Form 10-Q MEDIVATION, INC. For: Mar 31

Form 10-Q MEDIVATION, INC. For: Mar 31

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May 7, 2015 4:35 PM EDT

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2015

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

COMMISSION FILE NUMBER: 001-32836

MEDIVATION, INC.

(Exact name of registrant as specified in its charter)

Delaware

13-3863260

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

identification No.)

525 Market Street, 36th floor

San Francisco, California 94105

(Address of principal executive offices) (Zip Code)

(415) 543-3470

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of May 1, 2015, 78,694,031 shares of the registrant’s Common Stock, $0.01 par value per share, were outstanding.


PART I — FINANCIAL INFORMATION			3

	ITEM 1. FINANCIAL STATEMENTS.		3

		CONSOLIDATED BALANCE SHEETS (unaudited).	3

		CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited).	4

		CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited).	5

		NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited).	6

	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.		20

	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.		29

	ITEM 4. CONTROLS AND PROCEDURES.		29

PART II — OTHER INFORMATION			30

	ITEM 1. LEGAL PROCEEDINGS.		30

	ITEM 1A. RISK FACTORS.		31

	ITEM 6. EXHIBITS.		52

PART I. FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

MEDIVATION, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(unaudited)


	March 31, 2015			December 31, 2014
ASSETS
Current assets:
Cash and cash equivalents	$	568,636		$	502,677
Receivable from collaboration partner		126,613			184,737
Deferred income tax assets		20,035			21,987
Prepaid expenses and other current assets		12,821			12,264
Restricted cash		930			203

Total current assets		729,035			721,868
Property and equipment, net		42,031			41,161
Intangible assets		101,000			101,000
Deferred income tax assets, non-current		18,531			15,176
Restricted cash, net of current		12,409			11,562
Goodwill		10,000			10,000
Other non-current assets		11,845			10,852

Total assets	$	924,851		$	911,619

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable, accrued expenses and other current liabilities	$	91,965		$	106,132
Contingent consideration		10,000			10,000
Deferred revenue		1,411			2,822
Current portion of build-to-suit lease obligation		469			698

Total current liabilities		103,845			119,652
Convertible Notes, net of unamortized discount of $32,993 and $36,598 at March 31, 2015 and December 31, 2014, respectively		225,007			222,140
Contingent consideration		100,000			96,000
Build-to-suit lease obligation, excluding current portion		19,240			18,711
Other non-current liabilities		5,705			5,817

Total liabilities		453,797			462,320
Commitments and contingencies (Note 13)
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; 170,000,000 shares authorized; 78,621,483 and 78,117,227 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively		786			781
Additional paid-in capital		531,095			506,227
Accumulated deficit		(60,827	)		(57,709	)

Total stockholders’ equity		471,054			449,299

Total liabilities and stockholders’ equity	$	924,851		$	911,619

The accompanying notes are an integral part of these unaudited consolidated financial statements.

MEDIVATION, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)


	Three Months Ended March 31,
	2015			2014
Collaboration revenue	$	129,188		$	87,189
Operating expenses:
Research and development expenses		44,676			45,919
Selling, general and administrative expenses		83,939			49,735

Total operating expenses		128,615			95,654

Income (loss) from operations		573			(8,465	)
Other income (expense), net:
Interest expense		(5,608	)		(5,230	)
Interest income		11			9
Other income (expense), net		126			(38	)

Total other income (expense), net		(5,471	)		(5,259	)

Loss before income tax benefit		(4,898	)		(13,724	)
Income tax benefit		1,780			59

Net loss	$	(3,118	)	$	(13,665	)


Basic and diluted net loss per common share	$	(0.04	)	$	(0.18	)


Weighted average common shares used in the calculation of basic and diluted net loss per common share		78,318			76,245

The accompanying notes are an integral part of these unaudited consolidated financial statements.

MEDIVATION, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)


	Three Months Ended March 31,
	2015			2014
Cash flows from operating activities:
Net loss	$	(3,118	)	$	(13,665	)
Adjustments for non-cash operating items:
Stock-based compensation		13,372			9,661
Change in fair value of contingent purchase consideration		4,000			—
Amortization of debt discount and debt issuance costs		3,910			3,532
Depreciation on property and equipment		1,531			1,064
Amortization of deferred revenue		(1,411	)		(4,233	)
Change in deferred income taxes		(1,402	)		—
Asset impairment and other charges		73			—
Changes in operating assets and liabilities:
Receivable from collaboration partner		58,124			13,959
Prepaid expenses and other current assets		(520	)		3,121
Other non-current assets		(1,335	)		(4,806	)
Accounts payable, accrued expenses and other current liabilities		(17,587	)		(2,687	)
Interest payable		1,698			1,698
Other non-current liabilities		(113	)		(255	)

Net cash provided by operating activities		57,222			7,389

Cash flows from investing activities:
Change in restricted cash		(1,574	)		(2,073	)
Purchases of property and equipment		(956	)		(1,645	)

Net cash used in investing activities		(2,530	)		(3,718	)

Cash flows from financing activities:
Proceeds from issuance of common stock under equity incentive and stock purchase plans		11,502			9,010
Reduction of build-to-suit lease obligation		(227	)		—
Repayment of Convertible Notes		(8	)		—

Net cash provided by financing activities		11,267			9,010

Net increase in cash and cash equivalents		65,959			12,681
Cash and cash equivalents at beginning of period		502,677			228,788

Cash and cash equivalents at end of period	$	568,636		$	241,469

Supplemental disclosures of cash flow information:
Non-cash investing activities:
Interest capitalized during construction period for build-to-suit lease transactions	$	527			—
Property and equipment expenditures incurred but not yet paid	$	918		$	385

The accompanying notes are an integral part of these unaudited consolidated financial statements.

MEDIVATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2015

(unaudited)

NOTE 1. DESCRIPTION OF BUSINESS

Medivation, Inc. (the “Company” or “Medivation”) is a biopharmaceutical company focused on the development and commercialization of medically innovative therapies to treat serious diseases for which there are limited treatment options. Through the Company’s collaboration with Astellas Pharma, Inc. or Astellas, it has one commercial product, XTANDI^® (enzalutamide) capsules, or XTANDI. XTANDI has received marketing approval in the United States, Europe, and numerous other countries worldwide for the treatment of patients with metastatic castration-resistant prostate cancer, or mCRPC, and in Japan for the treatment of patients with castration-resistant prostate cancer, or CRPC. Since its launch in the United States in September 2012, and subsequent launch in additional countries, XTANDI’s worldwide net sales (as reported by Astellas) were approximately $1.9 billion through March 31, 2015. The Company and Astellas are also conducting investigational studies of enzalutamide in prostate cancer and in advanced breast cancer. Under the Company’s collaboration agreement with Astellas, it shares with Astellas equally all profits (losses) related to U.S. net sales of XTANDI. The Company also receives royalties ranging from the low teens to the low twenties on ex-U.S. XTANDI net sales and certain milestone payments upon the achievement of defined development and sales events.

The Company seeks to become a global fully-integrated biopharmaceutical company through the continued commercialization of XTANDI, the acquisition or in-license and development and commercialization of other product opportunities, and through the advancement of its own proprietary research and development programs. The Company expects that its future growth may come from both internal research efforts and third party business development activities. In the fourth quarter of 2014, the Company licensed exclusive worldwide rights to pidilizumab (which is referred to as MDV9300), an immune modulatory, anti-Programmed Death-1 (PD-1) monoclonal antibody for all potential indications from CureTech, Ltd., or CureTech. Under the license agreement, the Company is responsible for all development, regulatory, manufacturing, and commercialization activities for MDV9300. The Company currently anticipates that it may initiate a Phase 3 clinical trial evaluating MDV9300 in one or more hematologic malignancies as early as in 2015. The Company is also considering evaluating MDV9300 in other indications, including but not limited to in combination with enzalutamide in breast and prostate cancer. In addition, the Company’s internal research and discovery efforts are focused, among other areas, in oncology and neurology.

The Company has incurred cumulative net losses of $60.8 million from inception through March 31, 2015, and may incur substantial costs in the foreseeable future as it continues to finance the commercialization of XTANDI in the U.S. market, clinical and preclinical studies of enzalutamide, MDV9300 and its early-stage programs, potential business development activities, and its corporate overhead costs. The Company has funded its operations primarily through public offerings of its common stock, the issuance of 2.625% convertible senior notes due April 1, 2017, or the Convertible Notes, from upfront, milestone, and cost-sharing payments under collaboration agreements, and subsequent to September 13, 2012, from collaboration revenue related to XTANDI net sales. As of March 31, 2015, the Company may earn up to $245.0 million of remaining sales milestones under the Astellas Collaboration Agreement.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of Presentation and Principles of Consolidation

The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States, or U.S. GAAP, for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited consolidated financial statements have been prepared on the same basis as the annual audited consolidated financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments necessary for the fair statement of the Company’s financial condition, results of operations and cash flows for the periods presented, have been included. The results of operations of any interim period are not necessarily indicative of the results of operations for the full year or any other interim period.

The unaudited consolidated financial statements and related disclosures have been prepared with the presumption that users of the interim unaudited consolidated financial statements have read or have access to the audited consolidated financial statements for the preceding year. Accordingly, these unaudited consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 2014, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, or the Annual Report, filed with the U.S. Securities and Exchange Commission, or SEC, on February 25, 2015. The consolidated balance sheet at December 31, 2014 has been derived from the audited consolidated financial statements at that date.

The unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. The Company operates in one business segment.

All tabular disclosures of dollar and share amounts are presented in thousands unless otherwise indicated. All per share amounts are presented at their actual amounts. The number of shares issuable under the Amended and Restated 2004 Equity Incentive Award Plan, or the Medivation Equity Incentive Plan, and the Medivation, Inc. 2013 Employee Stock Purchase Plan, or ESPP, disclosed in Note 10, “Stockholders’ Equity,” are presented at their actual amounts unless otherwise indicated. Amounts presented herein may not calculate or sum precisely due to rounding.

(b) Use of Estimates

The preparation of unaudited consolidated financial statements in accordance with U.S. GAAP requires that management make estimates and assumptions in certain circumstances that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates on historical experience and on assumptions believed to be reasonable under the circumstances. Although management believes that these estimates are reasonable, actual future results could differ materially from those estimates. In addition, had different estimates and assumptions been used, the consolidated financial statements could have differed materially from what is presented.

Significant estimates and assumptions used by management principally relate to revenue recognition, including reliance on third party information, estimating the performance periods of the Company’s deliverables under collaboration agreements, and estimating the various deductions from gross sales to calculate net sales of XTANDI. Additionally, significant estimates and assumptions used by management include those related to contingent purchase consideration, intangible assets, goodwill, the Convertible Notes, determining whether the Company is the primary beneficiary of any variable interest entities, leases, taxes, research and development and other accruals, and share-based compensation.

(c) Significant Accounting Policies

Reference is made to Note 2, “Summary of Significant Accounting Policies,” included in the notes to the Company’s audited consolidated financial statements included in its Annual Report. As of the date of the filing of this Quarterly Report on Form 10-Q, or Quarterly Report, there were no significant changes to the significant accounting policies described in the Company’s Annual Report.

(d) New Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2015-03, “Interest – Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs,” which requires that debt issuance costs related to a recognized debt liability be presented on the balance sheet as a direct deduction from the carrying amount of the debt liability, consistent with debt discounts. The ASU requires retrospective adoption and is effective for reporting periods beginning after December 15, 2015. Early adoption is permitted. The Company is currently assessing the impact the adoption of the ASU will have on its consolidated financial statements and related disclosures.

In February 2015, the FASB issued ASU 2015-02, “Consolidation (Topic 820): Amendments to the Consolidation Analysis.” The amended guidance provides a revised consolidation model for all reporting entities to use in evaluating whether they should consolidate certain legal entities. All legal entities will be subject to reevaluation under this revised consolidation model. The revised consolidation model, among other things, (i) modifies the evaluation of whether limited partnerships and similar legal entities are voting interest entities, (ii) eliminates the presumption that a general partner should consolidate a limited partnership, and (iii) modifies the consolidation analysis of reporting entities that are involved with voting interest entities through fee arrangements and related party relationships. The amended guidance is effective for fiscal years beginning after December 15, 2015, including interim periods within that reporting period. The Company is currently evaluating the effect, if any, that the amended guidance will have on its consolidated financial statements and related disclosures.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers” (Topic 606), a comprehensive new revenue recognition standard that will supersede the existing revenue recognition guidance. The new accounting guidance creates a framework by which an entity will allocate the transaction price to separate performance obligations and recognize revenue when (or as) each performance obligation is satisfied. Under the new standard, entities will be required to use judgment and make estimates, including identifying performance obligations in a contract, estimating the amount of variable consideration to include in the transaction price, allocating the transaction price to each separate performance obligation and determining when an entity satisfies its performance obligations. The standard allows for either “full retrospective” adoption, meaning that the standard is applied to all of the periods presented with a cumulative catch-up as of the earliest period presented, or “modified retrospective” adoption, meaning the

standard is applied only to the most current period presented in the financial statements with a cumulative catch-up as of the current period. On April 1, 2015, the FASB proposed deferring the effective date by one year to December 15, 2017 for annual reporting periods beginning after that date. The FASB also proposed permitting early adoption of the standard, but not before the original effective date of December 15, 2016. The Company has not yet selected a transition method and is currently evaluating the effect that the updated standard will have on its consolidated financial statements and related disclosures.

NOTE 3. COLLABORATION AGREEMENT

(a) Collaboration Agreement with Astellas

In October 2009, the Company entered into a collaboration agreement with Astellas, or the Astellas Collaboration Agreement, pursuant to which it is collaborating with Astellas to develop and commercialize XTANDI globally. Under the agreement, decision making and economic participation differs between the U.S. market and the ex-U.S. market. In the United States, decisions are generally made by consensus, pre-tax profits and losses are shared equally, and, subject to certain exceptions, development and commercialization costs (including cost of goods sold and the royalty on net sales payable to The Regents of the University of California (“UCLA” or “the Regents”) under the Company’s license agreement with UCLA) are also shared equally. The primary exceptions to equal cost sharing in the U.S. market are that each party is responsible for its own commercial full-time equivalent, or FTE, costs, and that development costs supporting marketing approvals in both the United States and either Europe or Japan are borne one-third by the Company and two-thirds by Astellas. The Company and Astellas are co-promoting XTANDI in the U.S. market, with each company providing half of the sales and medical affairs effort in support of the product. Both the Company and Astellas are entitled to receive a fee for each qualifying detail made by its respective sales representatives. Outside the United States, decisions are generally made by Astellas and all development and commercialization costs (including cost of goods sold and the royalty on net sales payable to UCLA) are borne by Astellas. Astellas retains all ex-U.S. profits and losses, and pays the Company a tiered royalty ranging from the low teens to the low twenties on the aggregate net sales of XTANDI outside the United States, or ex-U.S. XTANDI net sales. Astellas has sole responsibility for promoting XTANDI outside the United States and for recording all XTANDI net sales both inside and outside the United States. Both the Company and Astellas have agreed not to commercialize certain other products having a similar mechanism of action (as defined by the Astellas Collaboration Agreement) as XTANDI for the treatment of prostate cancer for a specified time period, subject to certain exceptions.

Under the Astellas Collaboration Agreement, Astellas paid the Company a non-refundable, upfront cash payment of $110.0 million in the fourth quarter of 2009. The Company is also eligible to receive up to $335.0 million in development milestone payments and up to $320.0 million in sales milestone payments. As of March 31, 2015, the Company has earned all of the $335.0 million in development milestone payments and $75.0 million of the sales milestone payments under the Astellas Collaboration Agreement. The Company expects that any of the remaining $245.0 million in sales milestone payments that the Company may earn in future periods will be recognized as revenue in their entirety in the period in which the underlying milestone event is achieved. The triggering events for the sales milestone payments are as follows:


Annual Global Net Sales in a Calendar Year	Milestone Payment⁽¹⁾
$400 million		⁽²	⁾
$800 million		⁽³	⁾
$1.2 billion	$	70 million
$1.6 billion	$	175 million

(1)	Each milestone shall only be paid once during the term of the Astellas Collaboration Agreement.

(2)	This milestone totaling $25.0 million was earned and recognized as collaboration revenue during the fourth quarter of 2013 and payment was received in the first quarter of 2014.

(3)	This milestone totaling $50.0 million was earned and recognized as collaboration revenue during the fourth quarter of 2014 and is included in receivable from collaboration partner on the consolidated balance sheet at December 31, 2014. Payment was received during the first quarter of 2015.

The Company and Astellas are each permitted to terminate the Astellas Collaboration Agreement for an uncured material breach by the other party or for the insolvency of the other party. Astellas has a right to terminate the Astellas Collaboration Agreement unilaterally by advance written notice to the Company. Following any termination of the Astellas Collaboration Agreement in its entirety, all rights to develop and commercialize XTANDI will revert to the Company, and Astellas will grant a license to the Company to enable it to continue such development and commercialization. In addition, except in the case of a termination by Astellas for the Company’s material breach, Astellas will supply XTANDI to the Company during a specified transition period.

Unless terminated earlier by the Company or Astellas pursuant to the terms thereof, the Astellas Collaboration Agreement will remain in effect: (a) in the United States, until such time as Astellas notifies the Company that Astellas has permanently stopped selling products covered by the Astellas Collaboration Agreement in the United States; and (b) in each other country of the world, on a

country-by-country basis, until such time as (i) products covered by the Astellas Collaboration Agreement cease to be protected by patents or regulatory exclusivity in such country and (ii) commercial sales of generic equivalent products have commenced in such country.

(b) Collaboration Revenue

Collaboration revenue consists of three components: (a) collaboration revenue related to U.S. XTANDI net sales; (b) collaboration revenue related to ex-U.S. XTANDI net sales; and (c) collaboration revenue related to upfront and milestone payments.

Collaboration revenue was as follows:


	Three Months Ended March 31,
	2015		2014
Collaboration revenue:
Related to U.S. XTANDI net sales	$	112,010	$	62,225
Related to ex-U.S. XTANDI net sales		15,767		5,731
Related to upfront and milestone payments		1,411		19,233

Total	$	129,188	$	87,189

The Company is required to pay UCLA ten percent of all Sublicensing Income, as defined in its license agreement with UCLA. The Company is currently involved in litigation with UCLA regarding certain terms of the license agreement and other matters, which are discussed in Note 13, “Commitments and Contingencies.”

Collaboration Revenue Related to U.S. XTANDI Net Sales

Under the Astellas Collaboration Agreement, Astellas records all U.S. XTANDI net sales. The Company and Astellas share equally all pre-tax profits and losses from U.S. XTANDI net sales. Subject to certain exceptions, the Company and Astellas also share equally all XTANDI development and commercialization costs attributable to the U.S. market, including cost of goods sold and the royalty on net sales payable to UCLA under the Company’s license agreement with UCLA. The primary exceptions to 50/50 cost sharing are that each party is responsible for its own commercial FTE costs and that development costs supporting marketing approvals in both the United States and either Europe or Japan are borne one-third by the Company and two-thirds by Astellas. The Company recognizes collaboration revenue related to U.S. XTANDI net sales in the period in which such sales occur. Collaboration revenue related to U.S. XTANDI net sales consists of the Company’s share of pre-tax profits and losses from U.S. XTANDI net sales, plus reimbursement of the Company’s share of reimbursable U.S. development and commercialization costs. The Company’s collaboration revenue related to U.S. XTANDI net sales in any given period is equal to 50% of U.S. XTANDI net sales as reported by Astellas for the applicable period.

Collaboration revenue related to U.S. XTANDI net sales was as follows:


	Three Months Ended March 31,
	2015			2014
U.S. XTANDI net sales (as reported by Astellas)	$	224,020		$	124,451
Shared U.S. development and commercialization costs		(110,313	)		(77,707	)

Pre-tax U.S. profit	$	113,707		$	46,744


Medivation’s share of pre-tax U.S. profit	$	56,853		$	23,372
Reimbursement of Medivation’s share of shared U.S. costs		55,157			38,853

Collaboration revenue related to U.S. XTANDI net sales	$	112,010		$	62,225

Collaboration Revenue Related to Ex-U.S. XTANDI Net Sales

Under the Astellas Collaboration Agreement, Astellas records all ex-U.S. XTANDI net sales. Astellas is responsible for all development and commercialization costs for XTANDI outside the United States, including cost of goods sold and the royalty on net

sales payable to UCLA under the Company’s license agreement with UCLA, and pays the Company a tiered royalty ranging from the low teens to the low twenties on net ex-U.S. XTANDI net sales. The Company recognizes collaboration revenue related to ex-U.S. XTANDI net sales in the period in which such sales occur. Collaboration revenue related to ex-U.S. XTANDI net sales consists of royalties from Astellas on those sales.

Collaboration revenue related to ex-U.S. XTANDI net sales was $15.8 million and $5.7 million for the three months ended March 31, 2015 and 2014, respectively.

Collaboration Revenue Related to Upfront and Milestone Payments

Collaboration revenue related to upfront and milestone payments from Astellas was as follows:


	Three Months Ended March 31,
	2015		2014
Development milestones earned	$	—	$	15,000
Amortization of deferred upfront and development milestones		1,411		4,233

Total	$	1,411	$	19,233

Deferred revenue under the Astellas Collaboration Agreement was $1.4 million and $2.8 million at March 31, 2015, and December 31, 2014, respectively.

(c) Cost-Sharing Payments

Under the Astellas Collaboration Agreement, the Company and Astellas share certain development and commercialization costs (including cost of goods sold and the royalty on net sales payable to UCLA under the Company’s license agreement with UCLA) in the United States. For the three months ended March 31, 2015 and 2014, development cost sharing payments from Astellas were $13.8 million and $15.9 million, respectively, and were recorded as reductions in research and development, or R&D, expenses. For the three months ended March 31, 2015 and 2014, commercialization cost-sharing payments to Astellas were $20.1 million and $7.6 million, respectively, and were recorded as increases in selling, general, and administrative, or SG&A, expenses.

NOTE 4. GOODWILL AND INTANGIBLE ASSETS

In the fourth quarter of 2014, the Company entered into a License Agreement with CureTech, pursuant to which it licensed exclusive worldwide rights to CureTech’s late-stage clinical molecule, MDV9300. The Company concluded that the in-license transaction is an acquisition of a business in accordance with Accounting Standards Codification, or ASC, 805-10, “Business Combinations.” The transaction resulted in identifiable intangible assets of $101.0 million consisting entirely of in-process research and development, or IPR&D, and goodwill of $10.0 million. The Company accounts for IPR&D as indefinite-lived intangible assets until regulatory approval or discontinuation at which time the Company evaluates impairment, converts the carrying value into a definite-lived intangible asset and determines the economic life for amortization purposes. The Company assesses the impairment of intangible assets and goodwill on an annual basis or more frequently whenever events or changes in circumstances may indicate that the carrying value might not be recoverable. There were no changes to the carrying value of goodwill or indefinite-lived intangible assets during the three months ended March 31, 2015.

