Medivation Inc. (MDVN) reported a loss of 24 cents per share in the first quarter of 2011, a penny wider than the Zacks Consensus Estimate of a loss of 23 cents but well below the year-ago loss of 51 cents. Lower expenses led to the narrower loss. Revenues for the quarter were $14.7 million, well below the Zacks Consensus Estimate of $16 million. Revenues were $15.7 million in the year-ago period.
The Quarter in Detail
Revenues consisted 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 fourth quarter of 2013, the Astellas payment will be recognized through the fourth quarter of 2014.
Operating expenses declined 28.7% to $23.8 million. Research and development expenses declined 31.1% to $17.6 million primarily due to a decrease in clinical and preclinical study costs and lower payroll and other related costs due to workforce reduction. Medivation expects its research and development headcount to increase to approximately 80 (from 68) in the next two quarters.
SG&A expenses declined 21.5% to $6.2 million primarily due to the workforce reduction implemented in March 2010.
Maintains 2011 Outlook
Medivation expects operating expenses (after adjusting cost-sharing payments from Pfizer and Astellas) in the range of $100 – $110 million. Medivation, which exited 2010 with a cash and equivalents balance of $207.8 million, expects to be able to fund operations beyond 2012.
Pipeline Update
Medivation provided an update on its pipeline candidates. Medivation and partner Astellas finished enrolling patients for the phase III AFFIRM study (advanced prostate cancer) in Nov 2010. An interim analysis of this study, which is being conducted in post-chemotherapy patients, will be conducted in 2011.
The companies initiated another phase III study (PREVAIL), which is being conducted in chemotherapy-naïve advanced prostate cancer patients. A head-to-head phase II study (TERRAIN) between MDV3100 and AstraZeneca’s (AZN) Casodex (bicalutamide) commenced in March 2011. A phase II study in hormone-naïve patients is scheduled to commence in the second quarter of 2011.
As far as dimebon is concerned, Medivation and partner, Pfizer, decided to discontinue the development of dimebon for Huntington disease following the release of phase III results (HORIZON study) which showed that dimebon failed to achieve its primary endpoints.
Meanwhile, Medivation continues to evaluate dimebon in the CONCERT study, which is being conducted with patients suffering from mild-to-moderate Alzheimer’s disease. Results from the CONCERT study are expected in the first half of 2012.
Neutral on Medivation
We currently have a Neutral recommendation on Medivation, supported by a Zacks #3 Rank (short-term Hold rating). Given the disappointing track record of dimebon, we are concerned about partner Pfizer’s commitment towards the collaboration. With dimebon failing in two phase III studies, we expect investor focus to shift to the development of MDV3100.
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