On February 25, 2016 Medivation, Inc. (NASDAQ: MDVN) reported its financial results for the fourth quarter and year ended December 31, 2015 (Press release, Medivation, FEB 25, 2016, View Source [SID:1234509219]).

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"We are delighted with our substantial progress in 2015 on many fronts — marked by strong worldwide net sales of XTANDI (enzalutamide) capsules at the Astellas level, which grew 80 percent over 2014, as well as key developments that enhance the clinical understanding of enzalutamide, expand and diversify our late-stage pipeline, and help secure our plans to continue to meet the needs of underserved patient populations," said David Hung, M.D., founder, President and Chief Executive Officer of Medivation.

Dr. Hung added, "In 2015, several promising developments in the enzalutamide clinical development program, including positive results from two Phase 2 trials comparing enzalutamide to bicalutamide in castration-resistant prostate cancer and a Phase 2 trial in advanced triple-negative breast cancer, combined with the expansion of our clinical pipeline with our acquisition of talazoparib, provide Medivation with a platform from which to build a world-class global oncology franchise. We look forward to multiple milestones throughout 2016 as we report on our continued progress."

Key highlights in recent months:

Acquired worldwide rights to talazoparib (MDV3800), an orally-available poly ADP ribose polymerase (PARP) inhibitor, from BioMarin Pharmaceutical Inc., as announced in October 2015.

Completed collaboration to pursue the translation of a novel gene expression signature algorithm from Medivation into a companion diagnostic assay using NanoString’s nCounter Dx Analysis System, together with Astellas Pharma Inc., as announced in January 2016.

Named Marion McCourt to the role of Chief Operating Officer, whose responsibilities include oversight of several functions including commercial operations, medical affairs, manufacturing, quality and corporate efficiency, effective February 2016.
Results from Phase 2 TERRAIN trial of enzalutamide versus bicalutamide in metastatic castration-resistant prostate cancer published in Lancet Oncology.

Results from Phase 2 STRIVE trial of enzalutamide versus bicalutamide in castration-resistant prostate cancer published in the Journal of Clinical Oncology.

Supplemental New Drug Application for XTANDI in metastatic castration-resistant prostate cancer accepted for review by U.S. Food and Drug Administration (FDA).

Medivation’s non-GAAP collaboration revenue for the fourth quarter of 2015, which excludes collaboration revenue related to upfront and milestone payments, was $202.7 million compared with $133.3 million for the same period in 2014 (+52% vs. prior year) and $695.4 million for the full year 2015 compared with $389.4 million in 2014 (+79% vs. prior year).

Medivation’s non-GAAP collaboration revenue consists of two components: a) collaboration revenue related to U.S. XTANDI net sales and b) collaboration revenue related to ex-U.S. XTANDI net sales.

a) Medivation’s collaboration revenue related to U.S. net sales of XTANDI for the fourth quarter 2015 was $157.9 million compared with $115.1 million for the same period in 2014 (+37% vs. prior year) and $575.7 million for the full year 2015 compared with $339.9 million for 2014 (+69% vs. prior year).

b) Medivation’s collaboration revenue related to ex-U.S. net sales of XTANDI for the fourth quarter 2015 was $44.8 million compared with $18.2 million for the same period in 2014 (+146% vs. prior year) and $119.8 million for the full year 2015 compared with $49.5 million for 2014 (+142% vs. prior year).

Non-GAAP operating expenses were $127.1 million for the quarter ended December 31, 2015 compared with $109.3 million for the same period in 2014 and $430.0 million for the full year 2015 compared with $334.4 million for 2014.

Non-GAAP research and development (R&D) expenses for the fourth quarter of 2015 were $61.4 million, compared with $44.2 million for the same period in 2014 and $180.6 million for the full year 2015 compared with $134.0 million for 2014. The increase in non-GAAP R&D expenses for the fourth quarter of 2015 relates primarily to an increase in third-party clinical and preclinical development costs due to an increase of activities, which include those related to the acquisition of MDV3800 that was completed during the quarter. The increase in non-GAAP R&D expenses for the full year 2015 also relates primarily to an increase in third-party clinical and preclinical development costs and personnel costs resulting from higher staffing levels and in facilities and information technology costs.

