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Medivation Q3 Loss Narrower Than Expected

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Medivation Inc. (MDVN) reported a third-quarter 2013 loss of 18 cents per share, narrower than the Zacks Consensus Estimate of a loss of 28 cents per share but wider than the year-ago loss of 6 cents.

Revenues came in at $60 million, in-line with the Zacks Consensus Estimate but below the year-ago revenues of $64.8 million.

The Quarter in Detail

Xtandi delivered U.S. net sales of $108.5 million (reported by Astellas (ALPMY)) in the third quarter, up 32% sequentially. The company estimates that demand accounted for about 50% of this increase with higher inventory levels at the distribution level accounting for 25% of the increase. Awareness about Xtandi among oncologists and urologists continues to be high. Ex-U.S. net sales were $13 million.

Medivation's third quarter collaboration revenue was $60 million consisting of U.S. collaboration revenues of $54.2 million, ex-U.S. collaboration revenues of $1.6 million and up-front and development milestone payments related revenues accounting for the remaining $4.2 million.

Xtandi is approved for the treatment of patients with metastatic castration-resistant prostate cancer who have previously received docetaxel. Xtandi is currently approved in 12 countries and under regulatory review in 35 countries.

Operating expenses increased 5.6% to $68 million. Research and development expenses decreased 10.3% to $28.7 million. SG&A expenses increased 21.5% to $39.3 million.

2013 Outlook

Medivation still expects operating expenses (after adjusting cost-sharing payments) in the range of $285–$300 million. The company, however, expects Xtandi U.S. net sales (reported by Astellas) to surpass the earlier guidance of $345-$365 million.

Medivation is working on expanding Xtandi’s label. Interim results from the phase III PREVAIL study on pre-chemo patients showed that patients on Xtandi experienced a statistically significant overall survival advantage compared with patients receiving placebo. A 30% reduction in risk of death was observed in the Xtandi arm compared to placebo. Risk of radiographic progression or death went down by 81% in the Xtandi arm compared to placebo.

Considering the overall survival benefit and safety profile, the Independent Data Monitoring Committee recommended that patients on placebo should be offered treatment with Xtandi. Medivation and Astellas intend to meet with regulatory agencies early next year.

Meanwhile, Medivation has commenced a phase IV study (:PLATO) on Xtandi which will compare Xtandi plus Zytiga and prednisone to Zytiga and prednisone in chemo-naïve metastatic prostate cancer patients whose disease has progressed following treatment with Xtandi. Xtandi is being evaluated in other studies as well, including a breast cancer study.

Our Take

We remain encouraged by Xtandi’s performance. Xtandi could very well be a game-changer for Medivation. The prostate cancer market represents huge commercial potential and Xtandi continues to perform well. Launch in additional countries should drive sales further. Medivation has consistently presented impressive data on Xtandi. Expansion into the pre-chemo setting would be a major positive for Medivation.

Medivation is currently a Zacks Rank #3 (Hold) stock. At present, companies like Vanda Pharmaceuticals, Inc. (VNDA) and Osiris Therapeutics, Inc. (OSIR) look attractive with both being Zacks Rank #1 (Strong Buy) stocks.

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