Medivation Execs Making A Strong Case For Independent Growth Vs. Sale, Credit Suisse Says

Medivation Inc MDVN reported its 1Q16 US/EU Xtandi sales and non-GAAP EPS short of expectations. Credit Suisse’s Kennen MacKay maintained an Outperform rating for the company, with a price target of $63.

Medivation posted Q1 US Xtandi sales at $307.6M and EU sales at $240M. Non-GAAP EPS came in at $0.11, significantly short of the CS estimate of $0.23 and Street expectation of $0.22. Management offered “a convincing value proposition for remaining independent,” analyst Kennen MacKay noted.

Management Takes A Stand

For the first time, the company announced 2020 revenue targets of more than $2.5Bn, representing a CAGR of 29 percent for 2015-2019. This is substantially higher than the CS estimate of $1.9Bn and Street expectation of $1.8Bn.

“Mgmt. made a clear argument for pipeline market opportunities (>$18.5Bn for Xtandi; >$30Bn for talazoparib; >$5Bn for pidilizumab), though we anticipate investors will heavily discount pipeline for development time and risk,” MacKay wrote. He added that some investors could become sellers at a higher offer price.

Long Term Upside

The analyst commented that Medivation was a long-term growth story, with upside from Xtandi in pre-metastatic prostate cancer, wholly owned pipeline assets talazoparib and pidilizumab. He added that the $52.50 per share offer from Sanofi SA (ADR) SNY has “significantly undervaluing MDVN’s pipeline,” while added that the company’s 2020 revenue targets “reinforce our bullish stance on independent operations of the company.”