Non-GAAP selling, general and administrative (SG&A) expenses for the fourth quarter of 2015 were $65.7 million, compared with $65.1 million for the same period in 2014 and $249.4 million for the full year 2015 compared with $200.4 million for 2014. The slight increase in non-GAAP SG&A expenses for the fourth quarter of 2015 relates primarily to higher administrative costs and royalties, which are partially offset by a decrease in XTANDI collaboration expenses. The increase in non-GAAP SG&A expenses for the full year 2015 relates primarily to higher collaboration expenses, as well as higher administrative and personnel-related costs, and royalties.

Non-GAAP net income for the fourth quarter of 2015 was $49.5 million, or $0.29 per diluted share, compared with non-GAAP net income of $18.0 million, or $0.11 per diluted share, for the same period in 2014. Medivation reported non-GAAP net income of $170.0 million, or $1.01 per diluted share, for the full year 2015, compared with non-GAAP net income of $34.6 million, or $0.22 per diluted share, in 2014.

On a GAAP basis, Medivation’s collaboration revenue for the fourth quarter of 2015 was $377.7 million compared with $274.7 million for the same period in 2014 (+37% vs. prior year) and $943.3 million for the full year 2015 compared with $710.5 million in 2014 (+33% vs. prior year). Medivation’s GAAP-basis collaboration revenue includes upfront and milestone payments for the fourth quarter of 2015 (not included in non-GAAP collaboration revenue), which totaled $175.0 million compared with $141.4 million for the same period in 2014 (+24% vs. prior year) and $247.8 million for the full year 2015 compared with $321.1 million in 2014 (-23% vs. prior year).

Operating expenses were $156.3 million for the quarter ended December 31, 2015 on a GAAP basis compared with $131.3 million for the same period in 2014 and $528.6 million for the full year 2015 compared with $428.6 million for 2014. Non-cash, stock-based compensation expense included in GAAP-basis operating expenses was $54.9 million in 2015 and $45.1 million in 2014.

R&D expenses for the fourth quarter of 2015 were $94.3 million on a GAAP basis compared with $57.9 million for the same period in 2014 and $232.1 million for the full year 2015 compared with $189.6 million for 2014. R&D expenses for the fourth quarter of 2015 include a $30.0 million non-cash charge related to partial impairment of an intangible in-process R&D asset pidilizumab (MDV9300). In the quarter, the Company determined the MDV9300 antibody does not bind to PD-1 and notified the Food and Drug Administration in January 2016, resulting in a partial clinical hold. In addition, the Company intends to submit an amendment to the Chemistry, Manufacturing and Controls, (CMC) section of its investigational new drug (IND) application for MDV9300 to incorporate certain manufacturing changes. These considerations gave rise to a change in clinical trial timelines and other significant inputs to the IPR&D asset valuation, leading to the partial impairment determination. Nevertheless, the Company believes MDV9300’s profile and clinical activity may differentiate it favorably among immuno-oncology agents. MDV9300 continues to show promise with activity and positive data observed in hematologic indications, including new data published in the fourth quarter in multiple myeloma. The non-cash impairment charge is excluded from non-GAAP results discussed above.

SG&A expenses for the fourth quarter of 2015 were $62.1 million on a GAAP basis compared with $73.4 million for the same period in 2014 and $296.5 million for the full year 2015 compared with $239.1 million for 2014.

Medivation reported GAAP-basis net income of $142.5 million, or $0.85 per diluted share, for the quarter ended December 31, 2015, compared with GAAP net income of $164.2 million, or $0.98 per diluted share, for the same period in 2014. Medivation reported GAAP net income of $244.7 million, or $1.47 per diluted share, for the full year 2015, compared to a GAAP net income of $276.5 million or $1.71 per diluted share in 2014. The comparison is affected, in part, by lower milestone-related revenue in 2015. As of the end of 2015, all development and sales milestones under the Astellas collaboration have now been earned. Worldwide sales eclipsed two milestone levels of $1.2 billion in the third quarter and $1.6 billion in the fourth quarter.

U.S. net sales of XTANDI, as reported by Astellas Pharma Inc, were $315.9 million for the quarter (+37% vs. prior year) and $1.15 billion for the full year 2015 (+69% vs. prior year). Net sales for the quarter ended December 31, 2015 included an unfavorable adjustment of $2.6 million related to changes in Astellas’ estimate of prior period gross-to-net deductions against gross sales and an increase in channel partner inventory of just over one-half week of supply. As seen in previous years, we anticipate U.S. net sales in the first quarter 2016 at the Astellas level may be below the level reported in the fourth quarter 2015, as a result of an expected higher gross-to-net rate (related to Part D coverage gap) and anticipated lower channel partner inventories (estimated at one-half week).

