MDVN Misses; Focus on Enzalutamide - Analyst Blog


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Medivation Inc. ( MDVN ) reported first quarter earnings of 1 cent per share, well below the Zacks Consensus Estimate of $1.13. The company, however, had posted a loss of 24 cents in the year-ago period. The company swung to a profit in the first quarter of 2012 due to the accelerated recognition of deferred revenues under the Pfizer ( PFE ) collaboration.

Revenues came in at $36.8 million, missing the Zacks Consensus Estimate of $67 million. Revenues, however, increased 150.4% from the year-ago quarter.

The Quarter in Detail

Revenues consisted of partial recognition of the non-refundable upfront payment of $225 million received from its former partner Pfizer in October 2008 and $110 million received from Astellas in late 2009. The upfront payments are being recognized on a straight-line basis.

With Pfizer exercising its right to terminate its collaboration agreement in Jan 2012, the remaining deferred revenue balance under the Pfizer collaboration will be recognized through 2012. While Medivation recognized $30.9 million of deferred revenue under the Pfizer collaboration in the first quarter of 2012, $35.6 million will be recognized in the second quarter of 2012. The balance $5.5 million will be recognized in the third quarter of 2012.

As far as revenue under the Astellas collaboration is concerned, about $65.3 million deferred revenue remains from this collaboration. Medivation intends to recognize the same at the rate of $5.9 million per quarter.

Operating expenses increased 50% to $35.7 million. Research and development expenses increased 13.7% to $20 million.

SG&A expenses increased 154.8% to $15.7 million. The increase in SG&A spend was expected as the company is working on building out its corporate infrastructure in anticipation of the potential launch of enzalutamide in the U.S. in 2012. Medivation said that it has recruited its sales management team and medical affairs field force, and is now recruiting the sales force.

Once enzalutamide is approved, Medivation will provide 50% of the U.S. sales and medical affairs field forces for the product.

2012 Outlook

Medivation expects operating expenses (after adjusting cost-sharing payments from Astellas) in the range of $155 - $170 million. The company could receive milestone payments of about $45 million related to the regulatory filing ($10 million and $5 million on the acceptance of the U.S. and E.U. filings, respectively) and potential U.S. approval ($30 million) of enzalutamide (formerly known as MDV3100).

The company expects capex of about $15 million, especially connected with its new headquarters.

Pipeline Update

Medivation along with its partner Astellas Pharma intends to file for U.S. approval for their prostate cancer candidate, enzalutamide, in the second quarter of 2012. The companies will be seeking priority review for the candidate. The E.U. filing is also slated for 2012.

Meanwhile, the company expects to finish enrolling patients for the phase III PREVAIL study, which is being conducted in chemotherapy naïve prostate cancer patients, later this month. Enzalutamide is also in a phase II study (TERRAIN), which will compare enzalutamide with bicalutamide, in advanced prostate cancer patients who have progressed following medical castration with LHRH analog therapy or surgical castration. Another open-label phase II study is being conducted to evaluate enzalutamide in advanced prostate cancer patients who have not had any previous hormonal therapies. Enzalutamide is also being studied for breast cancer (phase I).

Neutral on Medivation

We currently have a Neutral recommendation on Medivation, which carries a Zacks #3 Rank (short-term 'Hold' rating). With the regulatory filing for enzalutamide fast approaching, we expect investor focus to remain on the candidate. Enzalutamide could very well be a game-changer for Medivation.

MEDIVATION INC (MDVN): Free Stock Analysis Report
PFIZER INC (PFE): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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