NOTE 5. NET INCOME (LOSS) PER COMMON SHARE

The computation of basic net income (loss) per common share is based on the weighted-average number of common shares outstanding during each period. The computation of diluted net income (loss) per common share is based on the weighted-average number of common shares outstanding during the period plus, when their effect is dilutive, incremental shares consisting of shares subject to stock options, restricted stock units, stock appreciation rights, ESPP shares, warrants, and shares issuable upon conversion of convertible debt.

In periods where the Company reports a net loss, all common stock equivalents are deemed anti-dilutive such that basic net loss per common share and diluted net loss per common share are equal. The Convertible Notes can be settled in common stock, cash, or a combination thereof, at the Company’s election. During periods of net income, the Company’s intent and ability to settle the Convertible Notes in cash could impact the computation of diluted net income per common share.

Approximately 11.4 million and 12.6 million potentially dilutive common shares have been excluded from the diluted net loss per common share computations for the three months ended March 31, 2015 and 2014, respectively, because such securities have an anti-dilutive effect on net loss per common share due to the Company’s net loss in each of these periods.

NOTE 6. CONVERTIBLE SENIOR NOTES DUE 2017

On March 19, 2012, the Company issued $258.8 million aggregate principal amount of the Convertible Notes. The Company pays interest semi-annually in arrears on April 1 and October 1 of each year. The Convertible Notes mature on April 1, 2017, unless earlier converted, redeemed or repurchased in accordance with their terms. The Convertible Notes are general senior unsecured obligations and rank (1) senior in right of payment to any of the Company’s future indebtedness that is expressly subordinated in right of payment to the Convertible Notes, (2) equal in right of payment to any of the Company’s future indebtedness and other liabilities of the Company that are not so subordinated, (3) junior in right of payment to any of the Company’s secured indebtedness to the extent of the value of the assets securing such indebtedness and (4) structurally junior to all future indebtedness incurred by the Company’s subsidiaries and their other liabilities (including trade payables).

Prior to April 6, 2015, the Convertible Notes were not redeemable. On or after April 6, 2015, the Company may elect to redeem for cash all or a part of the Convertible Notes if the closing sale price of its common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the trading day preceding the date it provides notice of the redemption exceeds 130% of the conversion price in effect on each such trading day, subject to certain conditions. The redemption price will equal 100% of the principal amount of the Convertible Notes to be redeemed plus accrued and unpaid interest, if any, to, but excluding the redemption date. If a fundamental change (as defined in the Indenture) occurs prior to the maturity date, holders may require the Company to purchase for cash all or any portion of the Convertible Notes at a purchase price equal to 100% of the principal amount of the Convertible Notes to be purchased plus accrued and unpaid interest, if any, to, but excluding, the fundamental change purchase date.

Holders may convert their Convertible Notes prior to the close of business on the business day immediately preceding January 1, 2017 only upon the occurrence of the following circumstances: (1) during any calendar quarter commencing after the calendar quarter ending on June 30, 2012, if the closing sale price of the Company’s common stock, for at least 20 trading days (whether or not consecutive) in the period of 30 consecutive trading days ending on the last trading day of the calendar quarter immediately preceding the calendar quarter in which the conversion occurs, is more than 130% of the conversion price of the Convertible Notes in effect on each applicable trading day; (2) during the five consecutive trading-day period following any five consecutive trading-day period in which the trading price for the Convertible Notes for each such trading day was less than 98% of the closing sale price of the Company’s common stock on such date multiplied by the then-current conversion rate; (3) upon the occurrence of specified corporate events; or (4) if the Company calls any Convertible Notes for redemption, at any time until the close of business on the second business day preceding the redemption date. On or after January 1, 2017 until the close of business on the second business day immediately preceding the stated maturity date, holders may surrender their Convertible Notes for conversion at any time, regardless of the foregoing circumstances.

At March 31, 2015, the Convertible Notes met a requirement of convertibility because the Company’s common stock price was in excess of the stated conversion premium for at least 20 trading days in the period of 30 consecutive trading days ending on March 31, 2015. The Convertible Notes remain convertible through June 30, 2015. Convertibility of the Convertible Notes based on the trading price of the Company’s common stock is assessed on a calendar-quarter basis. Upon a conversion of the Convertible Notes, the Company is required to pay or deliver, as the case may be, cash, shares of the Company’s common stock, or a combination of both, at the Company’s election. As of March 31, 2015, the conversion rate was 19.5172 shares of common stock per $1,000 principal amount of the Convertible Notes, equivalent to a conversion price of approximately $51.24 per share of common stock. The conversion rate is subject to adjustment in certain events, such as distribution of dividends and stock splits. In addition, upon a Make-Whole Adjustment Event (as defined in the Indenture), the Company will, under certain circumstances, increase the applicable conversion rate for a holder that elects to convert its Convertible Notes in connection with such Make-Whole Adjustment Event.

During the first quarter of 2015, the Company received notification that $0.7 million principal amount of Convertible Notes were surrendered for conversion. The Company settled the principal and conversion premium for approximately $1.9 million in cash during the second quarter of 2015. At March 31, 2015, the $0.7 million principal amount was included in current liabilities on the consolidated balance sheet.

During the second quarter of 2015 (through May 5, 2015), the Company received notification that $90.3 million principal amount of Convertible Notes were surrendered for conversion, and settlement is anticipated to occur during the second quarter of 2015. The Company has elected to settle these conversion obligations through a combination of cash and shares of its common stock. The total payment will be based on the average of the volume-weighted-average prices of the Company’s common stock during the 20 trading-day cash settlement averaging periods specified in the Indenture governing the notes. The Company estimates the cash payment will be approximately $90.3 million for Convertible Notes surrendered through May 5, 2015.

Interest expense on the Convertible Notes consisted of the following:


	Three Months Ended March 31,
	2015		2014
Coupon interest expense	$	1,698	$	1,698
Non-cash amortization of debt discount		3,605		3,257
Non-cash amortization of debt issuance costs		305		275

Total	$	5,608	$	5,230

NOTE 7. BUILD-TO-SUIT LEASE OBLIGATION

In the fourth quarter of 2013, the Company entered into a property lease for approximately 52,000 square feet of space located in San Francisco, California. The lease agreement expires in July 2024, and the Company has an option to extend the lease term for up to an additional five years.

The Company is deemed, for accounting purposes only, to be the owner of the entire project including the building shell, even though it is not the legal owner. In connection with the Company’s accounting for this transaction, the Company capitalized $14.5 million as a build-to-suit property within property and equipment, net, and recognized a corresponding build-to-suit lease obligation for the same amount. The Company has also recognized, as an additional build-to-suit lease obligation, structural tenant improvements totaling $3.6 million for amounts paid by the landlord and $2.0 million for capitalized interest during the construction period.

A portion of the monthly lease payment is allocated to land rent and recorded as an operating lease expense and the non-interest portion of the amortized lease payments to the landlord related to the rent of the building is applied to reduce the build-to-suit lease obligation. At March 31, 2015, $0.5 million of the build-to-suit lease obligation representing the expected reduction in the liability over the next twelve months was classified as a current liability and the remaining $19.2 million was classified as a non-current liability on the consolidated balance sheet. Expected reductions (increases) in the build-to-suit lease obligation at March 31, 2015 were as follows:


Years Ending December 31,	Build-To-Suit Lease Obligation
Remainder of 2015	$	473
2016		(1	)
2017		77
2018		162
2019		254
2020 and thereafter		18,744

Total	$	19,709

The amounts included in the table above represent the reductions (increases) in the build-to-suit lease obligation on the Company’s consolidated balance sheet in each of the periods presented. The amount in the terminal period includes the amount to derecognize the build-to-suit lease obligation at the end of the lease term. The expected reductions (increases) in the build-to-suit lease obligation presented in the table above are impacted by the timing of the completion of the construction project. Actual expected lease payments under the build-to-suit lease obligation are included in Note 13, “Commitments and Contingencies.”

NOTE 8. PROPERTY AND EQUIPMENT, NET

Property and equipment, net, consisted of the following:


	March 31, 2015			December 31, 2014
Build-to-suit property	$	20,071		$	19,544
Leasehold improvements		15,002			15,051
Computer equipment and software		9,976			9,499
Furniture and fixtures		4,667			4,667
Construction in progress		2,806			1,360
Laboratory equipment		735			735

		53,257			50,856
Less: Accumulated depreciation		(11,226	)		(9,695	)

Total	$	42,031		$	41,161

NOTE 9. ACCOUNTS PAYABLE, ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accounts payable, accrued expenses and other current liabilities consisted of the following:


	March 31, 2015		December 31, 2014
Clinical and preclinical	$	32,381	$	31,069
Royalties payable		13,554		13,582
Accrued professional services and other current liabilities		12,567		8,909
Accounts payable		12,212		10,492
Payroll and payroll-related		11,166		33,272
Other payable to licensor		5,949		5,000
Interest payable		3,396		1,698
Current portion of long-term debt		738		4
Taxes payable		2		2,106

Total	$	91,965	$	106,132

Accounts payable represents short-term liabilities for which the Company has received and processed a vendor invoice prior to the end of the reporting period. Accrued expenses and other current liabilities represent, among other things, compensation and related benefits to employees, royalties due to licensors of technologies, cash interest payable related to the Company’s Convertible Notes, estimated amounts due to third party vendors for services rendered prior to the end of the reporting period, invoices received from third party vendors that have not yet been processed, taxes payable, current portion of long-term debt, and other accrued items.

NOTE 10. STOCKHOLDERS’ EQUITY

(a) Stock Purchase Rights

All shares of the Company’s common stock, if issued prior to the termination by the Company of its rights agreement, dated as of December 4, 2006, include stock purchase rights. The rights are exercisable only if a person or group acquires twenty percent or more of the Company’s common stock or announces a tender or exchange offer which would result in ownership of twenty percent or more of the Company’s common stock. Following the acquisition of twenty percent or more of the Company’s common stock, the holders of the rights, other than the acquiring person or group, may purchase Medivation common stock at half of its fair market value. In the event of a merger or other acquisition of the Company, the holders of the rights, other than the acquiring person or group, may purchase shares of the acquiring entity at half of their fair market value. The rights were not exercisable at March 31, 2015.

(b) Medivation Equity Incentive Plan

The Medivation Equity Incentive Plan provides for the issuance of options and other stock-based awards, including restricted stock units, performance share awards and stock appreciation rights. The vesting of all outstanding awards under the Medivation Equity Incentive Plan will accelerate, and all such share awards will become immediately exercisable, upon a “change of control” of Medivation, as defined in the Medivation Equity Incentive Plan. At March 31, 2015, there were 21,150,000 shares of common stock authorized for issuance under the Medivation Equity Incentive Plan, of which approximately 2.0 million shares of common stock were available for issuance under the Medivation Equity Incentive Plan.

Stock Options

The following table summarizes stock option activity for the three months ended March 31, 2015:


	Number of Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value ⁽¹⁾
Outstanding at December 31, 2014		5,067,957		$	33.52
Granted		507,916		$	114.56
Exercised		(374,281	)	$	23.07
Forfeited		(18,502	)	$	78.60

Outstanding at March 31, 2015		5,183,090		$	42.06		6.56	$	451.0

Vested and exercisable at March 31, 2015		3,323,776		$	22.56		5.33	$	354.0

⁽¹⁾

The aggregate intrinsic value is calculated as the pre-tax difference between the weighted average exercise price of the underlying awards and the closing price per share of $129.07 of the Company’s common stock on March 31, 2015. The calculation excludes any awards with an exercise price higher than the closing price of the Company’s common stock on March 31, 2015. The amounts are presented in millions.

The weighted-average grant-date fair value per share of options granted during the three months ended March 31, 2015 was $51.07.

Restricted Stock Units

The following table summarizes restricted stock unit activity for the three months ended March 31, 2015:


	Number of Shares			Weighted- Average Grant-Date Fair Value
Unvested at December 31, 2014		483,580		$	76.20
Granted		194,171		$	110.36
Vested		(74,370	)	$	81.28
Forfeited		(7,932	)	$	87.36

Unvested at March 31, 2015		595,449		$	86.56

Stock Appreciation Rights

The following table summarizes stock appreciation rights activity for the three months ended March 31, 2015:


	Number of Rights			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value ⁽¹⁾
Outstanding at December 31, 2014		688,228		$	24.05
Granted		—			—
Exercised		(26,912	)	$	23.20
Forfeited		—			—

Outstanding at March 31, 2015		661,316		$	24.08		6.72	$	69.4

Vested and exercisable at March 31, 2015		520,222		$	24.11		6.71	$	54.6

(1)

(c) ESPP

The ESPP permits eligible employees to purchase shares of the Company’s common stock through payroll deductions at the lower of 85% of the fair market value of the common stock at the beginning or end of a purchase period. Eligible employee contributions are limited on an annual basis to $25,000 in accordance with Section 423 of the Internal Revenue Code. As of March 31, 2015, a total of 3,000,000 shares of the Company’s common stock were authorized for issuance under the ESPP, and 123,680 shares have been issued.

(d) Stock-Based Compensation

The Company estimates the fair value of stock options, stock appreciation rights, and ESPP shares using the Black-Scholes valuation model. The Black-Scholes assumptions used to estimate the fair value of stock options granted were as follows:


	Three Months Ended March 31,
	2015			2014
Risk-free interest rate		1.56%-1.61	%		1.57-1.65	%
Estimated term (in years)		4.98			5.23
Estimated volatility		50	%		64	%
Estimated dividend yield		—			—

No ESPP offering periods commenced during the three months ended March 31, 2015 and 2014, respectively.

Stock-based compensation expense was as follows:


	Three Months Ended March 31,
	2015		2014
Stock-based compensation expense recognized as:
R&D expenses	$	5,811	$	4,122
SG&A expenses		7,561		5,539

Total	$	13,372	$	9,661

Unrecognized stock-based compensation expense totaled $104.3 million at March 31, 2015 and is expected to be recognized over a weighted-average period of 2.7 years.

NOTE 11. INCOME TAXES

The Company calculates its quarterly income tax provision in accordance with the guidance provided by ASC 740-270, “Interim Income Tax Accounting,” whereby the Company forecasts its estimated annual effective tax rate and then applies that rate to its year-to-date pre-tax book income (loss). Income tax benefit for the three months ended March 31, 2015 was $1.8 million. The provision for income taxes was higher than the tax computed at the U.S. federal statutory rate due primarily to state income taxes and non-deductible stock-based compensation. Income tax benefit for the three months ended March 31, 2014 was not significant.

The effective tax rate was 36.3% for the three months ended March 31, 2015.The effective tax rate for the three months ended March 31, 2014 was not significant. The increase in the effective tax rate for the three months ended March 31, 2015 as compared to the prior year period was due to the release of a portion of the valuation allowance during the fourth quarter of 2014.

The Company records a valuation allowance to reduce deferred tax assets to reflect the net amount that is more likely than not to be realized. Based upon the weight of available evidence at December 31, 2014, the Company determined that it was more likely than not that a portion of its deferred tax assets would be realizable and consequently released the valuation allowance against Federal and certain state net deferred tax assets and recorded a discrete tax benefit of $33.4 million during the fourth quarter of 2014. The decision to reverse a portion of the valuation allowance was made after management considered all available evidence, both positive and negative, including but not limited to the historical operating results, income or loss in recent periods, cumulative income in recent years, forecasted earnings, forecasted future taxable income, and significant risk and uncertainty related to forecasts. The release of the valuation allowance resulted in the recognition of certain deferred net tax assets and a decrease to income tax expense.

The future effective tax rate is subject to volatility and may be materially impacted by various internal and external factors. These factors may include, but are not limited to, the amount of income tax benefits and charges from: interpretations of existing tax laws; changes in tax laws and rates; future levels of research and development expenditures; changes in the mix of earnings in countries with differing statutory tax rates in which the Company may conduct business; changes in the valuation of deferred tax assets and liabilities; state income taxes; the tax impact of stock-based compensation; accounting for uncertain tax positions; closure of statute of limitations or settlement of tax audits; changes in estimates of prior years’ items; tax costs for acquisition-related items; changes in accounting standards; non-deductible officers’ compensation; limitations on the utilization of net operating losses and tax credits due to changes in ownership; and overall levels of income before taxes.

NOTE 12. FAIR VALUE DISCLOSURES

The following table presents the Company’s financial assets and liabilities that are measured at fair value on a recurring basis:


			Fair value measurements using:
	Fair Value		Level 1		Level 2		Level 3
March 31, 2015:
Cash equivalents:
Money market funds	$	189,036	$	189,036		—		—
Current liabilities:
Contingent consideration	$	10,000		—		—	$	10,000
Long-term liabilities
Contingent consideration	$	100,000		—		—	$	100,000
December 31, 2014:
Cash equivalents:
Money market funds	$	189,031	$	189,031		—		—
Current liabilities:
Contingent consideration	$	10,000		—		—	$	10,000
Long-term liabilities
Contingent consideration	$	96,000		—		—	$	96,000

In connection with the CureTech license transaction, the Company recorded contingent consideration liabilities pertaining to amounts potentially payable to CureTech. The fair value of contingent consideration was estimated utilizing a model with key assumptions that included estimated revenues or completion of certain development and sales milestone targets during the earn-out period, volatility, and estimated discount rates corresponding to the periods of expected payments. The estimated fair value of the contingent consideration liability is measured at each reporting period based on significant inputs not observable in the market. The Company assesses these estimates on an ongoing basis as additional data impacting the assumptions is obtained. Changes in the estimated fair value of contingent consideration are reflected as non-cash adjustments to operating expenses in the consolidated statements of operations. During the three months ended March 31, 2015, the Company recorded a non-cash fair value adjustment of $1.0 million and $3.0 million in the statement of operations to increase R&D expenses and SG&A expenses, respectively.

Contingent consideration may change significantly as development progresses and additional data is obtained that will affect the Company’s assumptions regarding probabilities of successful achievement of related milestones used to estimate the fair value of the liability and the timing in which they are expected to be achieved. Considerable judgment is required to interpret the market data used to develop the assumptions. The estimates of fair value may not be indicative of amounts that could be realized in a current market exchange. Accordingly, the use of different market assumptions and/or different valuation techniques could result in materially different fair value estimates.

The $4.0 million increase in the fair value of the contingent consideration liability during the three months ended March 31, 2015 is primarily due to the time value of money. The aggregate remaining, undiscounted amount of contingent consideration that the Company could potentially be required to pay to CureTech under the License Agreement is included in the table below:


Potential sales milestones	$	245,000
Potential development and regulatory milestones	$	85,000
Potential payment upon completion of Manufacturing Technology Transfer	$	5,000
Potential future tiered royalties on annual worldwide net sales		5% to 11	%

There were no transfers between Level 1 and Level 2 financial instruments during the three months ended March 31, 2015 and 2014. The following table includes a roll-forward of the fair value of Level 3 financial instruments:


	Three Months Ended March 31,
	2015		2014
Long-Term Liabilities (Contingent Consideration):
Balance at beginning of period	$	96,000	$	—
Amounts acquired or issued		—		—
Net change in fair value		4,000		—
Settlements		—		—
Transfers in and/or out of Level 3		—		—

Balance at end of period	$	100,000	$	—

The following table presents the total balance of the Company’s other financial instruments that are not measured at fair value on a recurring basis:


			Fair value measurements using:
	Total Balance		Level 1		Level 2		Level 3
March 31, 2015:
Assets:
Bank deposits (included in “Cash and cash equivalents”)	$	379,600	$	379,600		—		—
Liabilities:
Convertible Notes	$	472,974		—	$	472,974		—
December 31, 2014:
Assets:
Bank deposits (included in “Cash and cash equivalents”)	$	313,646	$	313,646		—		—
Liabilities:
Convertible Notes	$	359,219		—	$	359,219		—

Due to their short-term maturities, the Company believes that the fair value of its bank deposits, receivable from collaboration partner, accounts payable and accrued expenses and other current liabilities approximate their carrying value.

The estimated fair value of the Company’s Convertible Notes, including the equity component, was $654.1 million and $496.8 million at March 31, 2015 and December 31, 2014, respectively, and was determined using recent trading prices of the Convertible Notes. The fair value of the Convertible Notes included in the table above represents only the long-term liability component of the Convertible Notes, because the equity component is included in stockholders’ equity on the consolidated balance sheets. For the purposes of the table above, the fair value of the Convertible Notes was bifurcated between the debt and equity components in a ratio similar to the principal amounts of the Convertible Notes at issuance.

NOTE 13. COMMITMENTS AND CONTINGENCIES

(a) Lease Obligations

In the first quarter of 2015, the Company entered into the Sixth Amendment to its corporate headquarters lease agreement in San Francisco, California, pursuant to which it leased approximately 16,000 additional square feet of office space. The Company is entitled to approximately $0.3 million of tenant improvement allowances pursuant to the Sixth Amendment. In connection with the execution of the Sixth Amendment, the Company delivered to the lessor a letter of credit collateralized by restricted cash totaling $1.6 million. In total, at March 31, 2015, the Company leased approximately 143,000 square feet of office space pursuant to the lease agreement, as amended, which expires in June 2019. Lease commitments pursuant to the Sixth Amendment are approximately $6.1 million over the term of the lease.

Future operating lease obligations as of March 31, 2015 are as follows:


Years Ending December 31,	Operating Leases
Remainder of 2015	$	6,552
2016		9,345
2017		9,544
2018		9,746
2019		5,065
2020 and thereafter		—

Total minimum lease payments	$	40,252

The Company is considered the “accounting owner” for a build-to-suit property and has recorded a build-to-suit lease obligation on its consolidated balance sheets. Additional information regarding the build-to-suit lease obligation is included in Note 7, “Build-To-Suit Lease Obligation.”

Expected future lease payments under the build-to-suit lease as of March 31, 2015 are as follows:


Years Ending December 31,	Expected Cash Payments Under Build- To-Suit Lease Obligation
Remainder of 2015	$	1,852
2016		2,538
2017		2,614
2018		2,692
2019		2,773
2020 and thereafter		14,162

Total minimum lease payments	$	26,631

(b) Restricted Cash

The Company had outstanding letters of credit collateralized by restricted cash totaling $13.3 million and $11.8 million at March 31, 2015 and December 31, 2014, respectively, to secure various operating leases. At March 31, 2015, $0.9 million and $12.4 million of restricted cash associated with these letters of credit were classified as current and long-term assets, respectively, on the consolidated balance sheets. At December 31, 2014, $0.2 million and $11.6 million of restricted cash associated with these letters of credit were classified as current and long-term assets, respectively, on the consolidated balance sheets.

(c) License Agreement with UCLA

Under an August 2005 license agreement with UCLA, the Company’s subsidiary Medivation Prostate Therapeutics, Inc., or MPT, holds an exclusive worldwide license under several UCLA patents and patent applications covering XTANDI and related compounds. Under the Astellas Collaboration Agreement, the Company granted Astellas a sublicense under the patent rights licensed to it by UCLA.

