Analyst Conference Summary


conference date: February 25, 2016 @ 1:30 PM Pacific Time
for quarter ending: December 31, 2015 (Q4, fourth quarter 2015)

Forward-looking statements

Overview: Strong revenue growth, but a net income lower as investment in future products increased.

Basic data (GAAP):

Revenue was $377.7 million, up 45% sequentially from $260.7 million, and up 37% from $274.7 million in the year-earlier period.

Net income was $142.5 million, up 79% sequentially from $79.5 million, and down 13% from $164.2 million year-earlier.

Diluted EPS was $0.85, up 81% sequentially from $0.47, but down 13% from $0.98 year-earlier.


Xtandi U.S. sales in Q1 2016 expected down sequentially due to seasonality due to the Part D coverage gap.

For the Full year 2016 U.S. net Xtandi sales are expected between $1.425 and $1.525 billion, a 28% growth rate at the midpoint. Non-GAAP collaboration revenue expected between $900 and $970 million. Non-GAAP operating expenses $555 to $600 million. Non-GAAP tax rate 36%. Non-GAAP diluted EPS $1.30 to $1.40.

Conference Highlights:

Xtandi (enzalutamide) for castration-resistant prostate cancer saw fast prescription growth from urologists. Growth from oncologists was also strong. Average duration has doubled to 8 months. Establishing market leadership in urology is the most important growth driver going forward.

Xtandi sales by Astellas were strong globally, up 80% in 2015 over 2014. CEO David Hung said Medivation now has "a platform from which to build a world-class global oncology franchise. We look forward to multiple milestones throughout 2016 as we report on our continued progress."

In October completed the acquisition for the late stage asset talazoparib, a highly-potent, orally-available poly ADP ribose polymerase (PARP) inhibitor. This was from Biomarin for a $410 million up front payment, plus possible milestone and royalty payments. Medivation believes talazoparib presents a very large cancer opportunity, and designated it MDV3800. [see more below]

GAAP collaboration payments in Q4 included $175 million in milestone payments. Non-GAAP collaboration payments were $202.7 million, down from $133.3 million year-earlier.

U.S. Xtandi sales by Astellas were $315.9 million, up 1% sequentially from $313.0 million and up 37% y/y. This resulted in $157.9 million in revenue to Medivation.

Xtandi ex-U.S. sales by Astellas were $231 million, up 13% sequentially from $205 million and up 83% from year-earlier. This resulted in $44.8 million in revenue to Medivation. The royalty was 16%. It is tiered and resets at the lowest, low teens level each year.

Total global sales by Astellas were $547 million, up 6% sequentially from $518 million and up 80% y/y.

Non-GAAP numbers: net income $49.5 million, down 15% sequentially from $58.4 million, and up 169% from $18.0 million year earlier. EPS $0.29, down 17% sequentially from $0.35 (adjusted for the split), and up 164% from $0.11 year-earlier. Collaboration revenue, which excludes upfront and milestone payments, was $202.7 million, down 22% sequentially from $260.7 million, but up 52% from $133.3 million year-earlier.

Xtandi (enzalutamide) pipeline developments:

A Supplemental New Drug Application for Xtandi in metastatic castration-resistant prostate cancer was accepted for review by the FDA. An improved label could be available for Xtandi in late 2016 based on new trial data. October 22, 2016 decision date. Three Phase 3 trials in earlier stage prostate cancer are enrolling. Also following patients in Phase 4 Plato trial, with top line date due this year.

Enzalutamide in triple-negative, androgen-receptor positive, breast cancer Phase 2 trial in Europe showed positive results. 10.5 month longer median survival was shown. Medivation is in discussions about the design for a pivotal Phase 3 study to start in the second half of 2016. Two other Phase 2 trials are underway for different patient types, with enrollment complete in one, and data due in the second half of 2016.

Hepatocellular carcinoma Phase 2 trial of enzalutamide enrolled its first patient this quarter.

