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Medivation, Inc. (NASDAQ:MDVN)

Q3 2010 Earnings Call Transcript

November 5, 2010 4:30 pm ET

Executives

Joey Fleury – WCG

David Hung – President and CEO

Pat Machado – Chief Business Officer and CFO

Lynn Seely – Chief Medical Officer

Analysts

Kim Lee – Global Hunter

Andrew Vaino – Roth Capital Partners

Nathan Kelly – Noble Finance

John Aschoff – Brean Murray

Howard Liang – Leerink Swann

Operator

Thank you for joining Medivation’s Third Quarter 2010 Financial Results Conference Call. This conference is being recorded. At the end of the presentation we will have a question and answer session will be given instructions at that time on how to signal for question.

I would now turn the call over to Joey Fleury.

Joey Fleury

Thank you and welcome to Medivation’s third 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 contains forward looking statements, including statements regarding the timing of clinical trial initiation, enrollment and data, potential future clinical trial event, the therapeutic and commercial potential of our products candidate and their continued development, regulatory and intellectual property matters, our collaboration, the sufficiency of our cash resources and statements above our future opportunities which 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 may be 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 press related progress, timing and result of Medivation’s clinical trial, difficulties as a ways in obtaining regulatory approval, difficulties or delays in enrolling and retaining patients in Medivation’s clinical trials, partnering of Medivation’s product candidate, 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 or liabilities, intellectual property matters and other risks and uncertainties detailed in Medivation’s filings with the Securities and Exchange Commission, including its quarterly report on Form 10-Q for the quarter-ended September 30th 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 disclaims any obligation or undertaking to update or revise any forward looking statements contained in this conference call.

With that, I will now turn the call over to Dr. David Hung, President and CEO of Medivation.

David Hung

Thank you all for joining us today. I’ll begin the call with an update on our programs including recent developments. I will then review third quarter financial results and I’ll conclude with an outline of our near-term company milestone.

Let’s begin with the Medivation 3100 program. We and our partner, Astellas, expect to complete enrollment in our ongoing Phase III AFFIRM trial on November 15, just a little more than a week from now. AFFIRM is a randomized double-blind placebo-controlled multinational study that is expected to enroll approximately 1200 patients with advanced prostate cancer who have previously failed docetaxel-based chemotherapy.

Primary end point of the AFFIRM trial is overall survival. All patients in AFFIRM represent the most advanced prostate cancer population we are targeting MDV3100. Patients with earlier stage prostate cancer also need a new treatment option. Therefore, our goal is to develop MDV3100 for the broadest possible spectrum of disease stage.

In the third quarter, we began the expansion to earlier stage patients with the initiation of our second phase retrial known as PREVAIL. PREVAIL is a randomized double-blind placebo-controlled multinational study that is expected to enroll approximately 1700 patients with advanced prostate cancer who have chemotherapy naïve. The co-primary end points of the trial are overall survival and progression free survival.

Secondary endpoints include time to first related event in time to initiation of different chemotherapy. Both of our Phase III prostate cancer trail AFFIRM and PREVAIL are valuating MDV3100 at a dose of 160 mg taken orally once daily plus standard of care versus placebo plus standard of care.

We and our partner, Astellas also remain on track to initiate two new trials in even earlier stage prostate cancer this year. A Phase 2 head to head trial comparing MDV3100 with bicalutamide and a Phase 2 trial in hormone-naïve patients. Our partner, Astellas bears two-thirds of the development cost of our ongoing Phase 3 AFFIRM and PREVAIL trial as well as our upcoming Phase 2 trial.

As you know, there has been a lot of good amount of news over the past several months focused on the prostate cancer space. Most recently, Abiraterone, a compound development by J&J for advanced prostate cancer announced positive data from the interim analysis demonstrating an overall survival benefit in post-chemo patients. The same population we are studying in our ongoing AFFIRM trial.