The Company is required to pay UCLA (a) an annual maintenance fee, (b) $2.8 million in aggregate milestone payments upon achievement of certain development and regulatory milestone events with respect to XTANDI (all of which has been paid as of March 31, 2015), (c) ten percent of all Sublicensing Income, as defined in the agreement, which the Company earns under the Astellas Collaboration Agreement, and (d) a four percent royalty on global net sales of XTANDI, as defined. Under the terms of the Astellas Collaboration Agreement, the Company shares this royalty obligation equally with Astellas with respect to sales in the United States, and Astellas is responsible for this entire royalty obligation with respect to sales outside of the United States. The Company is currently involved in litigation with UCLA, which is discussed in the section titled “Litigation” below.

UCLA may terminate the agreement if the Company does not meet a general obligation to diligently proceed with the development, manufacturing and sale of licensed products, or if it commits any other uncured material breach of the agreement. The Company may terminate the agreement at any time upon advance written notice to UCLA. If neither party terminates the agreement early, the agreement will continue in force until the expiration of the last-to-expire patent on a country-by-country basis.

(d) Clinical Manufacturing Agreements

Manufacturing Services and Supply Agreements

Contemporaneous with the execution of the License Agreement with CureTech, the Company entered into a Manufacturing Services and Supply Agreement, or MSA, with CureTech pursuant to which CureTech will provide clinical trial supply of MDV9300 over a three year period. In accordance with the terms of the MSA, the Company paid CureTech an upfront fee of $3.0 million during the fourth quarter of 2014. The Company is required to pay CureTech a one-time milestone payment of $5.0 million upon the completion of the Manufacturing Technology Transfer, as defined. In accordance with the terms of the MSA, the Company is also responsible for providing Manufacturing Funding totaling up to $19.3 million for clinical trial materials of MDV9300 over the three-year term of the MSA, of which $3.5 million was paid during the first quarter of 2015. The Manufacturing Funding is contingent upon the successful achievement of the requirements set forth in the Manufacturing Plan, and any such amounts may be reduced or eliminated by the Company under the terms of the MSA.

Development and Manufacturing Services Agreement

During the fourth quarter of 2014, the Company entered into a Development and Manufacturing Services Agreement with a third party clinical manufacturing organization. The term of the agreement is for the longer of (i) a period of five (5) years or (ii) through the completion of the Services, as defined. Under the current statement of work under this agreement, the Company intends to transfer the current manufacturing process of MDV9300 from CureTech to this third party, further scale up and production of Phase 3 clinical trial material of MDV9300 from this entity’s manufacturing facility. The estimated total consideration under the current statement of work is approximately $14.8 million, of which $0.7 million was paid during the first quarter of 2015.

(e) Research and License Agreement

In March 2014, the Company entered into a Research and License Agreement with a third party. Under the terms of the agreement, the Company paid a $12.0 million license and research agreement fee which was recorded in R&D expense in the consolidated statement of operations for the three months ended March 31, 2014. The Company could also be required to pay potential future development and sales milestone payments, subject to the achievement of defined clinical and commercial events, and royalties based on sales. Such future milestone and royalty payments are contingent upon future events that may or may not materialize.

(f) Litigation

The Company is party to legal proceedings, investigations, and claims in the ordinary course of its business, including the matters described below. The Company records accruals for outstanding legal matters when it believes that it is both probable that a liability has been incurred and the amount of such liability can be reasonably estimated. The Company evaluates, on a quarterly basis, developments in significant legal matters that could affect the amount of any accrual and developments that would make a loss contingency both probable and reasonably estimable. To the extent new information is obtained and the Company’s views on the probable outcomes of claims, suits, assessments, investigations or legal proceedings change, changes in the Company’s accrued liabilities would be recorded in the period in which such determination is made. In addition, in accordance with the relevant authoritative guidance, for matters for which the likelihood of material loss is at least reasonably possible, the Company provides disclosure of the possible loss or range of loss; however, if a reasonable estimate cannot be made, the Company will provide disclosure to that effect. Gain contingencies, if any, are recorded as a reduction of expense when they are realized.

In May 2011, the Company filed a lawsuit in San Francisco Superior Court against the Regents of the University of California, and one of its professors, alleging breach of contract and fraud claims, among others. The Company’s allegations in this lawsuit include that it has exclusive commercial rights to an investigational drug known as ARN-509, which is currently being developed by Aragon Pharmaceuticals, or Aragon. In August 2013, Johnson & Johnson and Aragon completed a transaction in which Johnson & Johnson acquired all ARN-509 assets owned by Aragon. ARN-509 is an investigational drug currently in development to treat the non-metastatic CRPC population. ARN-509 is a close structural analog of XTANDI, was developed contemporaneously with XTANDI in the same academic laboratories in which XTANDI was developed, and was purportedly licensed by the Regents to Aragon, a company co-founded by the heads of the academic laboratories in which XTANDI was developed. On February 9, 2012, the Company filed a Second Amended Complaint, adding as additional defendants a former Regents professor and Aragon. The Company seeks remedies including a declaration that it is the proper licensee of ARN-509, contractual remedies conferring to it exclusive patent license rights regarding ARN-509, and other equitable and monetary relief. On August 7, 2012, the Regents filed a cross-complaint against the Company seeking declaratory relief which, if granted, would require the Company to share with the Regents ten percent of any sales milestone payments it may receive under the Astellas Collaboration Agreement because such milestones constitute Sublicensing Income under the license agreement with UCLA. Under the Astellas Collaboration Agreement, the Company is eligible to receive up to $320.0 million in sales milestone payments. As of March 31, 2015, the Company has earned $75.0 million in sales milestones under the Astellas Collaboration Agreement The Company has paid UCLA $7.5 million, representing 10% of the sales milestone amounts earned from Astellas. On September 18, 2012, the trial court approved a settlement agreement dismissing the former Regents professor who was added to the case on February 9, 2012. On December 20, 2012, and January 25, 2013, the Court granted summary judgment motions filed by defendants Regents and Aragon, resulting in dismissal of all claims against Regents and Aragon, but denied such motions filed by the remaining Regents professor. On April 15, 2013, the Company filed a Notice of Appeal seeking appeal of the judgment in favor of Aragon, which is now wholly-owned by Johnson & Johnson, and the briefing of that matter has been concluded. The bench trial of the Regent’s cross-complaint against the Company was conducted in July 2013, and on January 15, 2014, the Court entered a judgment in the cross-complaint in favor of Regents, which the Company appealed on February 13, 2014 along with the December 2012 summary judgment order in favor of Regents. The jury trial of the Company’s breach of contract and fraud claims against the remaining Regents professor was conducted in October and November 2013. On November 15, 2013, the jury rendered a verdict in the case, finding in favor of Medivation on the breach of contract claim, and in favor of the Regents professor on the fraud claims. On November 22, 2013, the Court entered judgment for the prevailing party Medivation on the contract claim, and entering judgment in favor of the Regents professor on the fraud claims. The Company’s notice of appeal of the judgment on the fraud claims was filed on February 13, 2014. On October 17, 2014, the briefing in Medivation’s appeal of the summary judgment order and cross-complaint order in favor of Regents, as well as its appeal of the judgment on the fraud claims against the Regents professor commenced. On October 24, 2014, the court of appeals issued an order consolidating all of these appeals for hearing and consideration purposes, so the appeals will be heard and considered together once the briefing is completed.

On April 11, 2014, UCLA filed a complaint against the Company in which UCLA alleges that Medivation and MPT have failed to pay UCLA ten percent of “Operating Profits” Medivation has received (and will continue to receive) from Astellas, as a result of the Astellas Collaboration Agreement, and that Medivation has breached its fiduciary duties to UCLA, as minority shareholder of MPT. On July 16, 2014, UCLA dismissed without prejudice its claim that Medivation breached its fiduciary duties to UCLA, as a minority shareholder of MPT. On March 23, 2015, based upon an application by both the Company and UCLA, the court ordered the case be designated as complex and assigned to a single judge in the complex division of San Francisco Superior Court. The Company denies UCLA’s allegations and intends to vigorously defend the litigation.

While the Company believes it has meritorious positions with respect to the claims asserted against it and intends to advance its positions in these lawsuits vigorously, including on appeal, the process of resolving matters through litigation or other means is inherently uncertain, and it is not possible to predict the ultimate resolution of any such proceeding. The actual costs of defending the Company’s position may be significant, and the Company may not prevail.

NOTE 14. SUBSEQUENT EVENT

Subsequent to March 31, 2015 (through May 5, 2015), the Company received notification that $90.3 million principal amount of Convertible Notes were surrendered for conversion, and settlement is anticipated to occur during the second quarter of 2015. The Company has elected to settle these conversion obligations through a combination of cash and shares of its common stock. The total payment will be based on the average of the volume-weighted average prices of the Company’s common stock during the 20 trading-day cash settlement averaging periods specified in the indenture governing the notes. The Company estimates the cash payment will be approximately $90.3 million for Convertible Notes surrendered through May 5, 2015.

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2014, included in our Annual Report on Form 10-K for the year ended December 31,

2014, or Annual Report. The following discussion and analysis contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We intend that these forward-looking statements be subject to the safe harbors created by those provisions. Forward-looking statements are generally written in the future tense and/or are preceded by words such as “may,” “could,” “expect,” “believe,” “estimate,” “continue,” “anticipate,” “intend,” “plan,” or similar words, or negatives of such terms or other variations on such terms of comparable terminology. These forward-looking statements include, but are not limited to, statements regarding the commercialization of XTANDI^® (enzalutamide) capsules, or XTANDI, the continuation and success of our collaboration with Astellas Pharma, Inc., or Astellas, the timing, progress and results of our clinical trials, and our future drug development activities, including those with respect to pidilizumab (which is referred to as MDV9300). The forward-looking statements contained in this Quarterly Report on Form 10-Q, or Quarterly Report, involve a number of risks, uncertainties and assumptions, many of which are outside of our control. Factors that could cause actual results to differ materially from projected results include, but are not limited to, those discussed in “Risk Factors” in Item 1A of Part II below. Readers are expressly advised to review and consider those Risk Factors. Although we believe that the assumptions underlying the forward-looking statements contained in this Quarterly Report are reasonable, any of the assumptions could be inaccurate, and therefore there can be no assurance that the results anticipated by such statements will occur. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by us or any other person that the results or conditions described in such statements or our objectives and plans will be achieved. Furthermore, past performance in operations, trading price of our common stock or of our 2.625% convertible senior notes due on April 1, 2017, or the Convertible Notes, is not necessarily indicative of future performance. We disclaim any intention or obligation to update, supplement or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Overview

We are a biopharmaceutical company focused on the development and commercialization of medically innovative therapies to treat serious diseases for which there are limited treatment options. Through our collaboration with Astellas Pharma, Inc. or Astellas, we have one commercial product, XTANDI^® (enzalutamide) capsules, or XTANDI. XTANDI has received marketing approval in the United States, Europe and numerous other countries worldwide for the treatment of patients with metastatic castration-resistant prostate cancer, or mCRPC and in Japan for the treatment of patients with castration-resistant prostate cancer, or CRPC. Since its launch in the United States in September 2012, and subsequent launch in additional countries, XTANDI’s worldwide net sales (as reported by Astellas) were approximately $1.9 billion through March 31, 2015. We and Astellas are also conducting investigational studies of enzalutamide in prostate cancer and in advanced breast cancer. Under our collaboration agreement with Astellas, we share equally with Astellas all profits (losses) related to U.S. net sales of XTANDI. We also receive royalties ranging from the low teens to the low twenties on ex-U.S. XTANDI net sales and certain milestone payments upon the achievement of defined development and sales events.

We seek to become a global fully-integrated biopharmaceutical company through the continued commercialization of XTANDI, the acquisition or in-license and development and commercialization of other product opportunities, and through the advancement of our own proprietary research and development programs. We expect that our future growth may come from both internal research efforts and third party business development activities. In the fourth quarter of 2014, we licensed exclusive worldwide rights to pidilizumab (which is referred to as MDV9300), an immune modulatory, anti-Programmed Death-1 (PD-1) monoclonal antibody for all potential indications from CureTech, Ltd., or CureTech. Under the license agreement, we are responsible for all development, regulatory, manufacturing, and commercialization activities for MDV9300. We currently anticipate that we may initiate a Phase 3 clinical trial evaluating MDV9300 in one or more hematologic malignancies as early as in 2015. We are also considering evaluating MDV9300 in other indications, including but not limited to in combination with enzalutamide in breast and prostate cancer. In addition, our internal research and discovery efforts are focused, among other areas, in oncology and neurology.

2015 Business Highlights

•

In April 2015, we and Astellas reported top-line results from the Phase 2 STRIVE trial. The trial achieved its primary endpoint demonstrating a statistically significant increase in progression free survival (PFS) for patients with non-metastatic or metastatic CRPC for enzalutamide compared with bicalutamide (Hazard Ratio = 0.24; 95% Confidence Interval, 0.18-0.32; p < 0.0001). Median PFS was 19.4 months in the enzalutamide group compared with 5.7 months in the bicalutamide group. The median time on treatment in the STRIVE trial was 14.7 months in the enzalutamide group versus 8.4 months in the bicalutamide group. Serious adverse events were reported in 29.4% of enzalutamide-treated patients and 28.3% of bicalutamide-treated patients. Grade 3 or higher cardiac adverse events were reported in 5.1% of enzalutamide-treated patients versus 4.0% of bicalutamide-treated patients. One seizure was reported in the trial in the enzalutamide-treated group and none in the bicalutamide-treated group.

•

In January 2015, we and Astellas reported top-line results from the Phase 2 TERRAIN trial. The trial achieved its primary endpoint demonstrating a statistically significant increase in PFS for patients with metastatic CRPC for enzalutamide

compared to bicalutamide (Hazard Ratio = 0.44; 95% Confidence Interval, 0.34-0.57; p < 0.0001). Median PFS was 15.7 months in the enzalutamide group compared to 5.8 months in the bicalutamide group. The median time on treatment in the TERRAIN trial was 11.7 months in the enzalutamide group versus 5.8 months in the bicalutamide group. Serious adverse events were reported in 31.1% of enzalutamide-treated patients and 23.3% of bicalutamide-treated patients. Grade 3 or higher cardiac adverse events were reported in 5.5% of enzalutamide-treated patients versus 2.1% of bicalutamide-treated patients. Two seizures were reported in the enzalutamide group and one in the bicalutamide group.

•

We presented additional results from the Phase 2 TERRAIN trial as well as an updated overall survival analysis from the placebo-controlled Phase 3 PREVAIL trial at the 2015 European Association of Urology Congress in March 2015.

•

In January 2015, we enrolled the first patient in the Phase 3 EMBARK trial. The trial is intended to evaluate the efficacy and safety of enzalutamide alone or in combination with androgen deprivation therapy in approximately 1,860 patients with high-risk, hormone-sensitive, non-metastatic prostate cancer that has biochemically recurred (rising PSA level) following definitive local therapy with radical prostatectomy and/or radiation. The primary endpoint of the trial is metastasis-free survival.

•

During the first quarter of 2015, we completed enrollment in the Phase 2 trial evaluating enzalutamide in combination with exemestane in women with advanced breast cancer that is estrogen receptor positive (ER+) or progesterone receptor positive (PgR+) and human epidermal growth factor receptor 2 (HER2) normal. The trial will assess 240 patients in two parallel cohorts of 120 patients each. The first cohort will enroll patients who have not previously received hormonal treatment for advanced breast cancer. The second cohort will enroll patients who have previously progressed following one hormonal treatment for advanced disease. The primary endpoint of the trial is PFS in all patients and in the subset of patients whose tumor expresses the androgen receptor.

First Quarter 2015 Financial Highlights

•

Worldwide net sales of XTANDI, as reported by Astellas, for the three months ended March 31, 2015, were approximately $357.0 million.

•

Net sales of XTANDI in the United States for the three months ended March 31, 2015, as reported by Astellas, were $224.0 million, an increase of $99.6 million, or 80%, from the three months ended March 31, 2014.

•

Net sales of XTANDI outside of the United States for the three months ended March 31, 2015, as reported by Astellas, were approximately $133.0 million, an increase of $82.1 million, or 161%, from the three months ended March 31, 2014.

•

Collaboration revenue for the three months ended March 31, 2015, was $129.2 million, an increase of $42.0 million, or 48%, from the three months ended March 31, 2014.

•

At March 31, 2015, the remaining sales milestone payments that may be earned under the Astellas Collaboration Agreement were $245.0 million, some or all of which we anticipate could be earned in 2015 or 2016. No sales milestone payments were earned under the Astellas Collaboration Agreement for the three months ended March 31, 2015. Development milestone payments earned under the Astellas Collaboration Agreement were $15.0 million for the three months ended March 31, 2014.

•

Total operating expenses for the three months ended March 31, 2015 were $128.6 million, an increase of $33.0 million, or 34%, from the three months ended March 31, 2014. Operating expenses included non-cash stock-based compensation expense of $13.4 million and $9.7 million for the three months ended March 31, 2015 and 2014, respectively. Operating expenses for the three months ended March 31, 2015 also included non-cash expense of $4.0 million related to a fair value adjustment for contingent purchase consideration.

•

Cash and cash equivalents were $568.6 million at March 31, 2015, an increase of $66.0 million, or 13%, from $502.7 million at December 31, 2014. At March 31, 2015, the collaboration receivable from Astellas was $126.6 million.

Critical Accounting Policies and the Use of Estimates

The preparation of our consolidated financial statements and related footnotes requires us to make estimates, assumptions and judgments in certain circumstances that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We have based our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. We have discussed the development, selection and disclosure of these estimates with the Audit Committee of our

Board of Directors. Actual results could differ materially from these estimates under different assumptions or conditions. A detailed description of our significant accounting policies is included in the footnotes to our audited consolidated financial statements included in our Annual Report.

We have identified our most critical accounting policies and estimates upon which our financial statements depend as those relating to: revenue recognition, reliance on third party information, including estimates of the various deductions from gross sales used to calculate net sales of XTANDI, and the estimated performance periods of our deliverables under collaboration agreements; business combinations, including estimates related to goodwill, intangible assets and contingent consideration; stock-based compensation; research and development expenses and accruals; litigation; Convertible Notes, including our estimate of how the net proceeds thereof should be bifurcated between the debt component and the equity component; leases, including build-to-suit lease arrangements; and income taxes. As of March 31, 2015, there have been no significant or material changes to our critical accounting policies or estimates from that disclosed in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report.

Results of Operations

Collaboration Revenue

We have a collaboration agreement with Astellas pursuant to which we are collaborating with Astellas to develop and commercialize XTANDI globally. The terms of the collaboration agreement are described in Note 3, “Collaboration Agreement,” to our unaudited consolidated financial statements included elsewhere in this Quarterly Report. Collaboration revenue consists of three components: (a) collaboration revenue related to U.S. XTANDI net sales; (b) collaboration revenue related to ex-U.S. XTANDI net sales; and (c) collaboration revenue related to upfront and milestone payments.

Collaboration revenue was as follows (in thousands):


	Three Months Ended March 31,
	2015		2014
Collaboration revenue:
Related to U.S. XTANDI net sales	$	112,010	$	62,225
Related to ex-U.S. XTANDI net sales		15,767		5,731
Related to up-front and milestone payments		1,411		19,233

Total	$	129,188	$	87,189

We are required to pay the Regents of the University of California (“UCLA” or “the Regents”) ten percent of all Sublicensing Income, as defined in our license agreement with UCLA. We are currently involved in litigation with UCLA regarding certain terms of the license agreement and other matters, which are discussed in Part II, Item 1, “Legal Proceedings.”

Collaboration Revenue Related to U.S. XTANDI Net Sales

Collaboration revenue related to U.S. XTANDI net sales was as follows (in thousands):


	Three Months Ended March 31,
	2015			2014
U.S. XTANDI net sales (as reported by Astellas)	$	224,020		$	124,451
Shared U.S. development and commercialization costs		(110,313	)		(77,707	)

Pre-tax U.S. profit	$	113,707		$	46,744


Medivation’s share of pre-tax U.S. profit	$	56,853		$	23,372
Reimbursement of Medivation’s share of shared U.S. costs		55,157			38,853

Collaboration revenue related to U.S. XTANDI net sales	$	112,010		$	62,225

U.S. net sales of XTANDI (as reported by Astellas) for the three months ended March 31, 2015, were $224.0 million, an increase of $99.6 million, or 80%, compared with net sales for the prior year period. The increase was due to higher sales volumes, partially offset by a 5.8% decrease in price elements. The decrease in price elements includes a net favorable adjustment of $5.2 million and $9.0 million for the three months ended March 31, 2015 and 2014, respectively, related to changes in prior period estimates of deductions against gross sales. Fourth quarter U.S. XTANDI net sales (as reported by Astellas) included approximately one week of additional channel partner inventory.

Collaboration revenue related to U.S. XTANDI net sales for the three months ended March 31, 2015 was $112.0 million, an increase of $49.8 million, or 80%, from $62.2 million for the prior year period. The increase resulted from an increase in our share of pre-tax U.S. profit in the collaboration with Astellas as well as an increase in the reimbursement of our shared U.S. costs.

Along with other manufacturers of branded pharmaceutical products, we are subject to various provisions of the Patient Protection and Affordable Care Act of 2010, or PPACA, and other healthcare reform legislation. The stated goals of this legislation include reducing the number of uninsured Americans, improving the quality of healthcare delivery and reducing projected U.S. healthcare costs. The largest component of the deductions from gross sales used in deriving net sales of XTANDI in the United States is legally mandated discounts or rebates to Medicare and other government programs such as Medicaid. Although the full impact to us of all elements of PPACA and other healthcare reform legislation cannot be specifically determined, we estimate that legally mandated discounts or rebates for Medicaid and Medicare Part D programs, including the 23.1% rebate and the “donut hole” provisions, reduced U.S. XTANDI net sales by approximately 6.8% for the three months ended March 31, 2015. These provisions are anticipated to continue to impact U.S. sales of XTANDI to a similar degree in future periods. The financial impact of U.S. healthcare reform legislation to our consolidated financial statements in future periods depends on a number of factors, including the timing of and changes in sales volumes for our products and the number of patients eligible for these government programs. Additional information regarding the impact of the provisions of PPACA and other healthcare reform legislation on us is included in Part II, Item 1A, “Risk Factors.”

Collaboration Revenue Related to Ex-U.S. XTANDI Net Sales

Net sales of XTANDI outside of the United States (as reported by Astellas) were $133.0 million and $50.9 million for the three months ended March 31, 2015 and 2014, respectively. Collaboration revenue attributable to ex-U.S. XTANDI net sales was $15.8 million and $5.7 million for the three months ended March 31, 2015 and 2014, respectively.

