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Medivation, Inc. (NASDAQ:MDVN)

Q1 2010 Earnings Call

May 10, 2010 04:30 am ET

Executives

Nicole Foderaro - IR

David Hung - President, CEO and Director

Lynn Seely - CMO

Analysts

Michael Yee - RBC Capital Markets

Ram Selvaraju - Hapoalim

Andrew Vaino - Roth Capital

Howard Liang - Leerink Swann

Operator

Good day everyone and welcome to the Medivation first quarter 2010 financial result conference call. This call is being recorded. At the end of the company's prepared remarks, we'll open the call for questions and we'll provide specific instructions at that point on how to ask questions.

I would now like to turn the call over to Nicole Foderaro. Please go ahead, ma'am.

Nicole Foderaro

Thank you and welcome to Medivation's first quarter 2010 financial results conference call. On the call today from Medivation are Dr. David Hung, President and CEO; Patrick Machado, Chief Business and Financial Officer; Dr. Lynn Seely, Chief Medical Officer; and Rohan Palekar, Chief Commercial Officer. We issued a press release earlier today, a copy of which can be found at www.medivation.com in the news section.

Before we begin, I would like to remind you that various remarks that we make on this call contain forward-looking statements, including statements regarding the timing of clinical trial initiation, enrollment and completions, the receipt of related payments and projected operating expenses and cash levels that are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Any statements contained in this call that are not statements of historical facts maybe deemed to be forward-looking statements.

Forward-looking statements involve risks and uncertainties that could cause Medivation's actual results to differ significantly from those projected including without limitation, risk related to progress, timing and results of Medivation's clinical trials, difficulties or delays in obtaining regulatory approval, enrollment at patients in Medivation's clinical trials, partnering in Medivation's product candidates, manufacturing of Medivation's product candidate, competition with Medivation's product candidate, should they receive marketing approval. The adequacy of Medivation's financial resources, unanticipated expenditures, reliabilities and intellectual property matters and other risk and uncertainties detailed in Medivation's filings of the Securities and Exchange Commission including as quarterly report on Form 10-Q for the quarter ended March 31st, 2010 filed today with the SEC. You are cautioned not to place undue reliance on the forward-looking statements which speak only as of the date of this call.

Medivation's disclaims any obligation or undertaking to update or revise any forward-looking statements contained in this conference call. With that I will turn the call over to Dr. David Hung, President and CEO of Medivation.

David Hung

Thank you all for joining us today, I will begin the call with recent developments, Pat will then review first quarter financial results and provide financial guidance. And I will conclude with an outline of company milestones that we anticipate achieving this year. As you know in March, we and our partner Pfizer announced disappointing results from the Phase 3 CONNECTION trial of Dimebon in mild-to-moderate Alzheimer's patients. Dimebon failed to meet any of the efficacy endpoints in this trial.

In the weeks following the data announcement, we and Pfizer have conducted a thorough analysis of the CONNECTION data and study logistics to better understand the result. The conclusions of our analysis are that Dimebon did not demonstrate clinical benefit in the CONNECTION study and that no systematic issues with the study logistics were identified that would explain the results. After considering the CONNECTION results and all other available Dimebon data had generated to-date, Medivation remains committed to determining that the Dimebon office clinical benefit to Alzheimer's and Huntington's Disease patients.

In reaching this conclusion we considered multiple factors including the following: number one, the clinical benefit in mild-to-moderate Alzheimer's disease and Huntington disease seen in two prior dimebon trials. Number two, dimebon's excellent safety and tolerability profile across all studies completed to-date totaling more than 2,000 patients. Number three, our strong preclinical package consistently demonstrating dimebon's pharmacological activity across multiple assays. And number four, the significant unmet need for improved treatments in both AD and HD.

While the above factors convinced us that dimebon development should continue. At the same time, we realize that the probability of success for dimebon, particularly in AD had to reduce by the disappointing CONNECTION results. Thus we cannot justify proceeding with the comprehensive development program we had in place prior to the CONNECTION read out.

Accordingly, we have decided to streamline our ongoing dimebon development program to focus fully on the trials that we believe have the highest probability of demonstrating a benefit to patients that also happen to be the furthest along in development. We will discontinue the trials that do not meet these criteria. The Phase 3 dimebon trials that we will be continuing are CONCERT, our 12 month trial in mild-to-moderate AD patients were taken to donepezil and HORIZON, our six months trial in HD patients.

Medivation holds operational responsibility for both these trials and we intend to move forward with them. Our goal is complete patient enrollment in both CONCERT and HORIZON this year. Our decision to prioritize these two trials was influenced in large part by the following considerations.

