Market Overview

Will Johnson & Johnson Cure Cancer?


Today, Johnson & Johnson (NYSE: JNJ) stated that its prostate cancer pill Zytiga improved survival in a pre-chemo trial and delayed the progression of cancer in patients who had yet to begin chemo. An independent data monitoring committee unanimously recommended that the Zytiga study be unblinded after interim analysis showed that patients who took Zytiga survived longer than those in the placebo group. As a result, Zytiga met all secondary endpoints in the study.

The study examined more than 1,000 patients, which followed Zytiga's approval last April to treat prostate cancer in men who had already been exposed to chemo. Johnson & Johnson plans to present detailed results of the study at a future medical conference and hopes to file an approval application with the FDA in late 2012 for expanded use. As a result of the data, shares of Medivation (NASDAQ: MDVN) are up 15% as the company is developing its own prostate cancer pill.

The Zytiga trial emphasized survival in its primary endpoints. In an interview with Dow Jones, JNJ spokeswoman Kellie McLaughlin stated that the progression-free survival benefit was statistically significant and represented a strong trend. One of the primary benefits of Zytiga is a relatively simple form of consumption in a single pill, rather than complicated chemo or infusion treatments that are the current standard of treatment. However, determining the actual rate of survival could be complicated by stopping the clinical trial early.

Zytiga works by blocking the production of CYP17, an enzyme which makes androgen, a key hormone in prostate cancer cells. Physicians hope that these drugs will help to stop tumors from spreading in prostate cancer patients. Some analysts believe that the emergence of these pills could dampen the enthusiasm for Dendreon's (NASDAQ: DNDN) Provenge infusion treatments. 'This news represents a major, at least, headline blow to the Provenge franchise," stated Roth Capital analyst Joseph Pantginis in a note to clients today. "Expansion of Zytiga's label may be perceived as a significant threat to Provenge's market share."

Zytiga looks as if it could be a promising treatment for prostate cancer patients given its simplicity in consumption. The market for a prostate cancer treatment with significant survival benefits is huge, and Johnson & Johnson stands to benefit if it can get its drug to market.


If you believe in the viability of a prostate cancer treatment pill, you should consider these trades:
  • Go long Johnson & Johnson. While it is a large company, Zytiga has blockbuster potential and could significantly impact the company's bottom line.
  • Go short Dendreon. If prostate cancer pills make it to market, many patients will likely opt for them over the costlier and more complicated infusion treatment that Provenge offers.
If you believe that prostate cancer pills will stall in the clinical trial process, consider these trades:
  • Go short Medivation. The company is currently developing its own prostate cancer pill and would likely see its shares fall significantly if it cannot advance it through clinical trials.
  • Go long Dendreon. The company has already generated significant interest in Provenge given its survival benefits. Without a rival, the company is posed to capture most of the prostate cancer treatment market in the short term.
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