We believe these data are net positive for MDV3100 as they represent total clinical validation for the androgen receptor signaling pathway in the treatment of advanced prostate cancer.

We are also encouraged by the fact that the Phase 1-2 efficacy data published to-date for Abiraterone and MDV3100 are quite similar.

Now, let me turn to Dimebon. Together with our partner, Pfizer, we continue to investigate Dimebon’s potential clinical benefit in the ongoing Phase 3 HORIZON trial in Huntington disease and the ongoing Phase 3 CONCEPT trial in mild-to-moderate Alzheimer’s disease patients that are on (inaudible)

In Huntington disease we are on track to report top line results from HORIZON trial in the first half of 2011. If the data are positive, we expect to request a pre-NDA meeting with the FDA. We believe our clinical development program in Huntington disease is an attractive opportunity for Medivation for several reasons.

First, Huntington disease is a fatal genetic disease with a substantial unmet medical need. Currently, no medications are approved by the FDA to treat the impairments and cognition in global function that are associated with the condition.

Second, the patient population being studied in HORIZON is more homogeneous than the Alzheimer’s patients, because Huntington disease is a genetic disease with a single genetic cause.

And third, we believe that the Huntington disease market represents a commercially attractive opportunity for Medivation even in a scenario where Dimebon is not approved to treat Alzheimer’s disease.

The HD indication offers a shorter regulatory approval period, the potential for premium pricing, reduced commercialization cost and a potentially longer commercial exclusivity period based on orphan drug exclusivity and potential patent protection. The pending patent applications are issued. We have to potential to have exclusivity path 2026 [ph].

In Alzheimer’s disease we continue to enroll patients in CONCERT and expect to complete patient accrual at the end of this month. As a reminder, CONCERT a 12-month randomized double-blind placebo-controlled Phase 3 clinical trial in patients with mild-to-moderate Alzheimer’s disease is validating the potential efficacy of Dimebon when added to ongoing treatment within the net result.

Most of our programs are proceeding as expected and are supported by world-class collaborators with multiple near-term milestones ahead we look forward to updating all of you on our continued progress.

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

Pat Machado

Thanks, David and good afternoon, everyone. Revenue for the third quarter of 2010 was $14.4 million, consisting of partial recognition of the non-refundable upfront payments from our corporate partners, Pfizer and Astellas.

These payments are recorded as deferred revenue upon receipt and recognized as revenue on a straight-line basis over the estimated performance period of the company's obligations under each collaboration agreement.

We presently expect to complete our performance period in the fourth quarter of 2013 for the Pfizer collaboration and in the fourth quarter of 2014 for the Astellas collaboration.

Total operating expenses for the third quarter of 2010 were $21.1 million, compared with $27.6 million for the same period in 2009. These figures are net of cost-sharing payments from the company's corporate partners of $17.9 million and $4.2 million in the third quarters of 2010 and 2009 respectively, and include non-cash stock-based compensation expense of $3.3 million and $2.5 million respectively.

For the nine months ended September 30, 2010, total operating expenses were $77.7 million, compared with $73.8 million for the same period in 2009. These figures are net of cost-sharing payments from the company's corporate partners of $41.5 million and $16.2 million in the nine months ended September30, 2010 and 2009 respectively, and include non-cash stock-based compensation expense of $10.0 million and $7.7 million respectively.

Income tax benefit for the third quarter of 2010 was $1.5 million, compared with income tax expense of $2.8 million in the comparable period of 2009. For the nine months ended September 30, 2010, income tax benefit was $1.5 million, compared with income tax expense of $4.5 million in the prior year period.

Medivation reported a net loss for the quarter ended September 30, 2010 of $5.4 million, or $0.16 per share, compared with a net loss of $14.0 million or $0.42 per share for the same period in 2009. For the nine months ended September 30, 2010, the net loss was $30.1 million, or $0.88 per share, compared with a net loss of $28.5 million, or $0.90 per share, for the same period in 2009.