MDV 9300 (pidilizumab) is being considered as an immuno-oncology agent. It turns out not to be a PD-1 inhibitor, which was disclosed to the FDA in January. A B-cell lymphoma study should start this year. A $30 million charge was taken as a partial impairment on this drug, based on an evaluation, but the plan is still to develop it in DLBCL and myeloma. In a Phase 2 DLBCL trial, but on an FDA hold. It does activate NK cells, which is rare. Still working to identify its binding target. Only paid $5 million for the rights.

SREVP pathway small molecule Phase 1 trial of healthy volunteers is underway. MDV4463.

Talazoparib, or MDV3800, will be tested in Phase 3 trials for all cancers where the DNA replication is or can be compromised. The first trials could be in non-BRCA, non BSA breast cancer; prostate; lung; and ovarian cancers. It is currently in a Phase 3 study, EMBRACA, for a women with breast cancer with deleterious germline BRCA1 and BRCA2 mutations. Primary endpoint is PFS. Should complete enrollment in Q4 2016 with top line results in 2017.

Cash balance ended at $225.9 million, down sequentially from $490 million. Collaboration receivables were $391.6 million. $75.0 million revolving debt. Contingent consideration debt $262.4 million. During the quarter $75 million was borrowed on a new credit facility as part of a $300 million facility and $410 million was used to buy talazoparib.

The $75 million debt has been repaid since the year began.

GAAP operating expenses were $156.3 million, consisting of $94.3 million for research and development and $62.1 million for selling, general and administrative expenses. Leaving income from operations of $221.4 million. Interest and other expense was $0.5 million. Income tax expense $78.4 million.

Medivation's sales force was increased by 40 in January.


Xtandi sales by type? PSA progression was 8.3 months in Terrain, by not yet reached in the current trial. When we launched all of our patients were behind Zytiga We were at four months and now are at 8 months, while Zytiga is at 10 months. We think we will at least hit 10 months and eventually exceed it. 20% of our scripts were in urology at last count.

Do you think Xtandi is still being used after Zytiga? Yes, more often than when Xtandi is first. But we had more new patient starts, for the first time, in Q4 than Zytiga. Whoever treats first typically gets the longer duration.

NCCN or AUA guidelines, getting Terrain and Strive data onto? The data was presented, the compendia change their guidelines on their own steam, so we can't predict timing.

Marketing effort to urologists? We started by looking at urologists who had already made prostate cancer prescriptions. We are educating about metastatic disease.

Plato study on combining Xtandi and Zytiga? In general the first agent does well, the second does not generate much response. It is designed to test continuing Xtandi vs. Zytiga follow up. If Plato were positive it would support continued treatment to progression. We already no that when one fails, changing to the other is not very effective.

Less confidence about Strive data getting into the label? Strive did have M0 and M1 subgroups. We don't think it will change the indication part of the label. We can't speculate on the details, we have to wait for the FDA.

Split between urology and oncology in salesforce? We also have Astellas sales force. We believe there is a higher-prescriber group of urologists that we are focusing on.

Do you think you will be able to address the M0 population? 75,000 or M1 CRPC patients and comparable number of M0 patients. M0 is an interesting subset. They generally get therapy for a rising PSA. If your prostate is removed your PSA should be zero, so if you get any PSA score above zero it would indicate you have metasisis. So the definition of M0 vs. M1 is problematic. As imaging procedures improve more patients will be moved to M1 from M0.

Any price increase in the guidance? We don't talk about the price strategy, that is done by Astellas. The last price increase was in April 2015.

Explained why Talazoparib is highly likely to be a major cancer drug.

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Disclaimer: My analyst call summaries may include both our condensations of statements made by company representatives and my own analysis. They are not covered by any warranty. I cannot guarantee anything said by company representatives is true. I try not to make errors, but it is possible. This is investment journalism, not financial advice.

Copyright 2016 William P. Meyers