Medivation Inc. (MDVN) reported dismal results in the fourth quarter of 2009 with net loss coming in at 78 cents per share, wider than the Zacks Consensus Estimate of a net loss of 57 cents and the year-ago net loss of 26 cents.
Despite full year revenues increasing to $69.3 million, net loss increased due to higher operating expenses. Net loss for 2009 came in at $1.71, wider than the Zacks Consensus Estimate of a net loss of $1.42. 

Full year revenues consisted of partial recognition of the non-refundable upfront payment of $225 million received from Pfizer (PFE) in Oct 2008 and $110 million received from Astellas in the fourth quarter of 2009. 

While the upfront payment from Pfizer is being recognized on a straight-line basis through the first quarter of 2012, the Astellas payment is being amortized through the fourth quarter of 2014. Revenues were $12.6 million in 2008. 

Operating expenses grew from $76.8 million in 2008 to $116.7 million in 2009. Research and development expenses increased 60% to $87.7 million as a result of greater clinical trial and other expenses which were partially offset by a cost share reimbursement under the company’s agreements with Pfizer and Astellas. 

SG&A expenses increased to $28.9 million primarily as a result of increased payroll and other miscellaneous expenses. Medivation intends to provide operating expense guidance for 2010 once it completes its analysis of the CONNECTION data on dimebon and determines the next steps of development for dimebon. 

The dismal fourth quarter results come on top of disappointing phase III results reported by Medivation earlier this month on its lead pipeline candidate dimebon. The company suffered a huge setback when dimebon failed to achieve both its primary and secondary endpoints in the CONNECTION study. 

Results showed that dimebon failed to achieve a statistically significant improvement over placebo. These results are extremely disappointing for both Medivation and Pfizer. 

Dimebon is the most advanced pipeline candidate at Medivation, which has no marketed products in its portfolio. The successful development of dimebon would have been a major boost for the company. In addition to the Alzheimer’s indication, Medivation is also studying dimebon for Huntington’s disease. 

Chances exist that the companies may seek approval for dimebon as a combination therapy. The candidate is currently being studied in combination with Pfizer’s Aricept for the treatment of mild-to-moderate Alzheimer’s. Positive results from this study could allow the companies to push for approval of the product as a combination therapy. 

Patient enrollment for a six month study, HORIZON, being conducted with dimebon in Huntington disease patients is also ongoing. Meanwhile, MDV3100, Medivation’s second pipeline candidate that is being developed in collaboration with Astellas Pharma, is in a phase III study that is being conducted in men with castration-resistant prostate cancer who were previously treated with docetaxel-based chemotherapy. 

We currently have a Neutral recommendation on Medivation. We expect investor focus to remain on the company’s future development plans for dimebon, which remains uncertain at this point of time. 

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.
Read the full analyst report on “MDVN”
Read the full analyst report on “PFE”
Read the full analyst report on “ELN”
Read the full analyst report on “JNJ”
Zacks Investment Research