers in men, with around 218,000 Americans diagnosed with the cancer each year. While there are many treatment therapies available, most of them are injectables. Zytiga has had the advantage of being the only oral pill; but now, with early approval of Xtandi, Zytiga will soon see competition in this market. In studies, Xtandi showed survival advantage (extending patients’ lives over a control group) of 5 months compared with JNJ’s 4.6 months. This could lead to many doctors prescribing the drug. However, it is yet to be seen how much the cost difference will matter. While Zytiga currently costs about $5,500 per month, Xtandi will be priced at $7,450 for a month’s dose, so Zytiga still has the price advantage. 
Secondly, Zytiga can fend off competition depending on how early it gets approval for additional indication after getting priority review status from the FDA. Currently, the drug is approved for patients diagnosed with both hormone treatment and chemotherapy. After demonstrating encouraging results in its clinical trials recently, JNJ filed applications with the FDA and the EU’s European Medicines Agency (EMA) to extend the use to patients not yet been treated with chemotherapy but have failed hormone treatment. The FDA’s priority review status means the drug could be approved in about six months. The FDA usually grants this status for drugs that either show strong efficacy in treatment or where no treatment currently exists.
The drug also showed strong results in eliminating early stage tumors in metastatic prostate cancer patients. Zytiga grossed around $200 million in 2011 in sales, and we see a $1 billion sales potential for the drug.
We are in the process of updating our $74 price estimate for JNJ to reflect the earnings and recent developments.Notes:
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