Why Did Medivation’s 1Q16 Earnings Disappoint?
Medivation's Earnings Disappointed, so Why Did the Stock Rise?
Actual versus estimated revenue
Medivation (MDVN) reported its earnings for 1Q16 on May 5. Wall Street analysts expected revenue for 1Q16 to be ~ $197.3 million. Medivation disappointed by reporting non-GAAP (generally accepted accounting principles) collaboration revenue of amounting $182.5 million, a 43% year-over-year increase. Xtandi, the company’s only commercialized drug, remained the anchor for robust growth.
Medivation has been quite volatile in meeting Wall Street expectations over past five quarters.
Medivation’s significantly lower earnings in 1Q16
Wall Street analysts projected that Medivation would report earnings of $0.23 per share. The company actually reported non-GAAP earnings of $0.11 per share in 1Q16. The non-GAAP EPS (earnings per share) jumped 35% annually.
Earnings in the first quarter were lower following lower non-GAAP revenue along with inventory changes related to Xtandi. Similarly, “non-GAAP SG&A (selling, general and administrative) is higher during the first quarter due to the timing of certain collaboration expense incurred by Astellas (ALPMY).”
It’s often risky to directly invest in a pharmaceutical or biotechnology company. Any news release for the success or failure of their drug results in stock price volatility. To remain on the safer side, you can choose to invest in the iShares Nasdaq Biotechnology ETF (IBB). It invests 1.8% of its total holdings in Medivation. Other major holdings in IBB’s portfolio include Amgen (AMGN), Celgene (CELG), and Gilead Sciences (GILD). They’re 7.6%, 7.2% and 7.0% of the fund’s total assets, respectively.
Let’s have a look at MDVN’s share price performance in the next part of this series.
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