Cash, cash equivalents and short-term investments at September 30, 2010, totaled $211.5 million, compared with $278.2 million at December 31, 2009 and $233.3 million at June 30, 2010.

And in October, we received notice that we’ve been awarded the $733,000 research and development grant under the Internal Revenue Services Therapeutic Discovery Project Credit Program.

Medivation’s cash position remain strong. We continue to believe that based on our current assumption, our existing cash of $211.5 million is adequate to fund our currently planned operations beyond the end of 2012 by which time we expect to report a top line data from three Phase 3 trials.

Our 12-month CONCERT trail in mild-to-moderate Alzheimer’s disease, our six-month HORIZON trail in Huntington disease and our AFFIRM trail in post chemotherapy advanced prostate cancer. We therefore believe that our current cash run way gets us the opportunity to generate an attractive return for our investors without any near-term financing over hand.

With that I will turn the call back over to David

David Hung

Thanks, Pat. Looking ahead, our near-term priorities remain to complete patient accrual and the Phase 3 AFFIRM trial of MDV3100 and post-chemotherapy advanced prostate cancer patients on November 15, to continue enrolling patients in PREVAIL, our pre-chemo advanced prostate cancer trial, to initiate two new Phase 2 MDV3100 trials in earlier stage prostate cancer this year, to complete patient accrual in the Phase 3 cancer trial of Dimebon in combination with Aricept at the end of this month, to report results from the Phase 3 HORIZON trial Dimebon and Huntington disease patients in the first half of 2011 and to manage our portfolio operation and cash to maximize our return on investments and probability of success of the company.

As you can see we have a number of near-term milestones. Our strategic partnership remain strong and we have a solid financial runway which we believe positions us well for long-term success.

We will now open the call for questions. Operator, please go for questions.

Question-and-Answer Session

Operator

Thank you sir. (Operator instructions) Our first question comes from Kim Lee with Global Hunter.

Kim Lee – Global Hunter

Good afternoon. A couple of questions for you; first one, can you remind us when you considered patient enrollment in the HORIZON study?

Lynn Seely

It’s completed in July.

Kim Lee – Global Hunter

Great. And will you have an interim look at this data before top line data comes on in the first half of '11?

Lynn Seely

No, there is no plan the interim look.

Kim Lee – Global Hunter

Okay. And a question for Pat, what accounts for the drop in R&D quarter-over-quarter and what should we expect going forward?

Pat Machado

Kim, I think it’s primarily due to the fact that our R&D expense is shifting more heavily towards the prostate program and our cost sharing in that program is only one-third as opposed to 40% on the Dimebon related cost under our Pfizer collaboration.

Kim Lee – Global Hunter

Thank you.

Operator

Our next question comes from Andrew Vaino with Roth Capital Partners.

Andrew Vaino - Roth Capital Partners

Hey, thanks for taking the question. So, could we expect to see data from 3100 at the ASCO next year?

David Hung

We haven’t guided on when we really show results from that study.

Andrew Vaino - Roth Capital Partners

Okay, thank you.

Operator

Our next question comes from Nathan Kelly with Noble Finance.

Nathan Kelly – Noble Finance

Hi, good afternoon. Thanks for taking the questions. Nathan Kelly is in for Raghuram Selvaraju and Noble Financial filling in for him today. Just a few questions. What is the projected cash burn for 2011 if you guys have that with you?

Pat Machado

We have not guided on operating expense yet for 2011, would be doing that when we release the 2010(k) early next year.

Nathan Kelly – Noble Finance

Okay. And when you guys expect Astellas to initiate the Phase 2 development of MDV3100 and the hormone sensitive prostate cancer patients?

Lynn Seely

They’ve targeted to initiate this year.

Nathan Kelly – Noble Finance

This year? Okay. And then head-to-head study against Casodex, when is that expected to start?

