Medivation Tops Q2 Earnings & Ups View, Xtandi Impresses - Analyst Blog

Medivation Inc.MDVN reported second quarter 2015 earnings of 47 cents per share, surpassing the Zacks Consensus Estimate of 38 cents per share and the year-ago loss of 8 cents per share.

Revenues for the reported quarter increased 18.6% year over year to $175.7 million, well above the Zacks Consensus Estimate of $163 million.

The Quarter in Detail

Xtandi delivered U.S. net sales of $298.4 million, as reported by Astellas ALPMY , in the second quarter, up 33.2% sequentially. Difference in accrual rates of gross-to-net used in the second quarter compared with the first quarter contributed approximately $20 million to the sequential growth in net sales.

The company said that unit demand increased by a low- to mid-teens percentage rate sequentially. Medivation reported significant growth in prescriptions written by both oncologists and urologists following Xtandi's approval for the chemo-naïve indication. Moreover, while most of the Xtandi scrips are written by oncologists, there was significant growth in the number of urologists writing Xtandi. The company said that about 20% of scrips are now in urology.

Ex-U.S. net sales were approximately $188 million, up 42% sequentially. Xtandi performed well in Japan, Germany and France. Currency movement negatively impacted ex-U.S. net sales by about 2% (approximately $3 million).

Medivation is evaluating Xtandi for additional indications in the prostate cancer setting as well as for breast cancer. Xtandi's label was updated in Jul 2015 by the FDA to include updated overall survival analysis of the phase III PREVAIL study.

Medivation's collaboration revenues in the second quarter comprised U.S. collaboration revenues of $149.2 million (up 108% from the year-ago period) and ex-U.S. collaboration revenues of $25.6 million (up 156% from the year-ago period. Upfront and development milestone payments were $0.8 million (down 99% from the year-ago period).

Research and development expenses increased 38.7% to $47.4 million. SG&A expenses increased 30.3% to $65.5 million.

Ups 2015 Outlook

Medivation now expects U.S. net sales of Xtandi, as reported by Astellas, in the range of $1.14 - $1.18 billion, up from the earlier guidance of $1.050 billion - $1.125 billion.

Total collaboration revenues are expected in the range of $670 to $700 million (old guidance: $600-$650 million). This includes Medivation's 50% share of collaboration revenue related to U.S. net sales of Xtandi and collaboration revenue related to ex-U.S. net sales of Xtandi, in the form of a royalty payment from Astellas.

However, it excludes collaboration revenue of $2.8 million related to the amortization of upfront payments that the company expects to recognize in 2015 and up to $245 million of remaining milestone related payments that Medivation may earn from Astellas this year.

Operating expenses guidance remains unchanged at $410-$450 million (R&D - $180 million to $200 million; SG&A - $230 million to $250 million). This excludes non-cash expenses, stock-based compensation expense and milestone-related payments to a third party. The company also announced a two-for-one stock split, effective Sep 16.

Our Take

Medivation's second quarter results were impressive with the company surpassing expectations by a wide margin. Although Xtandi sales in the U.S. reflected the impact of gross-to-net adjustments, the product is performing well and is seeing significant uptake following its approval for the chemo-naïve patient population.

Xtandi sales should pick up with increased usage among urologists. The company is evaluating Xtandi in several studies and is looking to expand its label further. We are also positive on the company's efforts to build an immuno-oncology franchise.

Medivation is a Zacks Rank #3 (Hold) stock. Some better-ranked stocks in the health care sector include Corcept Therapeutics Incorporated CORT and Valeant Pharmaceuticals International, Inc. VRX . Both carry a Zacks Rank #1 (Strong Buy).

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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.

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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