Ex-U.S. net sales of XTANDI, as reported by Astellas, were approximately $231 million for the quarter (approximately +83% vs. prior year) and approximately $757 million for the full year 2015 (nearly doubled vs. prior year). Fluctuating currency exchange rates reduced estimated 2015 ex-U.S. net sales at the Astellas level, as expressed in U.S. dollars, by approximately 10% for the quarter and 14% for the year compared with the comparable 2014 periods.

At December 31, 2015, cash and cash equivalents were $225.9 million, compared with $502.7 million at December 31, 2014. In the second and third quarters of 2015, the Company utilized $259.9 million in cash for the retirement of the convertible notes and, in October, utilized $410.0 million in cash to fund an upfront payment to BioMarin Pharmaceutical Inc., for the acquisition of MDV3800.

The Company has provided full-year 2016 financial guidance, as detailed below.

FULL-YEAR 2016 FINANCIAL GUIDANCE
Year Ending December 31, 2016
U.S. net sales of XTANDI $1.425 to $1.525 billion(1)
Non-GAAP collaboration revenue $900 to $970 million(2)
Non-GAAP operating expenses $555 to $600 million(3)
Non-GAAP R&D expenses $280 to $300 million(4)
Non-GAAP SG&A expenses $275 to $300 million(5)
Non-GAAP tax rate(6) 35.5% – 36%
Non-GAAP diluted earnings per share $1.30 – $1.40

(1) This represents Medivation’s projection of U.S. net sales at the Astellas level.

(2) This measure includes (i) Medivation’s collaboration revenue related to U.S. net sales of XTANDI and (ii) Medivation’s collaboration revenue related to ex-U.S. net sales of XTANDI, in the form of a royalty payment earned from Astellas.

(3) Non-GAAP operating expenses, net of cost-sharing payments to/from Astellas, are expected to range between $555 and $600 million. Non-GAAP operating expenses exclude non-cash, stock-based compensation expense, and any change in fair value of contingent purchase consideration or in-process research and development expenses.

(4) Non-GAAP R&D expenses excludes approximately $30 – $35 million of stock-based compensation expense and any change in acquisition related fair value re-measurements such as contingent consideration or in-process research and development expenses

(5) Non-GAAP SG&A expenses excludes approximately $38 – $42 million of stock-based compensation expense, and any change in fair value of contingent purchase consideration.

(6) The 2016 non-GAAP tax rate is expected to range between 35.5% – 36%.