Net sales of XTANDI outside of the United States (as reported by Astellas) in the first quarter of 2015 increased approximately 6% compared to the fourth quarter of 2014 net sales of $126.0 million. U.S. dollar equivalent net sales of XTANDI outside of the United States (as reported by Astellas) were negatively impact by approximately 9% as compared to the fourth quarter of 2014 as a result of the strengthening of the U.S. dollar relative to primarily the euro and the yen.

Collaboration Revenue Related to Upfront and Milestone Payments

Collaboration revenue related to upfront and milestone payments was as follows (in thousands):


	Three Months Ended March 31,
	2015		2014
Development milestones earned	$	—	$	15,000
Amortization of deferred upfront and development milestones		1,411		4,233

Total	$	1,411	$	19,233

Collaboration revenue related to upfront and milestone payments from Astellas was $1.4 million for three months ended March 31, 2015, a decrease of $17.8 million, or 93%, from $19.2 million for the prior year period. During the first quarter of 2014, we earned $15.0 million of development milestone payments under the Astellas Collaboration Agreement as a result of the marketing approval of XTANDI in Japan for the treatment of patients with CRPC, with the precaution that the efficacy and safety of XTANDI had not been established in patients with prostate cancer who have not received chemotherapy at that time. In addition, the decrease was also due to a change in our estimated performance period under the Astellas Collaboration Agreement during the fourth quarter of 2014. At March 31, 2015, we estimated that our remaining performance obligations would be completed in the second quarter of 2015.

Deferred revenue under the Astellas Collaboration Agreement was $1.4 million and $2.8 million at March 31, 2015 and December 31, 2014, respectively.

Research and Development Expenses

Research and development, or R&D, expenses were as follows (dollars in thousands):


	Three Months Ended March 31,
	2015			2014
Research and development expenses	$	44,676		$	45,919
Percentage change		(3	%)
Percentage of operating expenses		35	%		48	%

R&D expenses decreased by $1.2 million, or 3%, to $44.7 million for the three months ended March 31, 2015 from $45.9 million for the prior year period. The decrease was primarily due to a $12.0 million license and research agreement fee to a third party and a $1.5 million payment to UCLA related to the development milestone payments we earned from Astellas during the three months ended March 31, 2014, partially offset by a $5.4 million increase in personnel costs resulting from higher staffing levels, a $4.0 million increase in third party costs as a result of increased activities primarily related to our MDV9300 program and other early stage programs, and a $1.8 million increase in facilities and information technology infrastructure costs. R&D expenses include a $1.0 million non-cash fair value charge for contingent purchase consideration related to our License Agreement with CureTech and non-cash stock-based compensation expense of $5.8 million.

Under the Astellas Collaboration Agreement, we and Astellas share certain development costs in the United States. Development cost-sharing payments from Astellas, and corresponding reductions in R&D expenses, were $13.8 million and $15.9 million for the three months ended March 31, 2015 and 2014, respectively.

We are currently engaged in three R&D programs: (1) the development of enzalutamide for the treatment of prostate and breast cancer; (2) the development of MDV9300; and (3) multiple proprietary research and drug discovery projects. R&D costs are identified as either directly allocable to one of our R&D programs or indirect costs, with only direct costs being tracked by specific program. Direct costs consist primarily of clinical, preclinical, and drug discovery costs, cost of supplying drug substance and drug product for use in clinical and preclinical studies, including clinical manufacturing costs, upfront and milestone payments under license agreements, personnel costs (including both cash costs and non-cash stock-based compensation costs), contract research organization fees, and other contracted services pertaining to specific clinical and preclinical studies. Indirect costs consist of corporate overhead costs and other administrative and support costs. The following table summarizes the direct costs attributable to each program and total indirect costs (in thousands):


	Three Months Ended March 31,
	2015		2014
Direct costs:
XTANDI (enzalutamide) program	$	19,385	$	20,288
MDV9300 program⁽¹⁾		5,700		—
Early-stage programs		13,766		21,572

Total direct costs		38,851		41,860
Indirect costs		5,825		4,059

Total	$	44,676	$	45,919

⁽¹⁾	The amount for the three months ended March 31, 2015 includes a $1.0 million non-cash fair value charge for contingent purchase consideration related to our License Agreement with CureTech.

Our R&D programs may be subject to change from time to time as we evaluate our priorities and available resources.

For a detailed discussion of the risks and uncertainties associated with the timing and cost of completing a product development plan, see Part II Item 1A, “Risk Factors—Risks Related to Our Future Product Development Candidates” of this Quarterly Report.

Selling, General and Administrative Expenses

Selling, general and administrative, or SG&A, expenses were as follows (dollars in thousands):


	Three Months Ended March 31,
	2015			2014
Selling, general and administrative expenses	$	83,939		$	49,735
Percentage change		69	%
Percentage of operating expenses		65	%		52	%

SG&A expenses increased by $34.2 million, or 69%, to $83.9 million for the three months ended March 31, 2015 from $49.7 million for the prior year period. The increase was primarily due to higher sales and marketing costs as well as certain medical affairs costs and other initiatives associated with the launch of XTANDI in the pre-chemotherapy setting in the United States. These included higher collaboration expenses due to Astellas and additional internal personnel costs due to higher staffing levels. In addition, we incurred approximately $1.9 million higher royalty expenses as a result of an increase in net sales of XTANDI and accrued payments of $5.9 million to UCLA associated with potential sales milestones payments from Astellas. SG&A expense for the three months ended March 31, 2015 includes a $3.0 million non-cash fair value charge for contingent purchase consideration related to our License Agreement with CureTech and $7.6 million of non-cash stock-based compensation expense.

Under our collaboration with Astellas, we are responsible for fifty percent of the cost of goods sold and the royalty payable to UCLA on U.S. net sales of XTANDI. Our share of these items is included in SG&A expenses in our consolidated statements of operations. As such, those components of our reported SG&A expenses will fluctuate in correlation with net sales of XTANDI in the United States.

Under the Astellas Collaboration Agreement, we and Astellas share certain commercialization costs in the United States. Commercialization cost-sharing payments to Astellas, and corresponding increases in SG&A expense, were $20.1 million and $7.6 million for the three months ended March 31, 2015 and 2014, respectively.

Other Income (Expense), Net

The components of other income (expense), net were as follows (in thousands):


	Three Months Ended March 31,
	2015			2014
Other income (expense), net:
Non-cash amortization of debt discount and issuance costs on Convertible Notes	$	(3,910	)	$	(3,532	)
Coupon interest expense on Convertible Notes		(1,698	)		(1,698	)
Interest income		11			9
Other income (expense), net		126			(38	)

Total	$	(5,471	)	$	(5,259	)

Other income (expense), net consists of coupon interest expense and non-cash interest expense on the Convertible Notes, interest income on our cash equivalents balances, and the impact of changes in foreign exchange rates on our foreign currency-denominated payables, which were not significant.

Income Tax Benefit

Income tax benefit and the effective income tax rate were as follows (dollars in thousands):


	Three Months Ended March 31,
	2015			2014
Income tax benefit	$	1,780		$	59
Effective income tax rate		36.3	%		0.4	%

Income tax benefit for the three months ended March 31, 2015 was $1.8 million. Income tax benefit for the three months ended March 31, 2014 was not significant. The effective tax rate was 36.3% for the three months ended March 31, 2015. The provision for income taxes was higher than the tax computed at the U.S. federal statutory rate due primarily to state income taxes and non-deductible, stock-based compensation. The effective tax rate for the three months ended March 31, 2014 was not significant. The increase in the effective tax rate for the three months ended March 31, 2015 as compared to the prior year period was due to the release of a portion of the valuation allowance during the fourth quarter of 2014.

The future effective tax rate is subject to volatility and may be materially impacted by various internal and external factors. These factors may include, but are not limited to, the amount of income tax benefits and charges from: interpretations of existing tax laws; changes in tax laws and rates; future levels of research and development expenditures; changes in the mix of earnings in countries with differing statutory tax rates in which we may conduct business; changes in the valuation of deferred tax assets and liabilities; state income taxes; the tax impact of stock-based compensation; accounting for uncertain tax positions; closure of statute of limitations or settlement of tax audits; changes in estimates of prior years’ items; tax costs for acquisition-related items; changes in accounting standards; non-deductible officers’ compensation; limitations on the utilization of net operating losses and tax credits due to changes in ownership; and overall levels of income before taxes.

Due to the availability of Federal gross net operating losses and Federal tax credit carryforwards for tax return purposes, which totaled $207.8 million and $33.0 million, respectively, at March 31, 2015, we expect our Federal cash income tax payments to be substantially lower than our statutory rate for the year ending December 31, 2015.

Liquidity and Capital Resources

We have historically funded our operations primarily through public offerings of our common stock, the issuance of the Convertible Notes, and from the upfront, milestone and cost-sharing payments under agreements with our current and former collaboration partners and, subsequent to September 13, 2012, from collaboration revenue related to XTANDI net sales. As of March 31, 2015, we may earn up to $245.0 million of remaining sales milestone payments under the Astellas Collaboration Agreement, some or all of which we anticipate could be earned in 2015 or 2016. UCLA has asserted that we are required to pay UCLA ten percent of any sales milestone payments and “Operating Profits” that we receive from Astellas. We deny UCLA’s allegations and intend to vigorously defend the litigation. For more information about this litigation, see Part II, Item 1, “Legal Proceedings.”

At March 31, 2015, we had cash and cash equivalents of $568.6 million, compared to $502.7 million at December 31, 2014. At March 31, 2015, our collaboration receivable from Astellas was $126.6 million. Based on our current expectations, we believe our capital resources at March 31, 2015 will be sufficient to fund our currently planned operations for at least the next twelve months. This estimate is based on a number of assumptions that may prove to be wrong. In addition, we may choose to raise additional funds in the form of equity, debt, or otherwise due to market conditions or strategic considerations even if we believe we have sufficient funds for our current and future operating plans. For example, we may choose to raise additional capital to fund business development activities, to refinance existing debt, and for other general corporate purposes. For a detailed discussion of the risks and uncertainties associated with our sources of liquidity and access to capital, see Part II, Item 1A, “Risk Factors—Risks Related to the Operation of Our Business.”

At March 31, 2015, we had outstanding $258.7 million aggregate principal amount of the Convertible Notes. Prior to April 6, 2015, the Convertible Notes were not redeemable. On or after April 6, 2015, we may elect to redeem for cash all or part of the Convertible Notes if the closing price of our common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the trading day preceding the date we provide notice of redemption exceeds 130% of the conversion price in effect on each such trading day, subject to certain conditions. The conversion price is currently $51.24. At March 31, 2015, the estimated fair value of the Convertible Notes, including the equity component, was approximately $654.1 million, based on recent trading prices of the Convertible Notes.

During the first quarter of 2015, we received notification that $0.7 million principal amount of Convertible Notes were surrendered for conversion. We settled the principal and conversion premium for approximately $1.9 million in cash during the second quarter of 2015. During the second quarter of 2015 (through May 5, 2015), we received notification that $90.3 million principal amount of Convertible Notes were surrendered for conversion, and settlement is anticipated to occur during the second quarter of 2015. We have elected to settle these conversion obligations through a combination of cash and shares of our common stock. The total payment will be based on the average of the volume-weighted-average prices of our common stock during the 20 trading-day cash settlement averaging periods specified in the Indenture governing the notes. We estimate that the cash payment will be approximately $90.3 million for Convertible Notes surrendered through May 5, 2015.

Cash Flow Analysis

The following table summarizes our cash flows (in thousands):


	Three Months Ended March 31,
	2015			2014
Net cash provided by (used in):
Operating activities	$	57,222		$	7,389
Investing activities		(2,530	)		(3,718	)
Financing activities		11,267			9,010

Net change in cash and cash equivalents	$	65,959		$	12,681

Net cash provided by operating activities totaled $57.2 million for the three months ended March 31, 2015, which consisted of positive changes in our operating assets and liabilities of $40.3 million and our net loss of $3.1 million adjusted for non-cash items of $20.1 million. Net cash provided by operating activities was primarily driven by collaboration revenue related to U.S. XTANDI net sales, royalties on ex-U.S. XTANDI net sales and sales milestone payments received from Astellas during 2015, partially offset by cash utilized in operations that arose in the ordinary course of business.

Net cash provided by operating activities totaled $7.4 million for the three months ended March 31, 2014, which consisted of positive changes in our operating assets and liabilities of $11.0 million and our net loss of $13.7 million adjusted for non-cash items of $10.0 million. Non-cash items consisted of non-cash stock-based compensation expense of $9.7 million, non-cash interest expense on the Convertible Notes of $3.5 million, and depreciation expense on property and equipment of $1.1 million, partially offset by non-cash amortization of deferred revenue of $4.2 million. The positive cash flow from changes in operating assets and liabilities of $11.0 million arose in the ordinary course of business.

Net cash used in investing activities totaled $2.5 million for three months ended March 31, 2015, and consisted of a $1.6 million increase in letters of credit collateralized by restricted cash to secure various leases and $1.0 million of capital expenditures. Net cash used in investing activities totaled $3.7 million for the three months ended March 31, 2014 and consisted of a $2.1 million increase in letters of credit collateralized by restricted cash to secure various leases and capital expenditures of $1.6 million.

Net cash provided by financing activities totaled $11.3 million for the three months ended March 31, 2015 and consisted primarily of proceeds from the issuance of common stock under equity incentive and stock purchase plans. Net cash provided by financing activities totaled $9.0 million for the three months ended March 31, 2014 and consisted of proceeds from the issuance of common stock under equity incentive and stock purchase plans.

Commitments and Contingencies

There have been no significant changes in our contractual cash obligations, commercial commitments and contingencies since December 31, 2014 except for the items disclosed below.

Leases

In the first quarter of 2015, we entered into the Sixth Amendment to our corporate headquarters lease agreement in San Francisco, California, pursuant to which we leased approximately 16,000 additional square feet of office space. In total, at March 31, 2015, we leased approximately 143,000 square feet of office space pursuant to the lease agreement, as amended, which expires in June 2019. Lease commitments pursuant to the Sixth Amendment are approximately $6.1 million over the term of the lease. There were no other changes to our lease obligations from that disclosed in our Annual Report other than a reduction of 2015 lease obligations due to the payment of current year lease payments.

Convertible Senior Notes Due 2017

Prior to April 6, 2015, the Convertible Notes were not redeemable. On or after April 6, 2015, we may redeem for cash all or part of the Convertible Notes if the closing price of our common stock for 20 or more trading days in the period of 30 consecutive trading days ending on the trading day preceding the date we provide notice of redemption exceeds 130% of the conversion price in effect on each such trading day, subject to certain conditions. If we choose to redeem all or part of the Convertible Notes for cash, we

may need to raise additional funds through public or private financing or other arrangements. At March 31, 2015, the estimated fair value of the Convertible Notes, including the equity component, was $654.1 million and was determined using recent trading prices of the Convertible Notes.

At March 31, 2015, the Convertible Notes met a requirement of convertibility because our common stock price was in excess of the stated conversion premium for at least 20 trading days in the period of 30 consecutive trading days ending on March 31, 2015. The Convertible Notes remain convertible through June 30, 2015. Convertibility of the Convertible Notes based on the trading prices of our common stock is assessed on a calendar-quarter basis. During the first quarter of 2015, we received notification that $0.7 million principal amount of Convertible Notes were surrendered for conversion. We settled the principal and conversion premium for approximately $1.9 million in cash during the second quarter of 2015. During the second quarter of 2015 (through May 5, 2015), we received notification that $90.3 million principal amount of Convertible Notes were surrendered for conversion, and settlement is anticipated to occur during the second quarter of 2015. We have elected to settle these conversion obligations through a combination of cash and shares of our common stock. The total payment will be based on the average of the volume-weighted-average prices of our common stock during the 20 trading-day cash settlement averaging periods specified in the Indenture governing the notes. We estimate that the cash payment will be approximately $90.3 million for Convertible Notes surrendered through May 5, 2015.

Contingent Consideration Liability

In connection with the CureTech License Agreement, we recorded contingent consideration pertaining to amounts potentially payable to CureTech. In accordance with accounting for business combinations guidance, these contingent cash payments are recorded as contingent consideration liabilities on our consolidated balance sheets at fair value. The aggregate remaining, undiscounted amount of contingent consideration that we could be required to pay to CureTech under the License Agreement is included in the table below (dollars in thousands):


Potential sales milestones	$	245,000
Potential development and regulatory milestones	$	85,000
Potential payment upon completion of Manufacturing Technology Transfer	$	5,000
Potential future tiered royalties on annual worldwide net sales		5% to 11	%

As of March 31, 2015, the contingent consideration liabilities that we could be required to pay to CureTech are our only financial liabilities measured and recorded using Level 3 inputs in accordance with accounting guidance for fair value measurements, and represent approximately 24% of our total liabilities. See Note 12, “Fair Value Disclosures,” in the accompanying notes to our unaudited consolidated financial statements for additional information.

Off-Balance Sheet Arrangements

We are involved with a variable interest entity, or VIE, that performs contract research for us. We have not consolidated this entity because we do not have the power to direct the activities that most significantly impact the VIE’s economic performance and, thus, we are not considered the primary beneficiary of the VIE.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Market risk is the exposure to loss resulting from changes in interest rates, foreign currency exchange rates, commodity prices and equity prices. We currently do not use derivative financial instruments to hedge our market risk exposures. Our investment policy emphasizes the safety and preservation of capital and liquidity over other portfolio considerations. There were no material changes to our market risk from those disclosed in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,” of our Annual Report.

ITEM 4.

CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and that such information is communicated to our management, including our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls and procedures have been designed to meet the reasonable assurance standards. Additionally, in

designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures is also based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

As required by Rule 13a-15(b) or Rule 15d-15(b) of the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer), of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2015. Based on the foregoing, our Chief Executive Officer (principal executive officer) and Chief Financial Officer (principal financial officer) concluded that our disclosure controls and procedures were effective as of March 31, 2015 at the reasonable assurance level.

Changes in Internal Controls

There were no changes in our internal control over financial reporting during the three months ended March 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

We are involved in legal proceedings, investigations, and claims in the ordinary course of our business, including the matters described below.

In May 2011, we filed a lawsuit in San Francisco Superior Court against the Regents of the University of California, or the Regents (or UCLA), and one of its professors, alleging breach of contract and fraud claims, among others. Our allegations in this lawsuit include that we have exclusive commercial rights to an investigational drug known as ARN-509, which is currently being developed by Aragon Pharmaceuticals, or Aragon. In August 2013, Johnson & Johnson and Aragon completed a transaction in which Johnson & Johnson acquired all ARN-509 assets owned by Aragon. ARN-509 is an investigational drug currently in development to treat non-metastatic CRPC population. ARN-509 is a close structural analog of XTANDI, was developed contemporaneously with XTANDI in the same academic laboratories in which XTANDI was developed, and was purportedly licensed by the Regents to Aragon, a company co-founded by the heads of the academic laboratories in which XTANDI was developed. On February 9, 2012, we filed a Second Amended Complaint, adding as additional defendants a former Regents professor and Aragon. We seek remedies including a declaration that we are the proper licensee of ARN-509, contractual remedies conferring to us exclusive patent license rights regarding ARN-509, and other equitable and monetary relief. On August 7, 2012, the Regents filed a cross-complaint against us seeking declaratory relief which, if granted, would require us to share with the Regents ten percent of any sales milestone payments we may receive under the Astellas Collaboration Agreement because such milestones constitute Sublicensing Income under the license agreement with UCLA. Under the Astellas Collaboration Agreement, we are eligible to receive up to $320.0 million in sales milestone payments. As of March 31, 2015, we have earned $75.0 million in sales milestones under the Astellas Collaboration Agreement. We have paid UCLA $7.5 million, representing 10% of the sales milestone amounts earned from Astellas. On September 18, 2012, the trial court approved a settlement agreement dismissing the former Regents professor who was added to the case on February 9, 2012. On December 20, 2012, and January 25, 2013, the Court granted summary judgment motions filed by defendants Regents and Aragon, resulting in dismissal of all claims against Regents and Aragon, but denied such motions filed by the remaining Regents professor. On April 15, 2013, we filed a Notice of Appeal seeking appeal of the judgment in favor of Aragon, which is now wholly-owned by Johnson & Johnson, and the briefing of that matter has been concluded. The bench trial of the Regent’s cross-complaint against us was conducted in July 2013, and on January 15, 2014, the Court entered a judgment in the cross-complaint in favor of Regents, which we appealed on February 13, 2014, along with the December 2012 summary judgment order in favor of Regents. The jury trial of our breach of contract and fraud claims against the remaining Regents professor was conducted in October and November 2013. On November 15, 2013, the jury rendered a verdict in the case, finding in favor of Medivation on the breach of contract claim, and in favor of the Regents professor on the fraud claims. On November 22, 2013, the Court entered judgment for the prevailing party Medivation on the contract claim, and entering judgment in favor of the Regents professor on the fraud claims. Our notice of appeal of the judgment on the fraud claims was filed on February 13, 2014. On October 17, 2014, the briefing in Medivation’s appeal of the summary judgment order and cross-complaint order in favor of Regents, as well as its appeal of the judgment on the fraud claims against the Regents professor commenced. On October 24, 2014, the court of appeals issued an order consolidating all of these appeals for hearing and consideration purposes, so the appeals will be heard and considered together once the briefing is completed.

On April 11, 2014, UCLA filed a complaint against us in which UCLA alleges that Medivation and Medivation Prostate Therapeutics, Inc., or MPT, have failed to pay UCLA ten percent of “Operating Profits” Medivation has received (and will continue to receive) from Astellas, as a result of the Astellas Collaboration Agreement, and that Medivation has breached its fiduciary duties to UCLA, as minority shareholder of MPT. On July 16, 2014, UCLA dismissed without prejudice its claim that Medivation breached its fiduciary duties to UCLA, as a minority shareholder of MPT. On March 23, 2015, based upon an application by both the Company and UCLA, the court ordered the case be designated as complex and assigned to a single judge in the complex division of San Francisco Superior Court. We deny UCLA’s allegations and intend to vigorously defend the litigation.

We believe that we have meritorious positions with respect to the claims we have asserted and the claims asserted against us, and we intend to advance our positions in these lawsuits vigorously, including on appeal. However, the lawsuits are subject to inherent uncertainties, the actual costs may be significant, and we may not prevail.

ITEM 1A.

RISK FACTORS

Risks facing our business have not changed substantively from those discussed in our Annual Report on Form 10-K for the year ended December 31, 2014, except for those risk factors below designated by an asterisk (*).Our business faces significant risks, some of which are set forth below to enable readers to assess, and be appropriately apprised of, many of the risks and uncertainties applicable to the forward-looking statements made in this Quarterly Report. You should carefully consider these risk factors as each of these risks could adversely affect our business, operating results, cash flows and financial condition. If any of the events or circumstances described in the following risk factors actually occurs, our business may suffer, the trading price of our common stock and our 2.625% convertible senior notes due April 1, 2017, or the Convertible Notes, could decline and our financial condition or results of operations could be harmed. Given these risks and uncertainties, you are cautioned not to place undue reliance on forward-looking statements. These risks should be read in conjunction with the other information set forth in this Quarterly Report. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not currently known to us, or that we currently believe to be immaterial, may also adversely affect our business.