First, with the 12 months dosing period CONCERT provides twice as much time as CONNECTION to observe potential benefit in dimebon treated patients and potential decline in placebo patients. Second, the patient population being studied in HORIZON, HD patients, is more homogenous than Alzheimer's patients because Huntington's Disease is a genetic disorder caused by a single gene mutation. Third, we believe that the estimated incremental cost of Medivation of continuing CONCERT, HORIZON through completion as compared to the cost of shutting down these trials produces a favorable risk adjusted return to Medivation given the large commercial opportunities we are targeting.

Fourth, we believe that CONCERT and HORIZON offer independent pathways through registration of dimebon for mild-to-moderate AD and for HD respectively. We will be meeting this quarter with the FDA to discuss the CONNECTION data and to obtain their input in guidance on our proposed regulatory path forward. And fifth, because it is an orphan drug indication we believe that Huntington disease represents a commercially attractive opportunity from Medivation even in the scenario where dimebon is not approved to treat Alzheimer's disease.

Conversely, we and our partner Pfizer have agreed to suspend development of dimebon in moderate to severe AD and accordingly we will stop the two ongoing Phase 3 trials in that indication, contact and consolation. We expect these trials to be wound down by the end of the third quarter. The purpose of these trials was as part of the label expansion strategy for dimebon once approved from mild-to-moderate AD. This strategy may be revisited if the data from our ongoing concert trial support doing so.

Now let me turn to MDV3100, our triple-acting oral androgen receptor antagonist. Last month we announced that positive efficacy data from the Phase 1-2 trial of MDV3100 in advanced prostate cancer patients was published in the Lancet. As a reminder in this study MDV3100 demonstrated anti-tumor activity as they evaluated by reductions in prostate specific antigen levels, radiographic finding and circulating tumor cell counts.

MDV3100 was generally well tolerated in this trial and doses up to and including 240 milligrams per day. Based on the favorable benefit risk ratio for MDV3100 observed in this trial, we and our partner Astellas are conducting a randomized double-blind, placebo-controlled Phase-III trial known as AFFIRM in men with castration-resistant prostate cancer who have failed prior chemotherapy. We are evaluating a dose of 160 milligrams per day of MDV3100 in the AFFIRM trial and the primary end point is overall survival.

Enrolment for AFFIRM is progressing on track, and we expect to complete patient accrual this year. In addition to our ongoing AFFIRM trial, we and Astellas believe that the largest potential opportunity for MDV3100 lies in expanding its use to earlier stage of prostate cancer. As such, we are excited to announce our plan to expand our MDV3100 development program by initiating three new trials this year.

A Phase-III trial in men with castration-resistant prostate cancer who are chemotherapy naïve, a Phase-II head-to-head trial comparing MDV3100 with bicalutamide and a Phase-I trial in hormone naive patients. As is the case with our ongoing AFFIRM trial, two thirds of the development cost of all three of these new trials will be funded by our partner, Astellas. Ins addition, the initiation of our new Phase-III trial would trigger a $10 million milestone payment to Medivation under our collaboration agreement with Astellas.

On the intellectual property front, just last week we straightened our patent position with the issuance of a US patent claiming MDV3100 composition of matter. The term of this patent runs through 2027 and under current law is eligible for up to five years patent term extension, based on time spent pursuing regulatory approvals to market MDV3100.

In summary, with the expected completion of enrollment in three Phase III trials this year, initiation of the three new MDV3100 trials have broadened, its potential patient reach are established, strategic partnerships with world class collaborators and a strong financial position. We believe we are well positioned as a company for long-term success.

I would now turn the call over to Pat who will review financial results for the first quarter.

Pat Machado

Thanks David and good afternoon everyone. Revenue for the first quarter of 2010 was $15.7 million consisting of partial recognition of the non-refundable upfront payment of $225 million we have received from Pfizer in the fourth quarter of 2008 and $110 million received from Astellas in the fourth quarter of 2009. Both upfront payments were recorded as deferred revenue upon receipt and are being recognized on a straight line basis over the estimated performance period of the company's obligations under the applicable collaboration agreement, which we presently expect to complete in the second quarter of 2013 for the Pfizer collaboration and in the fourth quarter of 2014, for the Astellas collaboration.

For the three months ended March 31st 2010, total operating expenses were $33.4 million compared with total operating expenses of $22.1 million for the same period in 2009. These figures include non-cash stock based compensation expense of $3.5 million in the quarter ended March 31st, 2010 compared with $2.6 million for the same period in 2009. Beginning in October 2008, Pfizer became responsible for 60% of all Dimebon related development and commercialization cost in the U.S. and 100% of such cost outside the US.