MEDIVATION, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited)
December 31, 2015 December 31, 2014
ASSETS
Current assets:
Cash and cash equivalents $ 225,853 $ 502,677
Receivable from collaboration partner 391,558 184,737
Deferred income tax assets - 21,987
Prepaid expenses and other current assets 15,877 12,264
Restricted cash 930 203
Total current assets 634,218 721,868
Property and equipment, net 58,142 41,161
Intangible assets 644,299 101,000
Deferred income tax assets, non-current 57,011 15,176
Restricted cash, net of current 12,206 11,562
Goodwill 18,643 10,000
Other non-current assets 7,072 10,852
Total assets $ 1,431,591 $ 911,619
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable, accrued expenses and other current liabilities $ 186,203 $ 106,128
Borrowings under Revolving Credit Facility 75,000 -
Contingent consideration 4,900 10,000
Deferred revenue - 2,822
Current portion of build-to-suit lease obligation - 698
Current portion of Convertible Notes, net of unamortized discount of $- and $1 at December 31, 2015 and 2014, respectively - 4
Total current liabilities 266,103 119,652
Convertible Notes, net of unamortized discount of $- and $36,598 at December 31, 2015 and 2014, respectively - 222,140
Contingent consideration 262,368 96,000
Build-to-suit lease obligation, excluding current portion 17,406 18,711
Other non-current liabilities 13,035 5,817
Total liabilities 558,912 462,320
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.01 par value per share; 1,000,000 shares authorized; no shares issued and outstanding - -
Common stock, $0.01 par value per share; 340,000,000 shares authorized; 163,905,342 and 156,234,454 shares issued and outstanding at December 31, 2015 and 2014, respectively 1,639 1,562
Additional paid-in capital 684,841 505,446
Retained earnings (accumulated deficit) 186,199 (57,709 )
Total stockholders’ equity 872,679 449,299
Total liabilities and stockholders’ equity $ 1,431,591 $ 911,619
MEDIVATION, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended
December 31, Years Ended
December 31,
2015 2014 2015 2014
Collaboration revenue $ 377,748 $ 274,730 $ 943,258 $ 710,487
Operating expenses:
Research and development expenses 94,259 57,877 232,100 189,570
Selling, general and administrative expenses 62,089 73,376 296,545 239,071
Total operating expenses 156,348 131,253 528,645 428,641
Income from operations 221,400 143,477 414,613 281,846
Other income (expense), net:
Loss on extinguishment of Convertible Notes - - (21,087 ) -
Interest expense (488 ) (5,589 ) (12,483 ) (21,690 )
Other, net 28 88 275 38
Total other income (expense), net (460 ) (5,501 ) (33,295 ) (21,652 )
Income before income tax (expense) benefit 220,940 137,976 381,318 260,194
Income tax (expense) benefit (78,433 ) 26,229 (136,593 ) 16,258
Net income $ 142,507 $ 164,205 $ 244,725 $ 276,452
Basic net income per common share $ 0.87 $ 1.06 $ 1.53 $ 1.80
Diluted net income per common share $ 0.85 $ 0.98 $ 1.47 $ 1.71
Weighted average common shares used in the calculation of basic net income per common share 163,746 155,644 160,345 153,859
Weighted average common shares used in the calculation of diluted net income per common share 168,368 171,513 169,324 170,001
MEDIVATION, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(in thousands, except per share amounts)
(unaudited)
Three Months Ended Year Ended
December 31,
2015 December 31,
2014 December 31,
2015 December 31,
2014
Collaboration revenue reconciliation:
GAAP collaboration revenue $ 377,748 $ 274,730 $ 943,258 $ 710,487
Milestone-related payments from Astellas (a) (175,000 ) (141,411 ) (247,822 ) (321,109 )
Non-GAAP collaboration revenue $ 202,748 $ 133,319 $ 695,436 $ 389,378
Research and development expenses reconciliation:
GAAP research and development expenses $ 94,259 $ 57,877 $ 232,100 $ 189,570
Stock-based compensation expense (b) (6,775 ) (4,677 ) (24,368 ) (17,913 )
Contingent consideration (c) 3,949 - 2,833 -
Impairment of intangible asset (d) (30,000 ) - (30,000 ) -
Milestone-related payments to third party (e) - (9,000 ) - (25,700 )
License payments to third party (e) - - - (12,000 )
Non-GAAP research and development expenses $ 61,433 $ 44,200 $ 180,565 $ 133,957
Selling, general, and administrative expenses reconciliation:
GAAP selling, general, and administrative expenses $ 62,089 $ 73,376 $ 296,545 $ 239,071
Stock-based compensation expense (b) (7,245 ) (7,658 ) (30,494 ) (27,221 )
Contingent consideration (c) 13,524 - 7,841 -
Milestone-related payments to third party (e) (2,714 ) (638 ) (24,500 ) (5,000 )
U.S. Branded Prescription Drug Fee adjustment (e) - - - (6,441 )
Non-GAAP selling, general, and administrative expenses $ 65,654 $ 65,080 $ 249,392 $ 200,409
Other expense (income), net reconciliation:
GAAP other expense (income), net $ 460 $ 5,501 $ 33,295 $ 21,652
Non-cash interest expense (f) (65 ) (3,891 ) (10,299 ) (14,898 )
Loss on extinguishment of convertible notes (g) - - (21,087 ) -
Non-GAAP other expense (income), net $ 395 $ 1,610 $ 1,909 $ 6,754
Income tax expense reconciliation:
GAAP income tax expense (benefit) $ 78,433 $ (26,229 ) $ 136,593 $ (16,258 )
Income tax effect on non-GAAP adjustments (h) (52,655 ) (40,483 ) (43,023 ) (74,966 )
Change in valuation allowance (h) - 71,130 - 104,861
Non-GAAP income tax expense $ 25,778 $ 4,418 $ 93,570 $ 13,637
Net income reconciliation:
GAAP net income $ 142,507 $ 164,205 $ 244,725 $ 276,452
Milestone-related payments from Astellas (a) (175,000 ) (141,411 ) (247,822 ) (321,109 )
Stock-based compensation expense (b) 14,020 12,335 54,862 45,134
Contingent consideration (c) (17,473 ) - (10,674 ) -
Impairment of intangible asset (d) 30,000 - 30,000 -
Milestone-related payments to third party (e) 2,714 9,638 24,500 30,700
License payments to third party (e) - - - 12,000
U.S. Branded Prescription Drug Fee adjustment (e) - - - 6,441
Non-cash interest expense (f) 65 3,891 10,299 14,898
Loss on extinguishment of Convertible Notes (g) - - 21,087 -
Income tax adjustments (h) 52,655 (30,647 ) 43,023 (29,895 )
Non-GAAP net income $ 49,488 $ 18,011 $ 170,000 $ 34,621
Diluted net income per share reconciliation:
GAAP net income $ 142,507 $ 164,205 $ 244,725 $ 276,452
Interest expense related to convertible notes, net of taxes (i) - 3,616 3,629 14,030
GAAP diluted net income 142,507 167,821 248,354 290,482
Non-GAAP adjustments after-tax (93,019 ) (146,194 ) (74,725 ) (241,831 )
Interest expense related to Convertible Notes, net of taxes (i) - (3,616 ) (2,531 ) (14,030 )
Non-GAAP diluted net income $ 49,488 $ 18,011 $ 171,098 $ 34,621
Non-GAAP diluted net income per share $ 0.29 $ 0.11 $ 1.01 $ 0.22
Shares used in per share calculation (diluted):
GAAP shares used in per share calculation (diluted) (j) 168,368 171,513 169,324 170,001
Anti-dilutive effect of potential common shares for convertible notes - (10,100 ) - (10,100 )
Non-GAAP shares used in per share calculation (diluted) (j) 168,368 161,413 169,324 159,901
Non-GAAP adjustment summary:
Collaboration revenue $ (175,000 ) $ (141,411 ) $ (247,822 ) $ (321,109 )
Research and development expenses 32,826 13,677 51,535 55,613
Selling, general and administrative expenses (3,565 ) 8,296 47,153 38,662
Other expense (income), net 65 3,891 31,386 14,898
Total non-GAAP adjustments before tax (145,674 ) (115,547 ) (117,748 ) (211,936 )
Income tax effect 52,655 (30,647 ) 43,023 (29,895 )
Total non-GAAP adjustments after tax $ (93,019 ) $ (146,194 ) $ (74,725 ) $ (241,831 )
(a) Upfront and milestone payments from Astellas: Upfront and milestone payments are excluded from non-GAAP financial measures because they occur at irregular intervals and are not related to Medivation’s long term core business going forward; such exclusion allows for better representation of the ongoing economics of the business, facilitates period over period comparison and is reflective of how Medivation manages its business.

