FDA Nod for J&J Cancer Drug

Johnson and Johnson (JNJ) recently announced US Food and Drug Administration (FDA) approval for its prostate cancer therapy, Zytiga (abiraterone acetate). Zytiga, an oral, once-daily medication, gained approval for use in combination with prednisone for the treatment of metastatic castration-resistant prostate cancer (mCRPC) in treatment-experienced patients whose chemotherapy contained docetaxel.

Phase III data on Zytiga showed a significant increase in median survival in patients treated with Zytiga and prednisone compared to patients treated with placebo and prednisone. A 35% reduction in the risk of death (14.8 months vs. 10.9 months) and a 3.9 month difference in median survival was observed in patients treated with Zytiga and prednisone compared to patients on placebo plus prednisone.

Zytiga will compete with Dendreon Corporation’s (DNDN) Provenge for a share of the prostate cancer market. Provenge is a therapeutic vaccine approved for treating mCRPC. Provenge gained approval in April 2010 and was launched in May 2010. Another potential competitor could be Medivation Inc.’s (MDVN) MDV3100 though the candidate is currently in phase III development.

The prostate cancer market represents huge commercial potential. According to the American Cancer Society, prostate cancer is the most commonly diagnosed cancer among men in the US, other than skin cancer. It is estimated by the American Cancer Society that about 217,000 new cases of prostate cancer were diagnosed in the US in 2010 with 32,000 men dying of prostate cancer.

Being an oral, once-daily treatment, Zytiga could gain share rapidly. Zytiga became a part of Johnson and Johnson’s portfolio with its July 2009 acquisition of Cougar Biotechnology.

Neutral on Johnson & Johnson

We currently have a Neutral recommendation on Johnson & Johnson. This is supported by the Zacks #3 Rank (short-term “Hold” rating). Even though Johnson & Johnson has been facing challenges in the form of OTC product recalls, pricing austerity in the EU and generic competition, we believe that the company’s diversified business model, lack of cyclicality and strong financial position will help it in tough situations.

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