Risks Related to XTANDI ^® (enzalutamide) capsules

We and Astellas may not be able to further commercialize XTANDI in the United States, and may fail to continue to generate significant revenue from the sale of XTANDI in the United States. XTANDI may fail to obtain regulatory approval and reimbursement, to be successfully commercialized and to generate significant revenue outside the United States.

We only have one commercial product, XTANDI ^® (enzalutamide) capsules, or XTANDI, which is approved in the United States to treat men with metastatic castration-resistant prostate cancer, or mCRPC. However, the further commercialization of XTANDI in the United States for the treatment of mCRPC and any other patient populations for which XTANDI is being developed and may subsequently be approved, may not be successful for a number of reasons, including:

•

we and our collaboration partner, Astellas Pharma, Inc., or Astellas, may not be able to establish or demonstrate in the medical community the safety and efficacy of XTANDI and its potential advantages over, and side effects compared to, competing therapeutics and products currently in clinical development for each applicable patient population;

•

our limited experience in marketing XTANDI to urologists;

•

reimbursement and coverage policies of government and private payors such as Medicare, Medicaid, insurance companies, health maintenance organizations and other plan administrators;

•

the price of XTANDI as compared to alternative treatment options;

•

changes or increases in regulatory restrictions;

•

changes to the label for XTANDI that further restrict how we and Astellas market XTANDI, including as a result of routine pharmacovigilance activities and/or data collected from the safety study in patients with known risk factor(s) for seizure that the FDA required us to undertake as a post-marketing requirement or from any other ongoing or future studies;

•

we and Astellas may not have adequate financial or other resources to successfully commercialize XTANDI; and

•

we and Astellas may not be able to obtain adequate commercial supplies of XTANDI to meet demand or at an acceptable cost.

If the further commercialization of XTANDI in the United States is unsuccessful, our ability to generate revenue from product sales and achieve profitability would be adversely affected and our business could be severely negatively impacted.

XTANDI has received marketing approval in the European Union (or Europe, or EU) for the treatment of patients with mCRPC and in Japan for the treatment of patients with castration-resistant prostate cancer, and numerous other countries worldwide for mCRPC. Additional marketing applications for the mCRPC indication are under review in numerous other countries. Unless we and Astellas can obtain additional regulatory approval and reimbursement of XTANDI outside the United States, Japan and the EU, Astellas’ ability to successfully commercialize XTANDI further and our ability to generate additional revenue from XTANDI worldwide, could be significantly limited.

XTANDI may fail to compete effectively commercially with other approved products and other products in development.

There are a number of currently marketed therapies for advanced prostate cancer that compete directly with XTANDI. In addition, several companies are currently developing products or are expected to be marketing products in the near future that compete or may compete directly with XTANDI in its currently approved indication for mCRPC and any other indication for which enzalutamide may be subsequently approved. Our current and future competitors are generally large pharmaceutical companies with considerably greater financial resources, human resources, and development and commercialization resources and experiences than ours, including Johnson & Johnson, Sanofi, and Bayer Pharma AG. Some competitive drugs already have acquired substantial shares in these markets or are generic which may make it more difficult for us to compete successfully in these markets notwithstanding any positive results that we may generate from our current or potential future clinical trials for enzalutamide. Also, intense competition from products and compounds in development could impact our ability to successfully conduct upstream clinical trials, as trials may become more difficult to enroll, or complete successfully, as patients may have more treatment options with demonstrated efficacy and safety. Factors upon which XTANDI would have to compete successfully include efficacy, safety, price and cost effectiveness. We cannot guarantee that we and Astellas will be able to compete successfully in the context of any of these factors.

Pricing pressure from third party payors and price competition could substantially impact Astellas’ or our ability to generate revenue from XTANDI and, therefore, negatively impact our business.

The realized price of XTANDI could be subject to pricing pressure from aggressive competitive pricing activity and managed care organizations and institutional purchasers, who use cost considerations to restrict the sale of preferred drugs that their physicians may prescribe. To the extent that payors believe similar lower-priced, branded or generic competitor products may be suitable alternatives for patients, we and our partner Astellas may consider reducing the price of XTANDI or be subject to formulary restrictions, which could result in a loss of sales revenue and/or market share. Additionally, XTANDI currently competes against products and could compete in the future with products marketed by some of the world’s largest and most experienced pharmaceutical companies, such as Johnson & Johnson, who have more resources and greater flexibility to engage in aggressive price competition in order to gain revenues and market share. It is uncertain whether we and Astellas could successfully compete with such competition and our failure to compete or a decision to reduce the price of XTANDI in order to compete could severely impact our business.

Competition from other approved products, including those that mechanistically operate similarly to XTANDI, could negatively impact the expected use or duration of therapy of XTANDI, and impact our ability to generate revenue.

We are competing and will continue to compete against drugs that operate similarly to XTANDI. If XTANDI is unable to successfully compete for a position in the prostate cancer treatment paradigm ahead of drugs like Zytiga and/or potentially ARN-509, which are now being investigated in Phase 3 clinical studies in earlier stage prostate cancer, sales of XTANDI may be negatively impacted. In addition, the availability of multiple other approved agents to treat the same patients being treated with XTANDI could cause the treating physicians to switch patients off of XTANDI and onto competing therapies more quickly than would otherwise be the case, which could also negatively impact XTANDI net sales.

Competition from generic products could potentially harm our business and result in a decrease in our revenue.

Competition from generic products could potentially harm our business and result in a decrease in our revenue. Competition from manufacturers of generic drugs could be a challenge for us, like other branded pharmaceutical companies, and the loss or expiration of intellectual property rights on enzalutamide or a competitor product, such as Zytiga, could adversely affect our business, and could put downward pressure on the price and market share of XTANDI. The patents listed in the Orange Book for the Zytiga product respectively expire in 2016 and 2027. Pursuant to the provisions of the Hatch-Waxman Act, these patents could be challenged by generic manufacturers as early as four years from the initial approval of the Zytiga product in the U.S. Generic products for the treatment of prostate cancer that have already been approved by the FDA, e.g., Casodex, are generally sold at a lower price than branded drugs. See the risk factor below entitled, “Risks Related to the Pharmaceutical Industry, Including the Activities of Medivation, Inc.— If the FDA or other applicable regulatory authorities approve generic products that compete with any of our products or product candidates, the sales of our products or product candidates may be adversely affected,” for additional information regarding general risks related to generic and biosimilar competition in our industry.

We have recently more significantly focused our marketing efforts in the United States to include urologists. If we are not successful in marketing XTANDI to urologists, the commercial potential of XTANDI may not be realized.

We have recently more significantly focused our sales and marketing efforts in the United States to include urologists as a result of the expanded label of XTANDI in the United States to treat mCRPC patients who have not received chemotherapy that we and Astellas announced on September 10, 2014. Failure to successfully commercialize XTANDI to urologists would have a negative impact on our business and future prospects.

We are dependent upon our collaborative relationship with Astellas to further develop, fund, manufacture and commercialize XTANDI, and if such relationship is unsuccessful, or if Astellas terminates our collaboration agreement with them, it could negatively impact our ability to conduct our business and generate revenue from XTANDI.

Under our collaboration agreement with Astellas, Astellas is responsible for developing, seeking regulatory approval for, and commercializing XTANDI outside the United States and is responsible globally for all manufacture of product for both clinical and commercial purposes. We and Astellas are jointly responsible for commercializing XTANDI in the United States. We and Astellas share equally the costs (subject to certain exceptions), profits and losses arising from development and commercialization of XTANDI in the United States. For clinical trials useful both in the United States and in Europe or Japan, we are responsible for one-third of the total costs and Astellas is responsible for the remaining two-thirds. We are subject to a number of risks associated with our dependence on our collaborative relationship with Astellas, including:

•

Astellas’ right to terminate the collaboration agreement with us on limited notice for convenience (subject to certain limitations), or for other reasons specified in the collaboration agreement;

•

the need for us to identify and secure on commercially reasonable terms the services of third parties to perform key activities currently performed by Astellas in the event that Astellas were to terminate its collaboration with us, including development and commercialization activities outside of the United States and manufacturing activities globally;

•

adverse decisions by Astellas regarding the amount and timing of resource expenditures for the commercialization of XTANDI;

•

failure by Astellas to negotiate favorable coverage determinations and adequate reimbursement rates with third party payors;

•

decisions by Astellas to prioritize other of its present or future products more highly than XTANDI for either development and/or commercial purposes;

•

possible disagreements with Astellas as to the timing, nature and extent of our development plans, including clinical trials or regulatory approval strategy, which if we disagree could significantly delay or halt development of XTANDI; and

•

the financial returns to us, if any, under our collaboration agreement with Astellas, depend in large part on the achievement of sales milestone payments and the generation of product sales, and if Astellas fails to perform or satisfy its obligations to us, the development or commercialization of XTANDI would be delayed or may not occur and our business and prospects could be materially and adversely affected.

Due to these factors and other possible disagreements with Astellas, we may be delayed or prevented from further developing, manufacturing or commercializing XTANDI or we may become involved in litigation or arbitration, which would be time consuming and expensive.

If Astellas were to terminate our collaborative relationship unilaterally, we would need to undertake development and commercialization activities for XTANDI solely at our own expense and/or seek one or more other partners for some or all of these activities, worldwide. If we pursued these activities on our own, it would significantly increase our capital and infrastructure requirements, might limit the indications we are able to pursue for XTANDI, and could prevent us from effectively commercializing XTANDI. If we sought to find one or more other pharmaceutical company partners for some or all of these activities, we may not be successful in such efforts, or they may result in collaborations that have us expending greater funds and efforts than our current relationship with Astellas.

We are dependent on third party manufacturers for commercial supply of XTANDI and for clinical trial materials and if we fail to receive such adequate supplies, global sales of XTANDI could be limited and clinical trials could be delayed.

We require adequate supplies of enzalutamide for commercial supply of XTANDI, and for use in clinical trials. Under our collaboration agreement, Astellas has the responsibility to manufacture commercial supplies of XTANDI for all markets and provide material for clinical studies. Astellas fulfills its manufacturing and supply obligations largely through third-party contract manufacturers. Consequently, we are, and expect to remain, dependent on Astellas and its contract manufacturers for commercial and clinical trial materials. If Astellas cannot provide the materials on a timely basis due to, for example, raw materials availability, quality issues or failure of the contracting facilities to perform, it could result in decreased sales or put at risk on-going clinical studies. If Astellas or its contract manufacturers do not perform, we may be forced to incur additional expenses, delays, or both, to arrange or take responsibility for contract manufacturers to manufacture or package XTANDI or enzalutamide on our behalf, as we do not have any internal manufacturing or packaging capabilities.

We also rely on our own third-party vendors for clinical supplies. If clinical supplies cannot be provided on a timely basis it could put at risk our sponsored clinical studies with XTANDI or enzalutamide.

In some instances, we and Astellas are dependent on third party suppliers of raw materials, intermediates or finished goods of commercial supplies of XTANDI and clinical trial materials. If any of these suppliers or subcontractors fails to meet our or Astellas’ needs, we may not have readily available alternatives. If we or Astellas experience a material supplier or subcontractor inability to

supply, our ability to satisfactorily and timely complete our clinical trial or delivery obligations could be negatively impacted which could result in reduced sales, termination of contracts and damages to our relationships with clinical trial sites and the medical community. We could also incur additional costs to address and resolve such an issue. Any of these events could have a negative impact on our results of operations and financial condition.

We are dependent on Astellas to distribute and sell XTANDI, and if Astellas fails to adequately perform these activities, our business would be negatively impacted.

Under our collaboration agreement with Astellas, we and Astellas have the right to jointly promote XTANDI to customers in the United States. However, Astellas has the sole right to distribute and sell XTANDI to customers in the United States and the sole right to promote, distribute and sell XTANDI to customers outside the United States. We are thus partially dependent on Astellas to successfully promote XTANDI in the United States, and solely dependent on Astellas to successfully distribute and sell XTANDI in the United States and to promote, distribute and sell XTANDI outside of the United States. In the United States, we depend on customer support from specialty pharmaceutical distributors and wholesalers in Astellas’ network. Astellas has contracted with a limited number of specialty pharmaceutical distributors and wholesalers to deliver XTANDI to end users. The use of specialty pharmacies and wholesalers requires significant coordination with Astellas’ sales and marketing, medical affairs, regulatory affairs, legal and finance organizations and involves risks, including but not limited to risks that these specialty pharmacies and wholesalers will:

•

not provide Astellas accurate or timely information regarding their inventories, patient- or account-level data or safety complaints regarding XTANDI;

•

not effectively sell or support XTANDI;

•

not devote the resources necessary to sell XTANDI in the volumes and within the timeframes that we expect; or

•

cease operations.

We generally do not have control over the resource or degree of effort that any of the specialty pharmacies and distributors may devote to XTANDI, and if their performance is substandard, this will adversely affect sales of XTANDI. If Astellas’ network of specialty pharmacies and distributors fails to adequately perform, it could negatively impact sales of XTANDI, which would negatively impact our business, results of our operations, cash flows and liquidity.

XTANDI may not be commercially successful if not widely-covered and appropriately reimbursed by third-party payors, and we are dependent upon Astellas for the execution of third-party payor access and reimbursement strategies for XTANDI.

Our ability to successfully commercialize XTANDI for its approved indications depends, in part, on the extent to which coverage and adequate reimbursement for XTANDI is available from government and health administration authorities, private health insurers, managed care programs and other third-party payors, both in the United States and globally.

In addition, even if third-party payors ultimately elect to cover and reimburse for XTANDI, most payors will not reimburse 100% of the cost, but rather require patients to pay a portion of the cost through a co-payment. Thus, even if reimbursement is available, the percentage of drug cost required to be borne by the patients may make use of XTANDI financially difficult or impossible for certain patients, which would have a negative impact on sales of XTANDI. For example, in the United States there exists a coverage gap, or “donut hole”, in the Medicare Part D coverage for prescription medications for participants, which renews annually each January 1st. While in the donut hole, Medicare Part D participants, including many patients in XTANDI’s approved indication, may have to pay out of pocket a substantial portion of their prescription drug costs, which may discourage physicians from prescribing or patients from accessing XTANDI. It is increasingly difficult to obtain coverage and adequate reimbursement levels from third-party payors, and we may be unable to achieve these objectives. Moreover, our commercial prospects would be further weakened if payors approve coverage for XTANDI only as second- or later-line treatments, or if they place XTANDI in tiers requiring unacceptably high patient co-payments. Since launch, several third-party payors and at least one government payor have approved coverage for XTANDI only after patient treatment on Zytiga plus prednisone. These coverage situations may persist even with expanded indications for XTANDI. Because XTANDI works via a similar molecular signaling pathway as Zytiga does, patients who have already failed treatment with Zytiga may not have as strong a response on XTANDI as would patients who are Zytiga-naïve. Failure to overturn coverage decisions or stop additional coverage decisions could materially harm our (or our partner’s) ability to successfully market XTANDI in the United States. Achieving coverage and acceptable reimbursement levels typically involves negotiating with individual payors and is a time-consuming and costly process. Therefore, obtaining acceptable coverage and reimbursement from one payor does not guarantee similar acceptable coverage or reimbursement from another payor. Additionally, even if favorable coverage and adequate reimbursement levels are achieved, the payor may change its decision in the future. We are dependent upon Astellas globally for the achievement of such coverage and acceptable reimbursement, and for negotiation with individual payors.

We and Astellas are required to undertake certain studies to comply with post-marketing requirements or commitments in the EU and the United States, which could result in adverse modifications to XTANDI’s existing labeling, and risk XTANDI’s ability to obtain additional regulatory approvals for additional patient populations.

In the EU, we and Astellas are required to collect efficacy data on mCRPC patients previously treated with Zytiga to determine XTANDI’s efficacy response in such patients, which we do not expect to be as good as in patients naïve to Zytiga. In the United States, we and Astellas are required to conduct an open-label safety study of XTANDI in patients with known risk factor(s) for seizure and to report the results of that study to the FDA in 2019. If the results of this study reveal unacceptable safety risks, this could result in decreased commercial utilization of XTANDI for mCRPC patients in the United States and in the EU, failure to obtain approval in other indications (including breast cancer), and modifications to the existing label for XTANDI, including potentially a boxed warning, or additional clinical testing. Any one or more of these outcomes would seriously harm our business. Additionally, we could receive additional post-marketing requirements as we seek approval of XTANDI in additional patient populations. Failure to conduct the post-marketing requirements or commitments in a timely manner may result in withdrawal of approval for XTANDI and substantial civil and/or criminal penalties.

If significant patient safety issues arise for XTANDI or our product candidates, our future sales may be reduced, which would adversely affect our results of operations.

The data supporting the marketing approvals for our products and forming the basis for the safety warnings in our product labels were obtained in controlled clinical trials of limited duration and, in some cases, from post-approval use. As our products are used over longer periods of time by many patients with underlying health problems, taking numerous other medicines, we expect to continue to find new issues such as safety, resistance or drug interactions of XTANDI or in other products, which may require us to provide additional warnings or contraindications on our labels or narrow our approved indications, each of which could reduce the market acceptance of these products.

Regulatory authorities have been moving towards more active and transparent pharmacovigilance and are making greater amounts of stand-alone safety information directly available to the public through websites and other means, e.g., periodic safety update report summaries, risk management plan summaries and various adverse event data. Safety information, without the appropriate context and expertise, may be misinterpreted and lead to misperception or legal action which may potentially cause our product sales or stock price to decline.

Further, if serious safety, resistance or drug interaction issues arise with XTANDI, product sales could be limited or halted by us or by regulatory authorities and our results of operations would be adversely affected.

XTANDI and any other product candidates that may receive regulatory approval in the future will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense as well as significant penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our products and product candidates.

We are required to monitor the safety and efficacy of XTANDI and any other products candidates that are approved by the FDA. In addition, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, import, export and recordkeeping for any approved products, such as XTANDI, will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports, registration and listing, as well as continued compliance with current good clinical practices, or cGCP, for any clinical trials that we conduct post-approval. We and our contract manufacturers will be subject to periodic unannounced inspections by the FDA to monitor and ensure compliance with cGMPs. We must also comply with requirements concerning advertising and promotion for XTANDI and any other product candidates for which we obtain marketing approval in the future. Promotional communications with respect to prescription drugs, including biologics, are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved labeling. Thus, we will not be able to promote XTANDI or any other products candidates for which we might obtain approval in the future for indications or uses for which they are not approved. Later discovery of previously unknown problems with XTANDI or any other product candidate for which we might obtain approval in the future, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things:

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restrictions on our ability to conduct clinical trials, including full or partial clinical holds on ongoing or planned trials;

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restrictions on such products’ manufacturing processes;

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restrictions on the marketing of a product;

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restrictions on product distribution;

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requirements to conduct post-marketing clinical trials;

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untitled or warning letters;

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withdrawal of the products from the market;

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refusal to approve pending applications or supplements to approved applications that we submit;

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recall of products;

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fines, restitution or disgorgement of profits or revenue;

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suspension or withdrawal of regulatory approvals;

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refusal to permit the import or export of our products;

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product seizure;

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injunctions;

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imposition of civil penalties; or

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criminal prosecution.

The FDA’s and other regulatory authorities’ policies may change and additional government regulations may be enacted that could affect the marketing of XTANDI or prevent, limit or delay regulatory approval of our other product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability.

*If we are unable to successfully develop enzalutamide for breast cancer with a suitable diagnostic, we may not be able to obtain regulatory approval for enzalutamide for breast cancer or realize the full potential for enzalutamide.

We may initiate a Phase 3 clinical trial evaluating enzalutamide in triple negative breast cancer (“TNBC”). A key element of our strategy to develop enzalutamide in TNBC is the use of a companion diagnostic to screen for patients who are likely to have androgen-driven TNBC. This strategy enables enrichment of patients more likely to benefit from treatment with enzalutamide. Patients who are diagnostic-negative are not likely to benefit from enzalutamide and would not be enrolled into a Phase 3 clinical trial. Regulatory approval for enzalutamide in androgen-driven TNBC will, therefore, likely depend on such a companion diagnostic as would future commercialization of enzalutamide if it is approved for patients with androgen-driven TNBC. We expect that we may enter into strategic alliances with a third party to develop the companion diagnostic. We and any future partners may encounter difficulties in developing enzalutamide for TNBC and/or developing the companion diagnostic for clinical, regulatory and/or commercial purposes. Companion diagnostics are subject to regulation by the FDA as a medical device and require separate regulatory clearance prior to commercialization.

Risks Related to our License and Manufacturing and Supply Agreement with CureTech, Ltd.

*The clinical molecule MDV9300 we licensed from CureTech is a biologic molecule, and we do not have long-standing experience or expertise in the development, manufacture, or commercialization of biologic molecules.

Under the license agreement, we will be responsible for all development, manufacturing, and commercialization activities for MDV9300 for all indications, including in oncology. We have limited history, experience, or expertise in the development, manufacturing and commercialization, including regulatory interactions, commercial manufacturing, and distribution of biologic molecules, like MDV9300.

The successful development, testing, manufacturing and commercialization of biologics involves a long, expensive, and uncertain process. There are unique risks and uncertainties with biologics, including:

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The development, manufacturing and marketing of biologics are subject to regulation by the FDA, the EMA, and other regulatory bodies. These regulations are often more complex and extensive than the regulations applicable to other pharmaceutical products;

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Manufacturing biologics, especially in large quantities, is often complex and may require the use of innovative technologies to handle living cells. Each lot of an approved biologic must undergo thorough testing for identity, strength, quality, purity and potency. Manufacturing biologics requires facilities specifically designed for and validated for this purpose, and sophisticated quality assurance and quality control procedures are necessary. Slight deviations anywhere in the manufacturing process, including filling, labeling, packaging, storage and shipping and quality control and testing, may result in lot failures, product recalls or spoilage. When changes are made to the manufacturing process, we may be required to provide preclinical and clinical data showing the comparable identity, strength, quality, purity or potency of the products before and after such changes. For MDV9300, we plan to implement changes in manufacturing site and to improve the manufacturing process as well as the critical bioassays. Comparability data will be required to support these changes; and

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The use of biologically derived ingredients can lead to allegations of harm, including infections or allergic reactions, or closure of product facilities due to possible contamination. Any of these events could result in substantial costs.

We are currently dependent on CureTech to produce clinical supply of MDV9300 that meets global regulatory standards. If CureTech fails to manufacture clinical supply of MDV9300 in accordance with our requirements, our ability to conduct clinical trials could be delayed or otherwise negatively impacted.

Our failure to successfully develop, manufacture, or commercialize MDV9300 could significantly impact our ability to generate value from the License Agreement with CureTech.

