Medivation Inc. (MDVN) reported a loss of 51 cents per share in the first quarter of 2010, exceeding the Zacks Consensus Estimate of a loss of 42 cents and the year-ago loss of 19 cents. Lower revenues and higher expenses led to the higher loss.
 
Revenues for the quarter were $15.7 million, consisting of partial recognition of the non-refundable upfront payment of $225 million received from Pfizer (PFE) in October 2008 and $110 million received from Astellas in late 2009. The upfront payments are being recognized on a straight-line basis – while the Pfizer payment will be recognized through the second quarter of 2013, the Astellas payment will be recognized through the fourth quarter of 2014. Revenues were $16.3 million in the year-ago period.
 
Operating expenses grew from $22.1 million in the year-ago period to $33.4 million in the quarter. Research and development expenses increased to $25.6 million primarily as a result of greater clinical and preclinical study expenses and other miscellaneous expenses.
 
SG&A expenses increased to $7.8 million primarily as a result of increased payroll and other miscellaneous expenses.
 
Medivation provided an update on its pipeline candidates. The company said that while it will continue enrolling patients in its CONCERT (mild-to-moderate Alzheimer’s disease) and HORIZON (Huntington disease) trials, it will no longer continue with the two ongoing phase III studies of dimebon in moderate-to-severe Alzheimer’s disease. 
 
The decision was based on an analysis of all data on dimebon. Medivation intends to meet with the US Food and Drug Administration (FDA) to determine the future regulatory path for dimebon for the Alzheimer’s indication.
 
Meanwhile, Medivation and partner Astellas are looking to complete enrolment for the phase III AFFIRM study (advanced prostate cancer) in 2010. The companies also intend to commence three new studies with MDV3100. While one study (phase III) will be conducted in men with chemotherapy-naive castration-resistant prostate cancer, the second will be a head-to-head phase II study between MDV3100 and AstraZeneca’s (AZN) Casodex (bicalutamide).
 
The third study (phase I) will be conducted in hormone-naïve patients. Top-line results from the CONCERT, HORIZON and AFFIRM should be out by 2012.
 
Medivation also provided guidance for 2010-2012. For 2010, Medivation expects total operating expenses, net of cost-sharing payments from Pfizer and Astellas, in the range of $105 and $115 million. The company also expects to receive a milestone payment of $10 million related to the initiation of a second phase III study with MDV3100.
 
Medivation said that its cash balance should be sufficient to finance operations beyond 2012 even if Pfizer opts to exit the dimebon agreement.
 
We currently have a Neutral recommendation on Medivation. We expect investor focus to remain on updates on the company’s pipeline candidates. We also expect investor focus to remain on Pfizer’s commitment towards the dimebon collaboration. Medivation could suffer another blow if Pfizer decides to pull out from the collaboration agreement for dimebon. We note that Pfizer already has another Alzheimer’s candidate, bapineuzumab, in its portfolio that is being developed with Elan Corp. (ELN) and Johnson & Johnson (JNJ). As such, Pfizer may decide to focus its efforts towards the development of bapineuzumab.
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