(b) Stock-based compensation expense: Stock-based compensation expense is excluded from non-GAAP financial measures because of the nature of this charge, varying available valuation methodologies, subjective assumptions and the variety of award types; such exclusion facilitates comparison of Medivation’s operating results to peer companies.

(c) Contingent consideration: The effects of contingent consideration valuation are excluded from non-GAAP financial measures because of the nature of this item, which is related to the change in fair value of the liability for contingent consideration related to Medivation’s License Agreement with CureTech, Inc. for MDV9300 and the acquisition of worldwide rights to MDV3800 from BioMarin; such exclusion facilitates comparisons of Medivation’s operating results to peer companies.

(d) Impairment of intangible asset: The effects of impairment of intangible asset are excluded from non-GAAP financial measures because of the nature of this item, which is related to impairment of our IPR&D asset related to MDV9300; such exclusion facilitates comparisons of Medivation’s operating results to peer companies.

(e) Milestone-related payments to third party and other adjustments: These payments and adjustments are excluded from non-GAAP financial measures because they occur at irregular intervals and are not related to Medivation’s long term core business going forward; such exclusion allows for better representation of the ongoing economics of the business, facilitates period over period comparison and is reflective of how Medivation manages its business.

(f) Non-cash interest expense related to the Convertible Notes and Revolving Credit Facility: The effects of non-cash interest expense related to the Convertible Notes and the Revolving Credit Facility are excluded from non-GAAP financial measures because these expenses are non-cash expenses; such exclusion facilitates comparison of Medivation’s cash operating results to peer companies and is reflective of how Medivation manages its business.

(g) Loss on extinguishment of Convertible Notes: The effects of loss on extinguishment of Convertible Notes are excluded from non-GAAP financial measures because this expense is a non-cash charge; such exclusion facilitates comparison of Medivation’s cash operating results to peer companies and is reflective of how Medivation manages its business.

