Medivation Earnings Call Nuggets: Gross to Net Conversion and the Pre-Chemo Market

Medivation, Inc. (NASDAQ:MDVN) recently reported its fourth quarter earnings and discussed the following topics in its earnings conference call.

Gross to Net Conversion

Y. Katherine Xu – William Blair & Company: I am just wondering in terms of the gross to net conversion, besides the rebates and discount, did you factor into, I’d say, the foundation money that you donated to and then could you comment on any donut hole or patients assistance problems or lung problems that you encountered? Recently, we saw at J&J, Zytiga sales coming down for the first quarter since launch, and then do you think you were encountered similar problems some time down the road?

C. Patrick Machado, J.D. – Chief Business Officer and CFO: Katherine, this is Pat, I’ll take the first part on the gross to net and I’ll Cheryl to speak to the donut hole. As I mentioned in the prepared comments, the largest components of the gross to net deduction of the various discounts that we’re required to offer at the government payors. Some of the patient assistance is included in gross to net other of that is included as an operating expense, so it’s a little bit different. Cheryl can speak to the donut hole?

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Cheryl L. Cohen – Chief Commercial Officer: We’re not going to be giving guidance on the first quarter currently today, but I can’t comment that it is coming with specialty products infusion and oral to have a transition in the first quarter in a January, February timeframe. So, patients conducted those donut holes. We’re absolutely committed to ensuring that patients have access despite these challenges and we have contributed to the foundations and we have other programs in place such as co-pay for the commercial patients.

Y. Katherine Xu – William Blair & Company: Do you see growth for J&J for the quarter that is coming down about year and a half since launch? So, do you foresee any problems as you guys as well as something along that line?

C. Patrick Machado, J.D. – Chief Business Officer and CFO: Katherine, this is Pat. We’re not in a position where we can be giving revenue guidance at this point just because we don’t have enough data to support perspective statements in that regard. I think as Cheryl pointed out donut hole is an issue across the board for all pharmaceutical companies with large Medicare beneficiary populations and certainly with the post-chemo label we fall into that category, but we’re in the position to give any guidance at this point.

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The Pre-Chemo Market

Yaron Werber – Citi: Two questions, David and just give us a little bit of a sense, I think there is honestly a lot of confusion among investors and just among Wall Street in general about the ‘pre-chemo market’ and I was hoping you could help us understand maybe the difference between the sort of pre-metastatic market the M0 and the sort of the pre-chemo market in the metastatic segment because I don’t think – it sounds like there was a lot of confusion as to whether this is too distinct market or whether this is one market that we should lump all of it? Then, secondly I don’t know if you can but any color you can give us the information how many patients are in the metastatic segment and then how many patients are there do you think sort of in the M0 segment, so we can really kind of maybe slip to bed once and for all this issue because I think J&J is really confused us also?

C. Patrick Machado, J.D. – Chief Business Officer and CFO: David do you want to take that?

David Hung, M.D. – President, CEO and Director: So, Yaron I think this is obviously a topic that there has been a lot of attention on recently. We continue to believe that the single fact which is most useful in helping to assess the size of that market is the number of Casodex scripts written annually in the U.S. As you know Casodex is the first-line agent that doctors reach for once the patient has started to progress on Lupron, which defines the beginning of Castration-Resistant Prostate Cancer. According to IMS Health there is just over 600,000 Casodex scripts written per year in the U.S. So that to us is the most comprehensive datapoint that exist upon which to start to attempt to quantitate that patient population. That obviously talks only to the size of the population. I think the other important variable is the time on treatment. We have seen in our earlier Phase 1/2 program we’ve seen roughly four-fold elevation in time to progression in pre-chemo patients as opposed to post-chemo patients. Whether that translates in a longer time on treatment in PREVAIL we will know when we get the results of that study. But it is safe to say that we expect pre-chemo patients to be on treatment for a longer period of time than post-chemo. Now, the M0 versus M1 that is a bit of a complicating factor so as you know that is largely a regulatory line. Most of the patients we believe who are just coming off Lupron are not typically being scanned for metastatic disease as a standard part of clinical practice because generally speaking there is no reason to do that. So, the Casodex numbers almost certainly reflect the mix of those two patient groups. And I think the question of what is going to be required in order to access that full population. In many respects it is going to come down to a reimbursement question. And I think it is going to come down to a question of if an agent has a label in metastatic pre-chemo our pairs going to impose prior authorization or other requirements that physician show the patient actually has metastatic disease. And if so is that going to change practice patterns and give doctors who are not currently scanning their patient reason to do that. Part of our strategy in pushing XTANDI as aggressively as we can into that population is this STRIVE and TERRAIN study. As you’ll recall those are both head-to-head studies against Casodex which is the gold standard and we feel that if we can show head-to-head superiority and large well-controlled Phase 2 trials that will provide additional evidence which helps push us as far upstream as we possibly can.

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Yaron Werber – Citi: Just a follow-up, you guys recently announced that you provided some funding to CVS for the chronic disease fund. I think there is some confusion as to what happened with J&J in Q4 whether they got hit with some retrospective payment to their distributors. Can you give us a little sense is there a shortfall in funding that help patients support groups in prostate cancer or what’s going on? That’s my last question.

David Hung, M.D. – President, CEO and Director: Cheryl, do you want to take that?

C. Patrick Machado, J.D. – Chief Business Officer and CFO: Jeff, this is Pat. I can take the first one and then I will pass the pricing question to Cheryl. With respect to the 600,000 scripts for Casodex each year there are no data that we are aware that split out between M1 and M0 just again because it is hard understating that a large group of those patients aren’t scanned as part of regular clinical practice because there is no real reason to do that. So, although they all clearly have at least micro-metastatic disease because their PSA is continuing to rise after their prostate is either being surgically removed or radiated whether or not they all have imigable disease is a datapoint that to our knowledge doesn’t exist. And Cheryl can take the pricing question.

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Cheryl L. Cohen – Chief Commercial Officer: Thank you, Pat. Just to reiterate the pricing strategy. When we put the price in place it was definitely based off of our post-chemo, product profile and our overall survival benefit and we feel that it was appropriately priced. Going forward obviously there is a lot of strategy things that we are looking at that you stated such duration. But the most important thing we need to see in order to establish price is our prevail data. So, stay tuned on that.

A Closer Look: Medivation Earnings Cheat Sheet>>