Medivation Inc. (MDVN) reported fourth quarter 2014 earnings of $1.96 per share, well above the Zacks Consensus Estimate of $1.21 per share and the year-ago earnings of 3 cents per share. Higher revenues boosted results.
Revenues for the reported quarter increased 184.4% year over year to $274.7 million, well above the Zacks Consensus Estimate of $228 million.
The Quarter in Detail
Xtandi delivered U.S. net sales of $230.2 million, as reported by Astellas (ALPMY), in the fourth quarter, up 27% sequentially. The company attributed about four-fifth of the sequential improvement to underlying demand growth thanks to Xtandi’s label expansion into the lucrative chemo-naïve population.
Ex-U.S. net sales were approximately $126 million, up 5% sequentially. Currency movement negatively impacted ex-U.S. net sales by about 7% compared to the third quarter.
Medivation is evaluating Xtandi for additional indications in the prostate cancer setting as well as for breast cancer.
Medivation's collaboration revenues in the fourth quarter were $274.7 million consisting of U.S. collaboration revenues of $115.1 million (up 82% from the year-ago period), ex-U.S. collaboration revenues of $18.2 million (compared to $4.3 million in the year-ago period) and upfront and development milestone payments accounting for the remaining $141.4 million. This included a $90 million development milestone payment and a sales milestone of $50 million on the achievement of annual worldwide Xtandi net sales of $800 million during the year.
Operating expenses increased 48.2% to $131.3 million. Research and development expenses increased 56% to $57.9 million. SG&A expenses increased 42.5% to $73.4 million. The higher expenses were due to higher collaboration-related expenses from Astellas, costs associated with the company’s newly-licensed pidilizumab program and higher personnel-related costs.
2015 Outlook
Medivation expects U.S. net sales of Xtandi, as reported by Astellas, in range of $1.050 billion to $1.125 billion with first quarter sales to be at or below $230 million.
Total collaboration revenues are expected in the range of $600-$650 million. This includes Medivation's 50% share of collaboration revenue related to U.S. net sales of Xtandi and collaboration revenue related to ex-U.S. net sales of Xtandi, in the form of a royalty payment from Astellas. However, it excludes collaboration revenue of $2.8 million related to the amortization of upfront payments that the company expects to recognize in 2015 and up to $245 million of remaining milestone related payments that Medivation may earn from Astellas this year.
Operating expenses are expected in the range of $410-$450 million. This excludes non-cash expenses, stock-based compensation expense and milestone-related payments to a third party.
Our Take
Medivation’s fourth-quarter results were encouraging with the company exceeding expectations by a wide margin. We are positive on Xtandi’s strong performance and believe it will drive sales further given its growing demand and further label expansion. Meanwhile, we expect Medivation to continue pursuing external licensing opportunities. The company also expects to announce an internal development program this year.
Medivation is a Zacks Rank #2 (Buy) stock. Some better-ranked stocks in the health care sector include Cambrex Corporation (CBM) and BioMarin Pharmaceutical Inc. (BMRN). Both hold a Zacks Rank #1 (Strong Buy).
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