One of my favorite watch list ideas right now is Medivation (MDVN), a little-known biotech firm that has a blockbuster drug that’s just starting to take market share. Here’s what I wrote about the company in Cabot Top Ten Trader last week:
“Medivation’s blockbuster anti-prostate cancer drug Xtandi is about to take the company’s revenue outlook to the next level. The drug is currently approved to treat post-chemotherapy patients, and is competing directly with Johnson & Johnson’s Zytiga. Sales have remained strong, despite the competition, but analysts believe that Xtandi is about to overtake Zytiga in a big way. On September 10, Xtandi received FDA approval for pre-chemo treatment, opening up a huge market for Medivation. According to analysts at Canaccord Genuity, the pre-chemo market could reach $2.7 billion. With forecast fiscal 2014 revenue arriving at $640 million for Medivation, the company has considerable room for growth. Why Xtandi over Zytiga? Because Medivation’s drug offers improved progression-free survival rates, delaying the need for chemo by 17 months, compared to just 8.4 months with Zytiga. That’s huge! Additionally, Xtandi also delays sketetal problems from cancer that spreads to bones and does not require an additional corticosteroid. Overall, Zytiga raked in $1.7 billion in 2013 and $1.07 billion in the first half of 2014. With Xtandi arriving as an arguably superior treatment, Medivation’s potential is gigantic.”
Analysts see the company’s earnings moving from a loss last year to $2.44 per share this year, and growing another 42% to $3.46 in 2015. Frankly, I think next year’s figure could be very conservative; estimates have been moving up rapidly, especially with the new approval.
The stock has been in a strong uptrend since breaking out in August, and nibbling on dips toward the mid-90s isn’t a bad idea. For my part, though, I’m just watching, thinking that the longer it holds up, the greater the chance of a huge move should the market get going.
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