The development and commercialization of MDV9300 may face strong competition from other anti-PD-1 antibodies as well as other immune-oncology agents, which have already received marketing approval and are being developed for additional indications, as well as by larger companies with substantial resources and relatively more experience developing, manufacturing, and commercializing biologic molecules.

The immuno-oncology field is competitively crowded with biologics molecules and other agents, including anti-PD-1 antibodies as well as other immune-oncology agents, like MDV9300, currently approved and on the market or in development for various tumor types and patient populations by larger more experienced companies than ours, such as Bristol Myers Squibb, Roche, AstraZeneca plc, Pfizer and Merck, Inc. This competitive environment could compromise our ability to develop MDV9300 by limiting the availability of clinical trial

investigators, sites, and/or appropriate clinical patients, which could slow, delay or limit the progress of MDV9300’s development. In addition, if we are able to successfully develop MDV9300 and obtain regulatory approval for it in an oncology indication, it will likely face competition from already approved anti-PD-1 molecules and other agents in the same or similar oncology indications. This could significantly limit our ability to generate revenue with MDV9300. While we have some experience developing and in certain aspects of the commercialization of small molecule products, we may be required to hire additional qualified employees with experience in the development, manufacturing, and commercialization, including regulatory interactions, commercial manufacturing, and distributing biological molecules, like MDV9300. Many of our competitors are large, multinational pharmaceutical and biotechnology companies with considerably more resources and experience with biological molecules than us.

Risks Related to Our Future Product Development Candidates

Our business strategy depends on our ability to identify and acquire additional product candidates which we may never acquire or identify for reasons that may not be in our control, or are otherwise unforeseen or unforeseeable to us.

A key component of our business strategy is to diversify our product development risk by identifying and acquiring new product opportunities for development. However, we may not be able to identify promising new technologies. In addition, the competition to acquire promising biomedical technologies is fierce, and many of our competitors are large, multinational pharmaceutical, biotechnology and medical device companies with considerably more financial, development and commercialization resources and experience than we have. Thus, even if we succeed in identifying promising technologies, we may not be able to acquire rights to them on acceptable terms or at all. If we are unable to identify and acquire new technologies, we will be unable to diversify our product risk. We believe that any such failure would have a significant negative impact on our prospects.

Pharmaceutical and biological product candidates require extensive, time-consuming and expensive preclinical and clinical testing to establish safety and efficacy, and regulatory approval. If we are unable to successfully develop and test our product candidates, we will not be successful.

The research and development of pharmaceuticals and biological products is an extremely risky industry. Only a small percentage of product candidates that enter the development process ever receive regulatory approval. The process of conducting the preclinical and clinical testing required to establish safety and efficacy and obtain regulatory approval is expensive and uncertain and takes many years. If we are unable to complete preclinical or clinical trials of current or future product candidates, due to safety concerns with a product candidate, or if the results of these trials are not satisfactory to convince regulatory authorities of their safety or efficacy, we will not be able to obtain regulatory approval for commercialization. We cannot be certain if any of our product candidates will be approved by regulatory authorities. Furthermore, even if we are able to obtain regulatory approvals for any of our product candidates, those approvals may be for indications that are not as broad as desired or may contain other limitations that would adversely affect our ability to generate revenue from sales of those products. If this occurs, our business would be materially harmed and our ability to generate revenue would be severely impaired.

Enrollment and retention of patients in clinical trials of enzalutamide and other product candidates are expensive and time-consuming processes, could be made more difficult or rendered impossible by competing treatments or clinical trials of competing drugs in the same or other indications, and could result in significant delays, cost overruns, or both, in our product development activities, or in the failure of such activities.

We may encounter delays in enrolling, or be unable to enroll, a sufficient number of patients to complete any of our clinical trials, and even once enrolled we may be unable to retain a sufficient number of patients to complete any of our trials. Patient enrollment and retention in clinical trials depends on many factors, including the size of the patient population, the nature of the trial protocol, the existing body of safety and efficacy data with respect to the study drug, the number and nature of competing treatments and ongoing clinical trials of competing drugs for the same indication, the proximity of patients to clinical sites and the eligibility criteria for the study. Furthermore, any negative results we may report in clinical trials of enzalutamide or any potential future product candidates may make it difficult or impossible to recruit and retain patients in other clinical studies of that same product candidate. Delays or failures in planned patient enrollment and/or retention may result in increased costs, program delays or both, which could have a harmful effect on our ability to develop enzalutamide or any product candidates, or could render further development impossible.

Our reliance on third parties for the operation of our business may result in material delays, cost overruns and/or quality deficiencies in our development programs.

We currently rely on third party vendors to perform key product development tasks, such as conducting preclinical and clinical studies and manufacturing our product candidates at appropriate scale for preclinical and clinical trials. In addition, we currently rely on Astellas and its third party vendors to supply commercial quantities of XTANDI. To manage our business successfully, we will need to identify, engage and properly manage qualified third party vendors that will perform these development and manufacturing activities. For example, we need to monitor the activities of our vendors closely to ensure that they are performing their tasks correctly, on time, on budget and in compliance with strictly enforced regulatory standards. Our ability to identify and retain key

vendors with the requisite knowledge is critical to our business and the failure to do so could negatively impact our business. Because all of our key vendors perform services for other clients in addition to us, we also need to ensure that they are appropriately prioritizing our projects. If we fail to manage our key vendors well, we could incur material delays, cost overruns or quality deficiencies in our development and commercialization programs, as well as other material disruptions to our business.

Risks Related to the Operation of our Business

We have a history of net losses and we may incur substantial costs in the foreseeable future as we continue our development and commercialization activities and may never achieve, maintain, or increase profitability to the degree contemplated on a quarterly or annual basis.

We have incurred significant losses since our inception through March 31, 2015. We have incurred significant costs principally from funding our research and development activities, from general and administrative expenses and from our XTANDI commercialization activities. We may incur substantial costs in the foreseeable future as we continue to finance the commercialization of XTANDI in the U.S. market, clinical and preclinical studies of enzalutamide, MDV9300 and early stage programs, potential business development activities, and our corporate overhead costs, which could impact our ability to achieve, maintain, or increase profitability on a quarterly or annual basis. Our ability to generate revenue sufficient to offset these costs in order to achieve, maintain, or increase profitability on a quarterly or annual basis is dependent on our ability, alone or with collaboration partners, to successfully commercialize products for which we receive marketing approval.

*Our operating results are unpredictable and may fluctuate. If our operating results are below the expectations of securities analysts or investors, the market value of our common stock and the trading price of the Convertible Notes could decline.

Our operating results are difficult to predict and will likely fluctuate from quarter to quarter and year to year. Due to the competitive market for mCRPC therapies, XTANDI net sales will be difficult to predict from period to period. As a result, you should not rely on XTANDI net sales results in any period as being indicative of future performance and sales of XTANDI may be below the expectation of securities analysts or investors in the future. Additionally, you should not place undue reliance on the forward-looking statements about expectations for future XTANDI net sales from our partner Astellas, as we may not agree with such statements, or from us, as XTANDI net sales results are difficult to predict. We believe that our quarterly and annual results of operations may be affected by a variety of factors, including:

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the level of demand for XTANDI;

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the extent to which coverage and reimbursement for XTANDI is available from government and health administration authorities, private health insurers, managed care programs and other third-party payors;

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the timing, cost and level of investment in our and Astellas’ sales and marketing efforts to support XTANDI sales;

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the timing, cost and level of investment in our research and development activities involving XTANDI and our product candidates;

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the cost of manufacturing XTANDI, and the amount of legally mandated discounts to government entities, other discounts and rebates, product returns and other gross-to-net deductions;

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the risk/benefit profile, cost and reimbursement of existing and potential future drugs which compete with XTANDI;

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the timeliness and accuracy of financial information we receive from Astellas regarding XTANDI net sales globally, and shared U.S. development and commercialization costs for XTANDI incurred by Astellas, including the accuracy of the estimates Astellas uses in calculating any such financial information including for gross to net revenue adjustments;

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inventory levels at pharmaceutical wholesalers and distributors;

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expenditures that we will or may incur to acquire or develop additional technologies, product candidates and products; and

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the impact of fluctuations in foreign currency exchange rates.

In addition, our collaboration revenue will also depend on the achievement of sales milestones that trigger milestone payments under our existing collaboration with Astellas, as well as any upfront and milestone payments under potential future collaboration and license agreements. These upfront and milestone payments may vary significantly from quarter to quarter and any such variance could cause a significant fluctuation in our operating results from one quarter to the next. We measure compensation cost for stock-based awards made to employees at the grant date of the award, based on the fair value of the award, and recognize the cost as an expense over the employee’s requisite service period. As the variables that we use as a basis for valuing these awards change over time, including our underlying stock price and stock price volatility, the magnitude of the expense that we must recognize may vary significantly. Each reporting period, we revalue contingent consideration obligations associated with business acquisitions to their fair value and record increases in fair value as non-cash contingent consideration expense and decreases in fair value as non-cash contingent consideration income. Changes in contingent consideration result from changes in assumptions regarding probability of successful achievement of related milestones, the estimated timing in which the milestones may be achieved and the discount rates used to estimate the fair value of the liability. Contingent consideration may change significantly as our development programs progress, revenue estimates evolve and additional data is obtained, impacting our estimates.

For these and other reasons, it is difficult for us to accurately forecast future profits or losses. As a result, it is possible that in some quarters our operating results could be below the expectations of securities analysts or investors.

Sales fluctuations of XTANDI as a result of inventory levels at pharmaceutical wholesalers and distributors may cause our revenue to fluctuate, which could adversely affect our financial results, the market value of our common stock and the trading price of our Convertible Notes.

The pharmaceutical wholesalers and distributors with whom Astellas has entered into inventory management agreements make estimates to determine end user demand and may not be completely effective in matching their inventory levels to actual end user demand. As a result, changes in inventory levels held by those wholesalers and distributors can cause our operating results to fluctuate unexpectedly if sales of XTANDI to these wholesalers do not match end user demand. Adverse changes in economic conditions or other factors may cause wholesalers and distributors to reduce their inventories of XTANDI. As inventory of XTANDI in the distribution channel fluctuates from quarter to quarter, we may see fluctuations in collaboration revenue from XTANDI net sales.

A significant and growing amount of revenue we generate is in currency other than U.S. dollars, which exposes us to foreign exchange risk.

A significant and growing amount of our collaboration revenue is generated from royalties on ex-U.S. net sales of XTANDI. The royalties we receive from Astellas on net sales of XTANDI outside of the United States are calculated by converting the respective countries’ XTANDI net sales in local currency to U.S. dollars. The royalties are paid to us in U.S. dollars on a quarterly basis. A strengthening of the U.S. dollar compared to current exchange rates, would likely result in lower collaboration revenue related to ex-U.S. XTANDI net sales than otherwise would have been reported as a result of such unfavorable exchange rate movements.

We currently do not actively hedge our exposures to fluctuations in foreign currency. Depending on the size of the exposures and the relative movements of exchange rates, if we choose not to hedge or fail to hedge effectively our exposure, we could experience adverse effects on our financial statements and financial condition.

If we fail to attract and keep senior management personnel, we may be unable to successfully develop our product candidates, including the continued development activities for enzalutamide, identify and acquire promising new technologies, conduct our clinical trials, and commercialize our products, and our business could be harmed.

Our future success depends upon the continued services of our executive officers and our ability to attract, retain, and motivate highly qualified management to oversee our business. We are particularly dependent on the continued services of David Hung, M.D., our president and chief executive officer and a member of our board of directors. Dr. Hung identified enzalutamide for acquisition and has primary responsibility for identifying and evaluating other potential product candidates. We believe that Dr. Hung’s services in this capacity would be difficult to replace. None of our executive officers is bound by an employment agreement for any specific term, and they may terminate their employment at any time. The loss of the services of any of our executive officers could delay or prevent the successful commercialization of XTANDI and continued development activities for enzalutamide and other product candidates, and adversely affect or preclude the identification and acquisition of new product candidates, either of which events could harm our business.

Although we have not historically experienced unique difficulties attracting and retaining qualified employees, we could experience such problems in the future. For example, competition for qualified personnel in the biotechnology and pharmaceutical fields is intense, especially in the San Francisco Bay Area. In addition, we will need to hire additional personnel as we expand our clinical development and commercial activities. We may not be able to attract and retain quality personnel on acceptable terms.

We may encounter difficulties in managing our growth and expanding our operations successfully.

Our business has experienced significant growth, which we expect will continue as we expand our commercialization efforts for XTANDI, seek to advance our product candidates through clinical trials, and integrate our potential business development activities. We expect that we will need to expand our development, regulatory, manufacturing, and commercial capabilities or contract with third parties to provide certain of these activities for us. As our operations expand, we expect that we will need to manage additional relationships with various strategic partners, suppliers and other third parties. Future growth may impose significant added responsibilities on members of management. Our future financial performance and our ability to develop and commercialize our product candidates and to compete effectively will depend, in part, on our ability to manage any future growth effectively. To that end, we must be able to manage our commercialization and development activities and clinical trials effectively and hire, train and integrate additional personnel. We may not be able to accomplish these tasks, and our failure to accomplish any of them could prevent us from successfully growing our company.

Our significant level of indebtedness and lease obligations could adversely affect our financial condition. In addition, we may not have sufficient funds to service our indebtedness and lease obligations when payments are due.

At March 31, 2015, we had outstanding $258.7 million of the Convertible Notes, and approximately $66.9 million of minimum lease commitments. We may also incur additional indebtedness to meet future financing needs, including for example in connection with business development activities, to refinance existing debt, and for other general corporate purposes. Our substantial indebtedness could have significant effects on our business, results of operations and financial condition. For example, it could:

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make it more difficult for us to satisfy our financial obligations, including with respect to the Convertible Notes and leases;

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increase our vulnerability to general adverse economic, industry and competitive conditions;

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reduce the availability of our cash resources to fund our operations because we will be required to dedicate a substantial portion of our cash resources to the payment of principal and interest on our indebtedness and lease payments;

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limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;

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prevent us from raising funds to redeem or repurchase the Convertible Notes;

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place us at a competitive disadvantage compared to our competitors that are less highly leveraged and that, therefore, may be able to take advantage of opportunities that our leverage prevents us from exploring; and

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limit our ability to obtain additional financing.

Each of these factors may have a material and adverse effect on our financial condition and viability.

We may need additional funds to support our operations, and such funding may not be available to us on acceptable terms, or at all, which would force us to delay, scale back or eliminate some or all of our development programs and other operations, restructure or refinance our indebtedness, or any combination of the foregoing. Raising additional capital may subject us to unfavorable terms, cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our product candidates and technologies.

We require significant capital to fund our operations. We have historically funded our operations primarily through public offerings of our common stock, the issuance of the Convertible Notes, and from the upfront, milestone, and costs-sharing payments under agreements with our current and former collaboration partners and, subsequent to September 13, 2012, from collaboration revenue related to XTANDI net sales. At March 31, 2015, we had cash and cash equivalents totaling $568.6 million available to fund our operations. We expect to spend substantial amounts of capital for our operations in the future. Based on our current expectations, we believe our capital resources at March 31, 2015 will be sufficient to fund our currently planned operations for at least the next twelve months. This estimate is based on a number of assumptions that may prove to be wrong, including assumptions regarding the amount and timing of net sales of XTANDI, potential XTANDI approvals in new markets and for other indications, and potential receipt of profit sharing, royalty, and milestone payments under our Astellas Collaboration Agreement, and we could exhaust our available cash and cash equivalents earlier than currently anticipated. For example, we may be required or choose to seek additional capital to fund the costs of commercialization of XTANDI in the United States, to expand our preclinical and clinical development activities for enzalutamide and MDV9300 and other existing or potential future product candidates, to fund business acquisitions, investments or to in-license technologies, if we face challenges or delays in connection with our clinical trials, to maintain minimum cash balances that we deem reasonable and prudent, or in the event a fundamental change occurs under the terms of the Convertible Notes, which would give the holders of the Convertible Notes the right to require us to purchase their Convertible Notes in cash or if we elect to redeem all or part of the Convertible Notes for cash if they meet the technical requirements of redemption beginning April 6, 2015, or if we elect to settle for cash all or a portion of any conversion notices we receive from holders in periods in which the Convertible Notes meet the requirement of convertibility. Our ability to raise additional funds on acceptable terms will be dependent on the climate of worldwide capital markets, which could be challenging.

We may have additional tax liabilities.

We are subject to income taxes in various jurisdictions. Significant judgment is required in determining our provision for income taxes and other tax liabilities. Our effective income tax rate in the future is subject to volatility and could be adversely affected by a number of factors, including: interpretations of existing tax laws; changes in tax laws and rates; future levels of research and development expenditures; changes in the mix of earnings in countries with differing statutory tax rates in which we may conduct business, changes in the valuation of deferred tax assets and liabilities; state income taxes; the tax impact of stock-based compensation; changes in estimates of prior years’ items; tax costs for acquisition-related items; changes in accounting standards; non-deductible officers’ compensation; limitations on the utilization of net operating losses and tax credits due to changes in ownership; and overall levels of income before taxes. The impact of our income tax provision resulting from these items may be significant and could have a negative impact on our net income.

We are also subject to non-income based taxes, such as payroll, sales, use, net worth, property, and goods and services taxes in the United States. We may have additional exposure to non-income based tax liabilities.

We are regularly subject to audits by tax authorities in the jurisdictions in which we conduct business. Although we believe our tax positions are reasonable, the final outcome of tax audits and related litigation could be materially different than that reflected in our historical income tax provisions and accruals, and we could be subject to assessments of additional taxes and/or substantial fines or penalties. The resolution of any audits or litigation could have an adverse effect on our financial position and results of operations.

We and our subsidiaries are engaged in a number of intercompany transactions. Although we believe that these transactions reflect arm’s length terms and that proper transfer pricing documentation is in place, which should be respected for tax purposes, the transfer prices and terms and conditions of such transactions may be scrutinized by tax authorities, which could result in additional tax and/or penalties becoming due.

Intellectual property protection for our product candidates is crucial to our business, and is subject to a significant degree of legal risk, particularly in the life sciences industry.

The success of our business will depend in part on our ability to maintain and obtain intellectual property protection, primarily patent protection for the XTANDI product and any potential future product candidates, as well as successfully asserting and defending these patents against third-party challenges. We and our collaborators will only be able to protect the XTANDI product and our potential future product candidates from unauthorized commercialization by third parties to the extent that valid and enforceable patents or trade secrets cover them. Furthermore, future protection of our proprietary rights is uncertain because legal means may afford only limited protection and may not adequately protect our rights or permit us or our potential future collaborators to gain or keep our competitive advantage.

The patent positions of life sciences companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain unresolved. Further, changes in either the patent laws or in interpretations of patent laws in the United States or other countries may diminish the value of our intellectual property rights. Accordingly, we cannot predict the breadth of claims that may be granted or enforced for our patents or for third-party patents that we have licensed. For example:

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we or our licensors might not have been the first to make the inventions covered by each of our pending patent applications and issued patents;

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we or our licensors might not have been the first to file patent applications for these inventions;

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others may independently develop similar or alternative technologies or duplicate any of our technologies;

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it is possible that none of our pending patent applications or the pending patent applications of our licensors will result in issued patents;

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our issued patents and future issued patents, or those of our licensors, may not provide a basis for protecting commercially viable products, may not provide us with any competitive advantages, or may be challenged by third parties and invalidated or rendered unenforceable; and

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we may not develop additional proprietary technologies or product candidates that are patentable.

Further, even if we can obtain protection for and defend the intellectual property position of the XTANDI product or any potential future product candidates, we or any of our potential future collaborators still may not be able to exclude competitors from developing or marketing competing drugs. Should this occur, we and our potential future collaborators may not generate any revenues or profits from the XTANDI product or any potential future product candidates or our revenue or profits would be significantly decreased.

We could become subject to litigation or other challenges regarding intellectual property rights, which could divert management attention, cause us to incur significant costs, prevent us from selling or using the challenged technology and/or subject us to competition by lower priced generic products.

Generic and other pharmaceutical manufacturers are and have been very aggressive in challenging the validity of patents held by proprietary pharmaceutical companies, especially if these patents are commercially significant. Pursuant to the provisions of the Hatch-Waxman Act, the XTANDI patents listed in the FDA “Orange Book” could be challenged by generic manufacturers as early as four years from the initial approval of the XTANDI product in the United States. Outside the United States, we currently are facing three pre-grant patent oppositions in India, and we may face additional challenges to our existing or future patents covering the XTANDI product or any potential future product candidates. If a generic pharmaceutical company or other third party were able to successfully invalidate any of our present or future patents, the XTANDI product and any potential future product candidates that may ultimately receive marketing approval could face additional competition from lower-priced generic products that would result in significant price and revenue erosion and have a significantly negative impact on the commercial viability of the affected product candidate(s).

In the future, we may be a party to litigation to protect our intellectual property or to defend our activities in response to alleged infringement of a third party’s intellectual property. These claims and any resulting lawsuit, if successful, could subject us to significant liability for damages and invalidation, or a narrowing of the scope, of our proprietary rights. These lawsuits, regardless of their success, would likely be time-consuming and expensive to litigate and resolve and would divert management time and attention. Any potential intellectual property litigation also could force us or our licensees to do one or more of the following:

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discontinue our products that use or are covered by the challenged intellectual property; or

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obtain from the owner of the allegedly infringed intellectual property right a license to sell or use the relevant technology, which license may not be available on reasonable terms, or at all.

If we or our licensees are forced to take any of these actions, our business may be seriously harmed. Although we carry general liability insurance, our insurance does not cover potential claims of this type.

In addition, our patents and patent applications, or those of our licensors, could face other challenges, such as interference proceedings, opposition proceedings, re-examination proceedings, inter parties review, post-grant review, derivation proceedings and pre-grant submissions. Any such challenge, if successful, could result in the invalidation of, or in a narrowing of the scope of, any of our patents and patent applications subject to the challenge. Any such challenges, regardless of their success, would likely be time-consuming and expensive to defend and resolve and would divert our management’s time and attention.

We may in the future initiate claims or litigation against third parties for infringement to protect our proprietary rights or to determine the scope and validity of our proprietary rights or the proprietary rights of competitors. These claims could result in costly litigation and the diversion of our technical and management personnel and we may not prevail in making these claims.

We rely on license agreements for certain aspects of our product candidates and our technology, and failure to meet our obligations under those agreements could severely negatively impact our business, and ability to generate revenue.

We have entered into agreements with third-party commercial and academic institutions to license intellectual property rights and technology. For example, we have a license agreement with UCLA pursuant to which we were granted exclusive worldwide rights

to certain UCLA patents related to XTANDI and a family of related compounds. Some of these license agreements, including our license agreement with UCLA, contain diligence and milestone-based termination provisions, in which case our failure to meet any agreed upon diligence requirements or milestones may allow the licensor to terminate the agreement. If our licensors terminate our license agreements or if we are unable to maintain the exclusivity of our exclusive license agreements, we may be unable to continue to develop and commercialize XTANDI or any potential future product candidates based on licensed intellectual property rights and technology.