Beginning in October 2009 Astellas became responsible for 50% of all MDV3100 related development and commercialization cost in the U.S. other than cost for clinical trials supporting development in both the U.S. and either Europe or Japan including the ongoing Phase-III AFFIRM trial and the three new trials we expect to begin this year which are borne two thirds by Astellas and one third by Medivation.

Astellas also bears 100% of all cost outside the U.S.; the parties make quarterly true-up payments if necessary to ensure that each bears its applicable share of cost.

For the first quarter of 2010, the net true-up payments payable to Medivation were $4.6 million and $6.1 million under the Pfizer and Astellas collaboration respectively.

Medivation presents these cost sharing true-up payments in the applicable expense line of its consolidated statement of operation.

For the three months ended March 31, 2010 the net loss was $17.5 million or $0.51 compared with a net loss of $5.6 million or $0.19 per share for the same period in 2009.

Cash, cash equivalents in short-term investment at March 31, 2010 totaled $255.5 million compared with $278.2 million at December 31, 2009. Now I would like to turn to guidance.

For 2010, we currently expect total operating expenses net of cost sharing payments from Pfizer and Astellas to be between $105 million and $115 million. Approximately $13.5 million of which is non-cash stock based compensation expense.

Taking our streamline dimebon development plan and an associated cost savings initiative into account, we believe that our existing cash is adequate to fund our currently budget operations beyond 2012. This guidance assumes no additional milestone payments, others in the $10 million milestone payment we expect to receive from Astellas this year, upon initiation of the second Phase III clinical trial of MDV3100.

Our guidance also applies without regard to whether Pfizer elect to remain in our dimebon collaboration. By the end of 2012, we expect to have reported top line data from three of our ongoing Phase III trials.

Our 12-month CONCERT trial in mild to moderate Alzheimer’s, our six-month HORIZON trials in Huntington disease and our AFFIRM trial in post chemotherapy castration-resistant prostate cancer.

We therefore believe that our current cash runway gives us the opportunity to generate an attractive return for our investors without any near-term financial overhang. With that, I will turn the call back over to David.

David Hung

Thanks, Pat. I would like to reiterate that our priorities for 2010 remain to complete patient accrual in the 12-month CONCERT trial of dimebon in combination with Aricept to complete patient accrual in the six-month HORIZON trial of dimebon in patients with Huntington disease, to take complete patient accrual in the AFFIRM trial of MDV3100 in patients with castration-resistant prostate cancer to initiate three new MDV3100 trials in earlier stage prostate cancer and to manage our portfolio operations and cash to maximize our return on investment and probability of success as a company. We will now open up the call for questions. Operator, please call for questions.

Question-and-Answer Session

Operator

(Operators Instructions) Our first question comes from Michael Yee from RBC Capital Markets.

Michael Yee - RBC Capital Markets

With regards to Pfizer, have you actually since the data, sat down with them and sort of strategized together, the commitment to go forward, or is there actually something that they are still evaluating, or I mean you guys are pretty much, they are pretty much ready to go all the way through Huntington's? And then the second question is on MDV3100, when would some sort of next update be on the Phase II data, is that something that ASCO or would we see something there?

Patrick Machado

We obviously have been in weekly, very regular conversations with Pfizer since the time the data were unblinded, they are in concurrence with the decision to discontinue development for moderate to severe Alzheimer's disease as you often know they have the right to terminate the collaboration based on the results in the CONNECTION trial. At this point, we don't know whether or when they may choose to do that, but at the present time we are continuing to move forward together on the mild-to-moderate AD and the Huntington's program.

The other thing that I would point out is that even if Pfizer were to elect or accept the collaboration under the terms of our agreement, they have a six-month tail and during which time they require to honor all of their obligations to Medivation including their financial obligations. So the financial impact to us of them electing to leave if that in fact is what they ultimately decide to do would be mitigated quite a bit by that provision.

Lynn Seely

So with respect to upcoming presentations we will be presenting at the American Neurological Association, San Francisco and also at ASCO. The Phase I-II trial continues on and even though the Charleston going on for more than three years in this very late stage patient population, we still have well over 10% of patients ongoing. So likely we won't have a complete update until the study is over.

Michael Yee - RBC Capital Markets

On the Huntington's study is it safe to say this is data in 2011? What is the reasonable chance this could fall in 2010?

Lynn Seely

Sure, we have committed to complete enrollment by the end of 2010, it's a six month study.