(h) Income tax adjustments: Adjustments to income tax expense for non-GAAP financial measures consist of the income tax effect of the non-GAAP adjustments and changes in valuation allowance.

(i) Interest expense related to Convertible Notes: For the three and twelve months ended December 31, 2014 and the twelve months ended December 31, 2015, interest expense related to the Convertible Notes was included in the computation of diluted net income per share for GAAP purposes because the effect was dilutive. However, it was excluded from the computation of diluted net income per share for non-GAAP purposes because the effect was anti-dilutive. For the twelve months ended December 31, 2015, cash interest expense, net of tax, of $1.1 million is added back to non-GAAP net income for purposes of the non-GAAP diluted net income per share calculation.

(j) Shares used in per share calculation (diluted): In periods in which Medivation reports a GAAP or non-GAAP net loss, all common stock equivalents are deemed anti-dilutive and basic and diluted shares are equal. In periods in which Medivation reports a GAAP or non-GAAP net income, the dilutive effect of common stock equivalents related to common stock issuable under Medivation’s equity incentive plan is included in the GAAP and non-GAAP net income per share calculation for that period.

In periods in which Medivation reports GAAP or non-GAAP net income, the effect of contingently issuable shares is considered in the calculation of diluted net income per share. The Convertible Notes had no effect on the diluted net income per share calculation for the three months ended December 31, 2015 for both GAAP and non-GAAP purposes because Medivation completed the settlement of all of its Convertible Notes during the third quarter of 2015. For the twelve months ended December 31, 2015, Medivation included the effect of approximately 3.9 million contingently issuable shares related to the Convertible Notes in the diluted net income per share calculation for both GAAP and non-GAAP purposes. For the three and twelve months ended December 31, 2014, Medivation included the effect of approximately 10.1 million contingently issuable shares related to the Convertible Notes in the diluted net income per share calculation for GAAP purposes. The effect of the Convertible Notes is excluded from the diluted net income per share calculation for non-GAAP purposes for the three and twelve months ended December 31, 2014 because their effect is anti-dilutive.

Non-GAAP Financial Measures
To supplement Medivation’s financial results presented on a U.S. generally accepted accounting principles, or GAAP, basis, Medivation uses certain non-GAAP financial measures as shown in the tables above. Medivation believes that these non-GAAP financial measures are helpful in understanding Medivation’s past financial performance and potential future financial results. These non-GAAP financial measures are not meant to be considered in isolation or as a substitute for comparable U.S. GAAP financial measures, and they should be read in conjunction with Medivation’s consolidated financial statements prepared in accordance with U.S. GAAP. Medivation’s management uses these non-GAAP financial measures for planning, budgeting, forecasting and performance measurement, to assess historical operating performance and make financial and operational business decisions, and also to provide forecasts and financial guidance to investors on this basis. In addition, Medivation believes that the presentation of these non-GAAP financial measures is useful to investors because it enhances the ability of investors to compare Medivation’s financial results period over period and allows for greater transparency with respect to key financial metrics Medivation uses in making operating decisions, and also because Medivation’s investors and analysts regularly use them to model or track Medivation’s financial performance. Medivation believes that the non-GAAP financial measures provide investors with a meaningful understanding of its historical and potential future financial results because they exclude certain non-cash charges such as stock-based compensation which is substantially dependent on changes in the market price of Medivation’s common stock and the timing of equity awards, impairment charges, contingent purchase consideration, revenues and expenses that occur at irregular intervals, such as milestone payments earned from collaboration partners and related payments to licensors of technology, and non-cash interest expense, and losses related to Convertible Notes. Investors should note that these non-GAAP financial measures are not prepared under any comprehensive set of accounting rules or principles and do not reflect all of the amounts associated with Medivation’s results of operations as determined in accordance with U.S. GAAP. Investors should also note that these non-GAAP financial measures have no standardized meaning prescribed by U.S. GAAP and, therefore, have limits in their usefulness to investors. In addition, from time-to-time in the future there may be other items that Medivation may exclude for the purposes of its non-GAAP financial measures; likewise, Medivation may in the future cease to exclude items that Medivation has historically excluded for the purpose of Medivation’s non-GAAP financial measures. Medivation’s non-GAAP financial measures may not be comparable with non-GAAP financial measures provided by other companies.