In the future, we may need to obtain additional licenses of third-party technology that may not be available to us or are available only on commercially unreasonable terms, and which may cause us to operate our business in a more costly or otherwise adverse manner that was not anticipated.

From time to time we may be required to license technology from additional third parties to further develop XTANDI and any future product candidates. Should we be required to obtain licenses to any third-party technology, including any such patents based on biological activities or required to manufacture our product candidates, such licenses may not be available to us on commercially reasonable terms, or at all. The inability to obtain any third-party license required to develop any of our product candidates could cause us to abandon any related development efforts, which could seriously harm our business and operations.

We may become involved in disputes with Astellas or any potential future collaborators over intellectual property ownership, and publications by our research collaborators and scientific advisors could impair our ability to obtain patent protection or protect our proprietary information, which, in either case, could have a significant impact on our business.

Inventions discovered under research, material transfer or other such collaboration agreements, including the Astellas Collaboration Agreement, may become jointly owned by us and the other party to such agreements in some cases and the exclusive property of either party in other cases. Under some circumstances, it may be difficult to determine who owns a particular invention, or whether it is jointly owned, and disputes could arise regarding ownership of those inventions. These disputes could be costly and time consuming and an unfavorable outcome could have a significant adverse effect on our business if we were not able to protect or license rights to these inventions. In addition, our research collaborators and scientific advisors generally have contractual rights to publish our data and other proprietary information, subject to our prior review. Publications by our research collaborators and scientific advisors containing such information, either with our permission or in contravention of the terms of their agreements with us, may impair our ability to obtain patent protection or protect our proprietary information, which could significantly harm our business.

Trade secrets may not provide adequate protection for our business and technology.

We also rely on trade secrets to protect our technology, especially where we believe patent protection is not appropriate or obtainable. However, trade secrets are difficult to protect. While we use reasonable efforts to protect our trade secrets, our or any potential collaborators’ employees, consultants, contractors or scientific and other advisors may unintentionally or willfully disclose our information to competitors. If we were to enforce a claim that a third party had illegally obtained and was using our trade secrets, our enforcement efforts would be expensive and time consuming, and the outcome would be unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets. Moreover, if our competitors independently develop equivalent knowledge, methods or know-how, it will be more difficult or impossible for us to enforce our rights and our business could be harmed.

Significant disruptions of information technology systems or breaches of data security could adversely affect our business.

Our business is increasingly dependent on critical, complex and interdependent information technology systems to support business processes as well as internal and external communications. The size and complexity of our computerized information systems make them vulnerable to breakdown, malicious intrusion, catastrophic events, computer viruses, and human error. We have experienced at least one successful intrusion into our computer systems, and although it did not have a material adverse effect on our operations, there can be no assurance of a similar result in the future. We have developed systems and processes that are designed to protect our information and prevent data loss and other security breaches, including systems and processes designed to reduce the impact of a security breach; however, such measures cannot provide absolute security, and we have taken and are continually taking additional security measures to protect against any future intrusion, including employee training. We may also face risks associated with significant disruptions of information technology systems or breaches of data security that could occur at third parties with whom we have relationships such as third party clinical research organizations, third party clinical manufacturing organization, clinical trial sites, current and potential future collaboration partners, and administrators of our corporate employee benefit plans. Any failure to protect against breakdowns, malicious intrusions and computer viruses may result in the impairment of production and key business processes. In addition, our systems are potentially vulnerable to data security breaches, whether by employees or others, which may expose sensitive data to unauthorized persons. Such data security breaches could lead to the loss of trade secrets or other intellectual property, or could lead to the public exposure of personal information of our employees, clinical trial patients, customers, and others. Such disruptions and breaches of security could expose us to liability and have a material adverse effect on the operating results and financial condition of our business.

Risks generally associated with a company-wide implementation of an enterprise resource planning (ERP) system may adversely affect our business and results of operations or the effectiveness of our internal controls over financial reporting.

We expect to commence implementation of a company-wide ERP system to upgrade certain existing business, operational, and financial processes. ERP implementations are complex and time-consuming projects that may require a year or more to complete. Our results of operations could be adversely affected if we experience time delays or cost overruns during the ERP implementation process, or if the ERP system or associated process changes do not give rise to the benefits that we expect.

Risks Related to the Pharmaceutical Industry, Including the Activities of Medivation, Inc.

Our industry is highly regulated by the FDA and comparable foreign regulatory agencies. We must comply with extensive, strictly enforced regulatory requirements to develop, obtain, and maintain marketing approval for any of our product candidates.

Securing FDA approval requires the submission of extensive preclinical and clinical data and supporting information for each therapeutic indication to establish the product candidate’s safety and efficacy for its intended use. It takes years to complete the testing of a new drug, biologic or medical device and development delays and/or failure can occur at any stage of testing. Any of our present and future clinical trials may be delayed, halted or approval of any of our products may be delayed or may not be obtained due to any of the following:

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any preclinical test or clinical trial may fail to produce safety and efficacy results satisfactory to the FDA or foreign regulatory authorities;

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preclinical and clinical data can be interpreted in different ways, which could delay, limit or prevent regulatory approval;

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negative or inconclusive results from a preclinical test or clinical trial or adverse medical events during a clinical trial could cause a preclinical study or clinical trial to be repeated or a program to be terminated, even if other studies or trials relating to the program are ongoing or have been completed and were successful;

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the FDA or foreign regulatory authorities can place a clinical hold on a trial if, among other reasons, it finds that patients enrolled in the trial are or would be exposed to an unreasonable and significant risk of illness or injury;

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the facilities that we utilize, or the processes or facilities of third party vendors, including without limitation the contract manufacturers who will be manufacturing drug substance and drug product for us or any potential collaborators, may not complete successful inspections by the FDA or foreign regulatory authorities; and

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we may encounter delays or rejections based on changes in FDA policies or the policies of foreign regulatory authorities during the period in which we develop a product candidate or the period required for review of any final regulatory approval before we are able to market any product candidate.

In addition, information generated during the clinical trial process is susceptible to varying interpretations that could delay, limit, or prevent regulatory approval at any stage of the approval process. Moreover, early positive preclinical or clinical trial results may not be replicated in later clinical trials. Failure to demonstrate adequately the quality, safety and efficacy of any of our product candidates would delay or prevent regulatory approval of the applicable product candidate. There can be no assurance that if clinical trials are completed, either we or our collaborative partners will submit applications for required authorizations to manufacture or market potential products or that any such application will be reviewed and approved by appropriate regulatory authorities in a timely manner, if at all.

We may be subject, directly or indirectly, to federal and state healthcare fraud and abuse and false claims laws and regulations. Prosecutions under such laws have increased in recent years and we may become subject to such litigation. If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.

Commercialization of drugs and biologics that receive FDA approval are subject directly or indirectly, to various state and federal fraud and abuse laws, including, without limitation, the federal Anti-Kickback Statute and federal False Claims Act and the state law equivalents of such laws. These laws may impact, among other things, our sales, marketing, and education programs.

The federal Anti-Kickback Statute prohibits persons and entities from knowingly and willingly soliciting, offering, receiving or providing remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual, or the furnishing or arranging for a good or service, for which payment may be made under a federal healthcare program such as the Medicare and Medicaid programs. The Anti-Kickback Statute is broad, and despite a series of narrow regulatory safe harbors and statutory exceptions, prohibits many arrangements and practices that are lawful in businesses outside of the healthcare industry. Penalties for violations of the federal Anti-Kickback Statute include, among other things, criminal and administrative penalties and civil sanctions such as fines, imprisonment and possible exclusion from Medicare, Medicaid and other federal healthcare programs. Many states have adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare items or services reimbursed by any source, including private insurance programs.

The federal False Claims Act prohibits persons and entities from knowingly filing, or causing to be filed, a false claim, or the knowing use of false statements, to obtain payment from the federal government. Suits filed under the False Claims Act, known as “qui tam” actions, can be brought by any individual on behalf of the government, and such individuals, commonly known as “whistleblowers,” may share in a proportion of any amounts paid by the entity to the government in fines or settlement. The frequency of filing qui tam actions has increased significantly in recent years, causing greater number of biotechnology and pharmaceutical companies to have to defend False Claims Act actions. When it is determined that an entity has violated the False Claims Act, the entity may be required to pay up to three times the actual damages sustained by the government, plus civil penalties for each separate false claim. Various states have also enacted laws modeled after the federal False Claims Act. Although we have developed, implemented, and continue to improve a program for compliance with all federal and state laws, we cannot guarantee that our compliance program will be sufficient or effective, that our employees will comply with our policies and that our employees will notify us of any violation of our policies, that we will have the ability to take appropriate and timely corrective action in response to any such violation, or that we will make decisions and take actions that will necessarily limit or avoid liability for whistleblower claims that individuals, such as employees or former employees, may bring against us or that governmental authorities may prosecute against us based on information provided by individuals. If one or more individuals bring a whistleblower claim against us or if a governmental authority prosecutes a claim against us on the basis of information provided by one or more individuals, and if we are found liable and a fine and/or an injunction is imposed on us or we agree to pay a fine and/or accept an injunction in settlement of the claim, the payment of the fine and/or the curtailment of our activities consequent to the injunction could have a material adverse effect on our financial condition and impair or prevent us from conduction our business. In addition, the costs and fees associated with defending a whistleblower claim would be significant.

We may also be subject to federal criminal healthcare fraud statutes that were created by the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH. The HIPAA health care fraud statute prohibits, among other things, knowingly and willfully executing, or attempting to execute a scheme to defraud any healthcare benefit program, including private payors. A violation of this statute is a felony and may result in fines, imprisonment, and/or exclusion from government sponsored programs. The HIPAA false statements statute prohibits, among other things, knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement or representation in connection with the delivery of or payment for healthcare benefits, items or services. A violation of this statute is a felony and may result in fines and/or imprisonment.

We, and our business activities, are also subject to the federal Physician Payments Sunshine Act, which is within PPACA. The federal Physician Payments Sunshine Act, and its implementing regulations, require certain manufacturers of drugs, devices, biological, and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program (with certain exceptions) to report annually information related to certain payments or other transfers of value provided to physicians and teaching hospitals and other healthcare providers. The final rule which required data collection on all payments and transfer of value took effect on August 1, 2013. The first reports were due in 2014, and the information was made publicly available on a searchable website. In addition, there has been a recent trend of increased federal and state regulation on payments made to physicians. Certain states mandate implementation of commercial compliance programs, impose restrictions on drug manufacturer marketing practices, and/or the tracking and reporting of gifts, compensation and remuneration to physicians.

We are unable to predict whether we could be subject to actions under any of these or other fraud and abuse laws, or the impact of such actions. If we are found to be in violation of any of the laws described above and other applicable state and federal fraud and abuse laws, we may be subject to penalties, including civil and criminal penalties, damages, fines, exclusion from government healthcare reimbursement programs and the curtailment or restructuring of our operations, any of which could have a material adverse effect on our business an results of operations.

We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and other worldwide anti-bribery laws.

We are subject to the U.S. Foreign Corrupt Practices Act, or FCPA, which generally prohibits companies and their intermediaries from making payments to non-U.S. government officials for purpose of obtaining or retaining business or securing any other improper advantage. We are also subject to similar anti-bribery laws in the jurisdictions in which we operate. Failure to comply with the FCPA or related laws governing the conduct of business with foreign government entities could disrupt our business and lead to severe criminal and civil penalties, including criminal and civil fines, denial of government reimbursement for our products and exclusion from participation in government healthcare programs. Other remedial measures could include further changes or enhancements to our procedures, policies, and controls and potential personnel changes and/or disciplinary actions, any of which could have a material adverse impact on our business, financial condition, results of operations and liquidity. We could also be affected by any allegation that we violated such laws.

If the FDA or other applicable regulatory authorities approve generic products that compete with any of our products or product candidates, the sales of our products or product candidates may be adversely affected.

Once an NDA is approved, the product covered thereby becomes a “listed drug” which, in turn can be relied upon by potential competitors in support of an approval of an abbreviated new drug application, or ANDA, or 505(b)(2) application. U.S. laws and other applicable policies provide incentives to manufacturers to create modified, non-infringing versions of a drug to facilitate the approval of an ANDA or other application for a generic substitute. These manufacturers might only be required to conduct a relatively inexpensive study to show that their product has the same active ingredient(s), dosage form, strength, route of administration, and conditions of use, or labeling, as our product or product candidate and that the generic product is bioequivalent to ours, meaning it is absorbed in the body at the same rate and to the same extent as our product or product candidate. These generic equivalents, which must meet the same quality standards as branded pharmaceuticals, would be significantly less costly than ours to bring to market and companies that produce generic equivalents are generally able to offer their products at lower prices. Thus, after the introduction of a generic competitor, a significant percentage of sales of any branded product is typically lost to the generic product. Accordingly, competition from generic equivalents to our products or product candidates would materially adversely impact our revenues, profitability and cash flows and substantially limit our ability to obtain a return on the investments that we have made in our product candidates.

To the extent that we receive regulatory approval to market biological products in the future, we will face competition from biosimilar products. A growing number of companies have announced their intention to develop biosimilar products, some of which could potentially compete with our product candidates. Because of the abbreviated pathway for approval of biosimilars in the United State and abroad, we may in the future face greater competition from biosimilar products. This additional competition could have a material adverse effect on our business and results of operations.

Healthcare reform initiatives and other third-party cost-containment pressures could cause us to sell our products at lower prices, resulting in decreased revenues.

The United States and some foreign jurisdictions have enacted or are considering enacting a number of legislative and regulatory proposals to change the healthcare system in ways that could affect our ability to profitably sell XTANDI and other product candidates should they received marketing approval. Among policy makers and payors in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

In March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, collectively PPACA, became law in the United States. PPACA substantially changed and will continue to change the way healthcare is financed by both governmental and private insurers and significantly affects the pharmaceutical industry. The provisions of PPACA most relevant to the pharmaceutical industry include:

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an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain governmental health care programs, not including orphan drug sales;

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an increase in the rebates a manufacturer must pay under the Medicaid Drug Rebate Program to 23.1% and 13% of the average manufacturer price for branded and generic drugs, respectively;

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Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D;

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extension of manufacturers’ Medicaid rebate liability to covered drugs dispensed to individuals who are enrolled in Medicaid managed care organizations;

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expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals with income at or below 133% of the Federal Poverty Level beginning in 2014, thereby potentially increasing manufacturers’ Medicaid rebate liability;

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expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;

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a new requirement to report certain financial arrangements with physicians and teaching hospitals, as defined in PPACA and its implementing regulations, including reporting any payment or “transfers of value” made or distributed to physicians and teaching hospitals, and reporting any ownership and investment interests held by physicians and their immediate family members and applicable group purchasing organizations;

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expansion of health care fraud and abuse laws, including the federal False Claims Act and Anti-Kickback Statute, new government investigative powers, and enhanced penalties for noncompliance;

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a licensure framework for follow-on biologic products; and

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a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.

We anticipate that the PPACA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and additional downward pressure on the price that we receive for any approved product, and could seriously harm our business. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. If we fail to successfully secure and maintain adequate coverage and reimbursement of our products or are significantly delayed in doing so, we will have difficulty achieving market acceptance of our products and expected revenue and profitability which would have a material adverse effect on our business, results of operations and financial condition. In addition, we will face competition from other approved drugs against which we compete, and the marketers of such other drugs are likely to be significantly larger than us and therefore enjoy significantly more negotiating leverage with respect to the individual payors than we may have.

We may be subject to product liability or other litigation, which could harm our ability to efficiently and effectively conduct our business, and, if successful, could materially and adversely harm our business and financial condition as a result of the costs of liabilities that may be imposed thereby.

Our business exposes us to the risk of product liability claims that is inherent in the development, manufacturing, distribution and sale of pharmaceutical products. If XTANDI or any potential future product candidate harms people, or is alleged to be harmful, we may be subject to costly and damaging product liability claims brought against us by clinical trial participants, consumers, health care providers, corporate partners or others. We have product liability insurance covering commercial sales of XTANDI and our ongoing clinical trials. However, the amount of insurance we maintain may not be adequate to cover all liabilities that we may incur. If we are unable to obtain insurance at an acceptable cost or otherwise protect against potential product liability claims, we may be exposed to significant litigation costs and liabilities, which may materially and adversely affect our business and financial position. If we are sued for injuries allegedly caused by XTANDI or any of our current or future product candidates, our litigation costs and liability could exceed our total assets and our ability to pay. Regardless of merit or eventual outcome, liability claims may result in:

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decreased demand for XTANDI and any potential future product candidate that we may develop;

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injury to our reputation;

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withdrawal of clinical trial participants;

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significant costs to defend the related litigation;

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substantial monetary awards to trial participants or patients;

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loss of revenue; and

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the inability to commercialize any other products that we may develop.

In addition, we may from time to time become involved in various lawsuits and legal proceedings which arise in the ordinary course of our business, such as our litigation with the Regents of the University of California. On April 11, 2014, The Regents of the University of California, or UCLA, filed a complaint against us and one of our subsidiaries in the Superior Court of the State of California, County of San Francisco. The complaint arises from the parties’ 2005 Exclusive License Agreement, or ELA, which grants our subsidiary rights in certain UCLA patents, including the UCLA patents covering XTANDI. The complaint centers on two allegations. The first allegation is that we and our subsidiary have failed to pay UCLA ten percent of “Operating Profits” we received (and will continue to receive) from Astellas Pharma, Inc. as a result of the 2009 Collaboration Agreement between us and Astellas. UCLA alleges that such Operating Profits are “Sublicensing Income” under the ELA and that UCLA is entitled to ten percent of such payments. The second allegation is that we breached our fiduciary duties to UCLA, as a minority shareholder of our subsidiary. UCLA owns a fraction of one percent of the outstanding shares of our subsidiary. The complaint seeks a declaration and judgment for breach of contract related to the allegation that “Operating Profits” payments received from Astellas are “Sublicensing Income” under the ELA, a judgment that we have breached our fiduciary duties and an injunction requiring us to comply with our fiduciary duties. At the time of this filing, UCLA’s second allegation that we breached our fiduciary duties to UCLA, as a minority shareholder of MPT, had been dismissed without prejudice. Although the UCLA complaint does not seek termination of the ELA, if we are not successful in this litigation we may be required to pay UCLA ten percent of the “Operating Profits” and be subject to other liabilities, any of which could have a material adverse effect on our financial condition and results of operations. See Part II, Item 1, “Legal Proceedings” for additional information on this litigation. Any litigation to which we are subject could require significant involvement of our senior management and may divert management’s attention from our business and operations. Litigation costs or an adverse result in any litigation that may arise from time to time may adversely impact our operating results or financial condition.

Risks Related to Business Acquisitions, Licenses, Investments and Strategic Alliances

Business acquisitions, licenses, investments and strategic alliances could disrupt our operations and may expose us to increased costs and unexpected liabilities.

We may acquire or make investments in other companies, enter into other strategic relationships, or in-license technologies. To do so, we may use cash, issue equity that could dilute our current stockholders, or incur debt or assume indebtedness. These transactions involve numerous risks, including but not limited to:

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difficulty integrating acquired technologies, products, operations, and personnel with our existing business;

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diversion of management’s attention in connection with both negotiating the acquisition and integrating the business;

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strain on managerial and operational resources;

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difficulty implementing and maintaining effective internal control over financial reporting at businesses that we acquire, particularly if they are not located near our existing operations;

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exposure to unforeseen liabilities of acquired companies or companies in which we invest;

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potential costly and time-consuming litigation, including stockholder lawsuits;

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potential issuance of securities to equity holders of the company being acquired which may have a dilutive effect on our stockholders;

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the need to incur additional debt or use our existing cash balances; and

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the requirement to record potentially significant additional future non-cash operating costs for the amortization of intangible assets and potential future impairment or write-down of intangible assets and/or goodwill as well as potentially significant non-cash adjustments to contingent consideration liabilities which would be recorded within operating expenses.

As a result of these or other problems and risks, businesses we acquire or invest in may not produce the revenues, earnings or business synergies that we anticipated, acquired or licensed technologies may not result in regulatory approvals, and acquired or licensed commercial products may not perform as expected. As a result, we may incur higher costs and realize lower revenues than we had anticipated. We cannot assure you that any acquisitions or investments we have made or may make in the future will be successfully identified and completed or that, if completed, the acquired business, licenses, investments, products, or technologies will generate sufficient revenue to offset the negative costs or other negative effects on our business. Failure to manage effectively our growth through acquisition or in-licensing transactions could adversely affect our growth prospects, business, results of operations, financial condition, and cash flow.

Funding may not be available for us to make acquisitions, investments, strategic alliances or in-license technologies in order to grow our business.

We have made and anticipate that we may continue to engage in strategic transactions to grow our business through acquisitions, investments, strategic alliances or in-licensing of technologies. Our growth plans rely, in part, on the successful identification and completion of these strategic transactions. At any particular time, we may need to raise substantial additional capital or issue additional equity to finance such transactions. There is no assurance that we will be able to secure additional funding on acceptable terms, or at all, or obtain stockholder approvals necessary to issue additional equity to finance such transactions. If we are unsuccessful in obtaining financing, our business would be adversely affected.

Our consolidated financial statements may be impacted in future periods based on the accuracy of our valuations of our acquired businesses and other agreements.

Accounting for business combinations and other agreements, e.g., in-license transaction, may involve complex and subjective valuations of the assets and liabilities recorded as a result of the business combination or other agreement, and in some instances contingent consideration, which is recorded in the our consolidated financial statements pursuant to the standards applicable for business combinations in accordance with accounting principles generally accepted in the United States. Differences between the inputs and assumptions used in the valuations and actual results could have a material effect on our consolidated financial statements in future periods.

We have substantial intangible assets and goodwill as a result of the license of MDV9300 from CureTech. A significant impairment or write-down of intangible assets and/or goodwill would have a material adverse event on our consolidated financial statements.

Regarding intangible assets and goodwill, we are required to perform an annual, or in certain situations a more frequent, assessment for possible impairment for accounting purposes. During the fourth quarter of 2014, we recorded significant intangible assets and goodwill as a result of the CureTech transaction. At March 31, 2015, we had intangible assets and goodwill of approximately $111.0 million, or approximately 12% of our total assets. If our development activities with respect to in-process research and development are not successful, we may be required to incur a non-cash impairment charge, adversely affecting our consolidated results of operations.

Risks Related to Ownership of Our Common Stock and Convertible Notes

Our stock price has been and may continue to be volatile and our stockholders’ investment in our common stock and Convertible Notes could decline in value.

The market prices for our securities and those of other life sciences companies have been highly volatile and often unrelated or disproportionate to the operating performance of those companies, and may continue to be highly volatile in the future. There has been particular volatility in the market prices of securities of life sciences companies because of problems or successes in a given market segment or because investor interest has shifted to other segments. These broad market and industry factors may cause the market price of our common stock and the trading price of our Convertible Notes to decline, regardless of our operating performance. We have no control over this volatility and can only focus our efforts on our own operations, and even these may be affected due to the state of the capital markets.