Operator

Our next question is coming from Ram Selvaraju from Hapoalim.

Ram Selvaraju - Hapoalim

With respect to the CONCERT study, could you clarify for us whether or not there may be an interim analysis at any point? And if so, when that might take place? And if that interim analysis were to be negative whether there would be the possibility of discontinuing the CONCERT study for the final outcome?

Lynn Seely

So, at this point there is no formal plans for the CONCERT study, the further along we get the less likely that becomes. But no definite decision has been made.

Ram Selvaraju - Hapoalim

And then with respect to MDV3100, could you give us a little bit more color on what the size and scope of the Phase II head-to-head study against Casodex would look like and also the Phase I study in hormone sensitive patients.

Lynn Seely

Sure, it is our standard practice to really give details of the trial when we announce their initiation. so we are not going to be able to give the details today. We just wanted to make you aware that they were going to be get into started this year and that we are very intent on moving upstream in this patient population.

Ram Selvaraju - Hapoalim

And the finally, with respect to when the Phase 3 in hormone refractory chemo-naive patients, the Phase 2 versus Casodex and the Phase 1 in hormone sensitive patients would read out. Could you give us an idea as to whether those events would be expected in 2011? And whether any of them would be expected in 2011 or follow them into 2012? I mean what would be the secrets on that?

Nicole Foderaro

So we are not commenting on when data will be available in these trials. The only date we’ve given at this point is that we will be completing an enrollment in the affirmed post chemotherapy trial by the end of 2010.

Operator

And our next question is coming from Andrew Vaino from Roth Capital.

Andrew Vaino - Roth Capital

Quick question on the discontinuation of the moderate sets of your indications. Is there anything that led to that, have you focused on looking at the [indiscernible] data or anything?

Lynn Seely

This Lynn. No, this was very much a decision based on focusing on the trial, the counter trial which we believe is the most likely to see positive outcome in the near term. And as you know, that’s a 12-month trial on background and the treatment, the CONCERT study.

Andrew Vaino - Roth Capital

Was there any mechanistic reasons to suggest the moderate to severe higher level product data?

Lynn Seely

No, not at all. I think it’s something that we remain interested in but that was really designed as a label expansion study and studies that were just getting underway and we really believe our best chance of success is in those 12 month study which is much further along.

Operator

Our next question is coming from Howard Liang from Leerink Swann.

Howard Liang - Leerink Swann

Regarding the Alzheimer’s program from the CONNECTION for, in your analysis, was there any positive signal in any patient sub-groups or was there any regions that are positive?

Lynn Seely

We are going to be presenting these data at ICAD in July. The International Conference on Alzheimer's Disease in July and so that is when we will be discussing the outcome of the data further.

Howard Liang - Leerink Swann

For the Phase 3 trial in pre-chemo studying, can you talk about what end-point would be tested?

Lynn Seely

No, again we are just giving indication that we are going to be beginning that trial this year but we will be giving more details of the trial when we actually initiate it.

Howard Liang - Leerink Swann

Okay then maybe lastly on the Phase I trial in hormone-naïve patients, what is purpose or rational for trial?

Lynn Seely

I think again we are very interested, we believe MDV3100 has the ability to benefit patients well up stream in the disease and so this is to begin initiation and that evaluation.

Operator

Our next question from Geoff Meacham with JPMorgan

Unidentified Analyst

Hi this is Christian [Gordy] on behalf of Geoff Meacham, I have a couple of questions I was wondering to ask what did you see in the CONNECTION data anything positive that encouraged you to continue the mild to moderate Alzheimer’s trial, the CONCERT trial and the Huntington trial?

Lynn Seely

So I think as we stated repeatedly that in the trial overall we didn’t see clinical benefit to patients but we believe that the CONCERT trial offers a really distinct opportunity to show this benefit and as a 12-month study to allow ample privacy drug benefit and placebo decline and also the patients in the CONCERT study are more garden variety typical patients already on background donepezil and with Huntington diseases, a distinct disease, it's very homogeneous, we know the causes and so again offers us, its often indication, offers us a very distinct and nice opportunity to demonstrate the drug's ability to benefit the patient.

Operator

I’m showing no further questions in the queue. I would like to turn the conference back to your host for any concluding remarks.

David Hung

Thank you all for joining us on the call today and we'll talk to you again at our next quarterly update. Thank you.

Operator

Okay, ladies and gentlemen, this concludes your conference. You may now disconnect and have a great day.

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Source: Medivation, Inc. Q1 2010 Earnings Call Transcript
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