Lynn Seely

Most probably this year.

Nathan Kelly – Noble Finance

Okay. And then for the AFFIRM trial, when would you guys expect to report top line data from that?

Lynn Seely

We haven’t guided on that, but as you heard we completed enrollment just about a week.

Nathan Kelly – Noble Finance

Okay. All right. Thank you for the questions today.

Operator

Our next question comes from John Aschoff with Brean Murray.

John Aschoff – Brean Murray

Hi, thanks. David, my question is about the AFFIRM trial. Placebo patients and 3100 patients will be dropping off this trial and I think it makes great deal of sense that a patient who is (inaudible) 3100 in the testosterone test passed around was pathway is not going to be able to respond of all of much to subsequent free agrarian [ph] therapy when with someone who came off of it actually taking dose. And wouldn’t that be a real concern to you, that would close the efficacy gap, already been established let’s say by the 3100 placebo, sub therapy after progression?

David Hung

I’m going to defer that to Lynn. First, to answer the first part of your question, we don’t really have any data right now on what happens to 3100 failures who get (inaudible) get 3100, but I am going to defer the general question for Lynn.

Lynn Seely

Yes, so, as we’ve said, we’ve done a great job getting this trial up and accrued and so, we believe that we’re in good shape with getting our event done before AVI [ph] become widely available and I think again the place where AVI is going to become available earlier in the US and the large majority of our patients enrolled are (inaudible) up.

John Aschoff – Brean Murray

How much actually (inaudible) especially in the last three or four months or so?

Lynn Seely

I’m sorry, I didn’t hear the question.

John Aschoff – Brean Murray

How many of the patients you’ve enrolled, let’s say even in the last three months, would have been from (inaudible)?

Lynn Seely

Yes, you’re cutting in and out, but again the majority of our patients are being enrolled (inaudible).

John Aschoff – Brean Murray

Okay, thank you.

Operator

(Operator instructions) Our next question comes from Howard Liang with Leerink Swann.

Howard Liang – Leerink Swann

Thanks very much. Regarding the PREVAIL trial, the co-primary endpoints of PFS and overall survival, how does that work that you need to hit both in order for the trial to be picked in positive?

Lynn Seely

So the way the trial is that there are co-primary endpoints I think that what will happen will largely be determined by what the regulators decide and she knows that this is a landscape which is changing, there will be in our protocol as per specified interim analysis where we’ll be looking at our final PFS analysis and then interim OS analysis and then obviously the final OS analysis will come later.

Howard Liang – Leerink Swann

So that each phase endpoint is the half of 0.5?

Lynn Seely

No, the output is what across the endpoints of the total output. 0.5 is obviously we have a guidance of the details of the statistical plan, but that typically in the trial like the majority of the alpha dose to (inaudible).

Howard Liang – Leerink Swann

Okay. When you have 1300 or 1700 patients I would assume that over followed for PFS, is the trial follow for overall survival?

Lynn Seely

Yes.

Howard Liang – Leerink Swann

Okay. Great. And then just a question on AFFIRM. I guess the reason you have a finite base of November 15th is it because you already have a number of patients you need or I guess my question is, is there an interest to increase the enrollment to build some margin increases in cost over?

Lynn Seely

We did, because this conference call is today, we have notified all the phase to close of enrollment and you need to give them some time to get those last patient. Actually, randomized, so they have a final date of November 15.

Howard Liang – Leerink Swann

Fair enough. How many patients do you expect to enroll in the trial?

Lynn Seely

So the target was 1170 and will be in that range.

Howard Liang – Leerink Swann

Okay, great, thanks very much.

Operator

At this time we will conclude the Q&A portion of this call. Dr. Hung, do you have any closing remarks?

David Hung

Thank you very much for joining the call today.

Operator

Ladies and gentlemen, this does conclude the conference call for today. We thank you for your participation and you may now disconnect our lines.

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