The following factors, in addition to other risk factors described herein, may have a significant impact on the market price of our common stock and trading price of our Convertible Notes:

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comments made by securities analysts, including changes in their recommendations;

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selling by existing stockholders and short-sellers;

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sales of our common stock by our directors, officers or significant stockholders, including sales effected pursuant to predetermined trading plans adopted under the safe-harbor afforded by Rule 10b5-1;

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the conversion of all or part of our Convertible Notes into shares of our common stock;

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negative opinions that are misleading and/or inaccurate regarding our business, management or future prospects published by certain market participants intent on putting downward pressure on the price of our common stock;

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lack of volume of stock trading leading to low liquidity;

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hedging or arbitrage trading activity involving our common stock, including in connection with arbitrage strategies employed or that may be employed by investors in the Convertible Notes;

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announcements by us of financing transactions and/or future sales of equity or debt securities;

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the recruitment or departure of key management personnel;

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our ability to meet the expectations of investors and securities analysts related to collaboration revenue generated from net sales of XTANDI, including the timing and amount thereof, and other financial metrics;

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changes in our financial guidance or financial estimates by any securities analysts who might cover our company, or our failure to meet our financial guidance or estimates made by securities analysts;

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variations in our quarterly financial results or those of companies that are perceived to be similar to us;

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new products, product candidates or uses for existing products or technologies introduced or announced by our competitors and the timing of these introductions and announcements;

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the progress and results of preclinical studies and clinical trials of our product candidates conducted by us, Astellas or any future collaborative partners or licensees, if any, and any delays in enrolling a sufficient number of patients to complete clinical trials of our product candidates;

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developments concerning our collaboration with Astellas or any future collaborations;

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our dependence on third parties, including Astellas, clinical manufacturing organizations and clinical research organizations, clinical trial sponsors and clinical investigators;

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legislation or regulatory developments in the United States or other countries affecting XTANDI or product candidates, including those of our competitors, including the passage of laws, rules or regulations relating to healthcare and reimbursement or the public announcement of inquiries relating to these subjects;

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developments or disputes concerning patent applications, issued patents or other proprietary rights;

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the receipt or failure to receive funding necessary to conduct our business;

•

changes in the market valuations of other companies in our industry;

•

litigation; and

•

general economic, industry and market conditions and other factors that may be unrelated to our operating performance, including market conditions in the pharmaceutical and biotechnology sectors.

These factors and fluctuations, as well as political and other market conditions, may adversely affect the market price of our common stock. Securities-related class action litigation is often brought against a company following periods of volatility in the market price of its securities. Securities-related litigation, whether with or without merit, could result in substantial costs and divert management’s attention and financial resources, which could harm our business and financial condition, as well as the market price of our common stock. Additionally, volatility or lack of positive performance in our stock price may adversely affect our ability to retain or recruit key employees, all of whom have been or will be granted equity awards as a part of their compensation.

A decrease in the market price of our common stock would also likely adversely impact the trading price of the Convertible Notes. The market price of our common stock could also be affected by possible sales of our common stock by investors who view the Convertible Notes as a more attractive means of equity participation in us and by hedging or arbitrage trading activity involving our common stock. This trading activity could, in turn, affect the trading prices of the Convertible Notes. This may result in greater volatility in the trading price of the Convertible Notes than would be expected for non-convertible debt securities.

If our operating results are below the expectations of securities analysts, the market price of our common stock and the trading price of our Convertible Notes could decline.

Various securities analysts follow our financial results and issue reports on us. These reports include information about our historical financial results as well as the analysts’ estimates of our future performance. The analysts’ estimates are based upon their own opinions and are often different from our estimates or expectations. If our operating results are below the expectations of securities analysts, the market value of our common stock and the trading price of the Convertible Notes could decline, perhaps substantially.

We do not intend to pay dividends on our common stock for the foreseeable future.

We do not expect for the foreseeable future to pay dividends on our common stock. Any future determination to pay dividends on or repurchase shares of our common stock will be at the discretion of our board of directors and will depend upon, among other factors, our success in completing sales or partnerships of our programs, our results of operations, financial condition, capital requirements, contractual restrictions and applicable law.

Provisions of our corporate charter documents, our stockholder rights plan and Delaware law could make it more difficult for a third party to acquire us, even if the offer may be considered beneficial by our stockholders.

Provisions of the Delaware General Corporation Law could discourage potential acquisition proposals and could delay, deter or prevent a change in control. The anti-takeover provisions of the Delaware General Corporation Law impose various impediments to the ability of a third party to acquire control of us, even if a change in control would be beneficial to our existing stockholders. Specifically, Section 203 of the Delaware General Corporation Law, unless its application has been waived, provides certain default anti-takeover protections in connection with transactions between us and an “interested stockholder.” Generally, Section 203 prohibits stockholders who, alone or together with their affiliates and associates, own more than 15% of the subject company from engaging in certain business combinations for a period of three years following the date that the stockholder became an interested stockholder of such subject company without approval of the board or the vote of two-thirds of the shares held by the independent stockholders. Our board of directors has also adopted a stockholder rights plan, or “poison pill,” which would significantly dilute the ownership of a hostile acquirer. Additionally, provisions of our amended and restated certificate of incorporation and bylaws could deter, delay or prevent a third party from acquiring us, even if doing so would benefit our stockholders, including without limitation, the authority of the board of directors to issue, without stockholder approval, preferred stock with such terms as the board of directors may determine.

We may issue additional shares of our common stock or instruments convertible into shares of our common stock, including additional shares associated with the potential conversion of the Convertible Notes, which could cause our stock price to fall and cause dilution to existing stockholders. In addition, a sale of a substantial number of shares of our common stock in the public market could cause the market price of our common stock to drop significantly.

We may from time to time issue additional shares of common stock or other instruments convertible into, or exchangeable or exercisable for, shares of our common stock, including in connection with potential in-licensing and acquisition transactions. In addition, we may elect to satisfy all or a portion of our conversion obligations under the Convertible Notes with shares of our common stock. The issuance of additional shares of our common stock, including upon conversion of some or all of the Convertible Notes, would dilute the ownership interests of existing holders of our common stock. Dilution will be greater if the conversion rate of the Convertible Notes is adjusted upon the occurrence of certain events specified in the indenture to the Convertible Notes.

The issuance of a substantial number of shares of our common stock, the sale of a substantial number of shares of our common stock that were previously restricted from sale in the public market, or the perception that these issuances or sales might occur, could depress the market price of our common stock and in turn adversely impact the trading price of the Convertible Notes. In addition, holders of the Convertible Notes may hedge their investment in the Convertible Notes by short selling our common stock, which could depress the price of our common stock. As a result, investors may not be able to sell their shares of our securities at a price equal to or above the price they paid to acquire them.

Furthermore, the issuance of additional shares of our common stock, or the perception that such issuances might occur, could impair our ability to raise capital through the sale of additional equity securities.

Provisions in the indenture for the Convertible Notes may deter or prevent a business combination.

Under the terms of the indenture governing the Convertible Notes, the occurrence of a fundamental change would require us to repurchase all or a portion of the Convertible Notes in cash, or, in some circumstances, increase the conversion rate applicable to the Convertible Notes. In addition, the indenture for the Convertible Notes prohibits us from engaging in certain mergers or business combination transactions unless, among other things, the surviving entity assumes our obligations under the Convertible Notes. These and other provisions could prevent or deter a third party from acquiring us even where the acquisition could be beneficial to our stockholders.

Any adverse rating of the Convertible Notes may negatively affect the price of our common stock.

We do not intend to seek a rating on the Convertible Notes. However, if a rating service were to rate the Convertible Notes and if such rating service were to assign the Convertible Notes a rating lower than the rating expected by investors or were to lower its rating on the Convertible Notes below the rating initially assigned to the Convertible Notes or otherwise announce its intention to put the Convertible Notes on credit watch, the price of our common stock could decline.

The conditional conversion feature of the Convertible Notes may adversely affect our financial condition and operating results.

Holders of the Convertible Notes are entitled to convert their notes at any time during specified periods at their option. If one or more holders elect to convert their Convertible Notes, unless we satisfy our conversion obligation by delivering solely shares of our common stock (other than cash in lieu of any fractional share), we would be required to settle all or a portion of our conversion obligation through the payment of cash, which could adversely affect our liquidity. We may, at any time prior to the final settlement method election date, irrevocably elect to satisfy our conversion obligation with respect to each subsequent conversion date in a combination of cash and shares of our common stock, if any, with a specified dollar amount of $1,000, in which case we will no longer be permitted to settle the principal portion of any converted Convertible Notes in shares of our common stock. In addition, even if holders do not elect to convert their Convertible Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

The accounting method for convertible debt securities that may be settled in cash, such as the Convertible Notes, could have a material effect on our reported financial results.

Under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 470-20, “Debt with Conversion and Other Options,” or ASC 470-20, an entity must separately account for the liability and equity components of convertible debt instruments (such as the Convertible Notes) that may be settled entirely or partially in cash upon conversion in a manner that reflects the issuer’s economic interest cost. The effect of ASC 470-20 on the accounting for the Convertible Notes is that the equity component is required to be included in the additional paid-in capital section of stockholders’ equity on our consolidated balance sheet and the value of the equity component would be treated as original issue discount for purposes of accounting for the debt component of the Convertible Notes. As a result, we are required to record a greater amount of non-cash interest expense as a result of the amortization of the discounted carrying value of the Convertible Notes to their face amount over the term of the Convertible Notes. We report lower net income in our financial results because ASC 470-20 requires interest to include both the current period’s amortization of the debt discount and the instrument’s coupon interest, which could adversely affect our reported or future financial results, the market price of our common stock and the trading price of the Convertible Notes.

The repurchase rights and events of default features of the Convertible Notes, if triggered, may adversely affect our financial condition and operating results.

Following a fundamental change under the indenture governing the Convertible Notes, dated as of March 19, 2012 between us and Wells Fargo Bank, National Association as Trustee, as supplemented by the first supplemental indenture dated as of March 19, 2012, or the Indenture, holders of the Convertible Notes will have the right to require us to purchase their Convertible Notes for cash. In addition, if an event of default under the Convertible Notes is triggered, the trustee or the holders of the Convertible Notes may declare the principal amount of the Convertible Notes, plus accrued and unpaid interest thereon, to be immediately due and payable. In either event, we would be required to make cash payments to satisfy our obligations, which could adversely affect our liquidity. In addition, even if the repurchase rights are not exercised or the payment of principal and interest of Convertible Notes is not accelerated, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Convertible Notes as a current rather than long-term liability, which could result in a material reduction of our net working capital.

We rely on Astellas to timely deliver important financial information relating to net sales of XTANDI. In the event that this information is inaccurate, incomplete, or not timely, we will not be able to meet our financial reporting obligations as required by the SEC.

Under the Astellas Collaboration Agreement, Astellas has exclusive control over the flow of information relating to net sales of XTANDI that we are dependent upon to meet our SEC reporting obligations. Astellas is required under the Astellas Collaboration Agreement to provide us with timely and accurate financial data related to net sales of XTANDI so that we may meet our reporting obligations under federal securities laws. In the event that Astellas fails to provide us with timely and accurate information, we may incur significant liability with respect to federal securities laws, our internal controls and procedures under the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, may be inadequate, and we could be required to record adjustments in future periods, any of which could adversely affect the market price of our common stock and Convertible Notes and subject us to securities litigation.

To the extent that we create any joint ventures or have any variable interest entities for which we are required to consolidate, we would need to rely on those entities to timely deliver important financial information to us. In the event that the financial information is inaccurate, incomplete, or not timely, we would not be able to meet our financial reporting obligations as required by the SEC.

To the extent we create joint ventures or have any variable interest entities that we are required to consolidate and the financial statements of such entities are not prepared by us, we will not have direct control over their financial statement preparation. As a result, we will, for our financial reporting, depend on what these entities report to us, which could result in us adding monitoring and audit processes, which could increase the difficulty of implementing and maintaining adequate controls over our financial processes and reporting in the future. This may be particularly true when such entities do not have sophisticated financial accounting processes in place, or where we are entering into new relationships at a rapid pace, straining our integration capacity. Additionally, if we do not receive the information from the joint venture or variable interest entity on a timely basis, this could cause delays in our external reporting obligations as required by the SEC.

Changes in, or interpretations of, accounting principles could have a significant impact on our financial position and results of operations.

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, or U.S. GAAP. These principles are subject to interpretation by the SEC and various other bodies formed to interpret and create appropriate accounting principles. A change in these principles can have a significant effect on our reported results and may even retroactively affect previously reported transactions.

For example, the FASB is currently working together with the International Accounting Standards Board (IASB) on several projects to further align accounting principles and facilitate more comparable financial reporting between companies who are required to follow U.S. GAAP under SEC regulations and those who are required to follow International Financial Reporting Standards outside of the United States. These efforts by the FASB and the IASB may result in different accounting principles under U.S. GAAP that may result in materially different financial results for us in areas including, but not limited to, principles for recognizing revenue and lease accounting.

Failure to maintain effective internal control over financial reporting in accordance with the Sarbanes-Oxley Act could have a material adverse effect on our stock price and the trading price of the Convertible Notes.

Section 404 of the Sarbanes-Oxley Act and the related rules and regulations of the SEC require an annual management assessment of the effectiveness of our internal control over financial reporting and a report by our independent registered public accounting firm attesting to the effectiveness of our internal control over financial reporting at the end of the fiscal year. If we fail to maintain the adequacy of our internal control over financial reporting, as such standards are modified, supplemented or amended from time to time, we may not be able to ensure that we can conclude on an ongoing basis that we have effective control over financial reporting in accordance with the Sarbanes-Oxley Act and the related rules and regulations of the SEC. If we cannot in the future favorably assess, or our independent registered public accounting firm is unable to provide an unqualified attestation report on, the effectiveness of our internal control over financial reporting, investor confidence in the reliability of our financial reports may be adversely affected, which could have a material adverse effect on our stock price and the trading price of our outstanding Convertible Notes.

ITEM 6.

EXHIBITS.

See the Exhibit List which follows the signature page of this Quarterly Report on Form 10Q, which is incorporated by reference here.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Date: May 7, 2015	MEDIVATION, INC.

	By:	/s/ Richard A. Bierly
	Name:	Richard A. Bierly
	Title:	Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

Incorporated By Reference

Exhibit

Number

Exhibit Description

Form

File No.

Exhibit

Filing Date

Filed
Herewith

3.1

Restated Certificate of Incorporation.

8-K

001-32836

3.4

10/17/2013

3.2

Certificate of Amendment to Amended and Restated Certificate of Designation of Series C Junior Participating Preferred Stock of Medivation, Inc.

8-K

001-32836

3.1

2/13/2015

3.3

Amended and Restated Bylaws of Medivation, Inc.

8-K

001-32836

3.2

2/13/2015

4.1

Common Stock Certificate.

10-Q

001-32836

4.1

5/9/2012

4.2

Rights Agreement, dated as of December 4, 2006, between Medivation, Inc. and American Stock Transfer & Trust Company, as Rights Agent, which includes the form of Certificate of Designations of the Series C Junior Participating Preferred Stock of Medivation, Inc. as Exhibit A, the form of Right Certificate as Exhibit B and the Summary of Rights to Purchase Preferred Shares as Exhibit C.

8-K

001-32836

4.1

12/4/2006

4.3

Indenture, dated March 19, 2012, between Medivation, Inc. and Wells Fargo Bank, National Association, as Trustee.

8-K

001-32836

4.1

3/19/2012

4.4

First Supplemental Indenture, dated March 19, 2012, between Medivation, Inc. and Wells Fargo Bank, National Association, as Trustee (including the form of 2.625% convertible senior notes due 2017).

8-K

001-32836

4.2

3/19/2012

10.1*

Compensation Arrangements with Named Executive Officers.

8-K

001-32836

Item 5.02

2/13/2015

10.2*

Compensation Arrangements with Non-Employee Directors.

10.3

Sixth Amendment to Lease, dated as of January 12, 2015, by and between Knickerbocker Properties, Inc. XXXIII and Medivation, Inc.

12.1

Computation of Ratio of Earnings to Fixed Charges.

31.1

Certification pursuant to Rule 13a-14(a)/15d-14(a).

31.2

Certification pursuant to Rule 13a-14(a)/15d-14(a).

32.1†

Certifications of Chief Executive Officer and Chief Financial Officer.

101.INS

XBRL Instance Document.

101.SCH

XBRL Taxonomy Extension Schema Document.

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document.

Incorporated By Reference

Exhibit

Number

Exhibit Description

Form

File No.

Exhibit

Filing Date

Filed
Herewith

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB

XBRL Taxonomy Extension Labels Linkbase Document.

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document.

*	Indicates management contract or compensatory plan or arrangement.

†

The certifications attached as Exhibit 32.1 accompanying this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Medivation, Inc., under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

Exhibit 10.2

COMPENSATION INFORMATION WITH NON-EMPLOYEE DIRECTORS

Medivation, Inc.

Cash Compensation for Non-Employee Directors


Annual Retainer, all members	$	50,000
Additional Annual Retainer for Chairman	$	50,000
Additional Annual Retainer for Committee Chairs:
Audit Committee	$	25,000
Compensation Committee	$	20,000
Nominating and Corporate Governance Committee	$	15,000
Additional Annual Retainer for Committee Members:
Audit Committee	$	15,000
Compensation Committee	$	10,000
Nominating and Corporate Governance Committee	$	7,500

Medivation, Inc.

Equity Compensation for Non-Employee Directors

Upon initial election to the Board of Directors, each non-employee director receives an initial grant of equity equal to a Black-Scholes value of $525,000, split equally between stock options and restricted stock units. The stock option has an exercise price per share equal to the closing sales price of a share of Medivation’s common stock on the date of grant. The stock option vests over four years, with 25% of the shares vesting on the one year anniversary of the date of grant, and the remainder vesting monthly in 36 equal installments over the next three years. The restricted stock unit vests with respect to 1/3 of the shares on each of the first, second and third anniversaries of the vesting date as determined based on Mediation’s company policy.

Each non-employee director receives an additional annual grant of equity equal to a Black-Scholes value of $350,000, split equally between stock options and restricted stock units. The stock option has an exercise price per share equal to the closing sales price of a share of Medivation’s common stock on the date of grant. Both stock options and restricted stock units received from an annual grant vest the earlier of one year from the date of grant or the next annual shareholder meeting.

Exhibit 10.3

SIXTH AMENDMENT TO LEASE

(Adding Additional Premises on the 37^th Floor)

This SIXTH AMENDMENT TO LEASE (“Amendment”) is made and entered into as of the 12th day of January, 2015 (the “Effective Date”), by and between KNICKERBOCKER PROPERTIES, INC. XXXIII, a Delaware corporation (“Landlord”), and MEDIVATION, INC., a Delaware corporation (“Tenant”).

RECITALS:

A. Landlord and Tenant entered into that certain Office Lease dated as of December 28, 2011 (the “Original Lease”), pursuant to which Landlord leased to Tenant and Tenant leased from Landlord those certain premises (the “Original Premises”) consisting of the entire rentable area on the thirty-fifth (35th) and thirty-sixth (36th) floors of that certain building located as 525 Market Street, San Francisco, California (the “Building”). Capitalized terms not otherwise defined herein shall have the meanings given them in the Lease.

B. Landlord and Tenant entered into that certain:

(i) First Amendment to Lease dated as of December 28, 2011 (“First Amendment”), pursuant to which certain technical modifications were made to the Original Lease;

(ii) Second Amendment to Lease dated as of July 6, 2012 (“Second Amendment”), pursuant to which certain dates and terms set forth in the Original Lease were confirmed and ratified;

(iii) Third Amendment to Lease dated as of September 27, 2012 (“Third Amendment”), pursuant to which Tenant leased additional premises consisting of the entire rentable area of the thirty-eighth (38th) floor of the Building (the “38th Floor Expansion Premises”);

(iv) Fourth Amendment to Lease dated as of June 26, 2013 (“Fourth Amendment”), pursuant to which Tenant leased additional premises consisting of a portion of the rentable area of the thirty-seventh (37th) floor of the Building (the “37th Floor Expansion Premises”); and

(v) Fifth Amendment to Lease, dated as of February 12, 2014 (“Fifth Amendment”), pursuant to which Tenant leased additional premises consisting of a portion of the thirty-third (33rd) floor of the Building (the “33rd Floor Expansion Premises”).

C. The Original Premises, as expanded by the 38th Floor Expansion Premises, the 37th Floor Expansion Premises, and the 33rd Floor Expansion Premises, is referred to herein as the “Current Premises,” The Original Lease, as amended, is referred to herein as the “Lease.”

D. Landlord and Tenant hereby stipulate that the Current Premises contains 127,126 rentable square feet.

E. The term of the Lease is scheduled to expire on June 30, 2019 (the “Expiration Date”), subject to the earlier termination or extension in accordance with the terms of the Lease.

F. Landlord and Tenant desire to amend the Lease to (i) expand the Current Premises to include those certain premises depicted on Exhibit “A” attached hereto (which the parties hereto stipulate contains 15,820 rentable square feet) on the thirty-seventh (37th) floor of the Building, known as Suite 3750 (the “Additional 37th Floor Expansion Premises”), and (ii) otherwise modify the Lease, all upon the terms and conditions hereinafter set forth.

G. The Additional 37th Floor Expansion Premises is currently leased by ClearSlide, Inc. pursuant to a lease scheduled to expire on February 28, 2015 (the “ClearSlide Lease”), and occupied by a sublessee pursuant to a sublease scheduled to expire on February 26, 2015 (the “Existing Sublease”). ClearSlide Inc. and its sublessee are collectively referred to herein as the “Existing Tenant”, and the ClearSlide Lease and the Existing Sublease are collectively referred to herein as the “Existing Tenant Lease”.

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Additional 37th Floor Expansion Premises: Term; Delivery.

(a) The term of Tenant’s lease of the Additional 37th Floor Expansion Premises shall commence on the date which is the earlier of (i) ninety (90) days following the Expansion Space Delivery Date (as defined herein), or (ii) Tenant’s commencement of business operations in the Additional 37th Floor Expansion Premises or any portion thereof, which period shall be extended on a day-for-day basis for Landlord Delays (as such term is defined in the Workletter Agreement (the “Workletter”) attached hereto as Exhibit “B” and made a part hereof) (the “Expansion Space Commencement Date”), and shall expire on the Expiration Date unless otherwise provided for in the Lease. Landlord shall deliver the Additional 37th Floor Expansion Premises to Tenant in the condition required by this Amendment upon the later to occur of the following: (i) March 1, 2015 (the “Target Delivery Date”), and (ii) the date the Existing Tenant Lease has expired or terminated and the Existing Tenant has vacated the Additional 37th Floor Expansion Premises (the date on which the last to occur of such items (i) and (ii) is referred to herein as the “Expansion Space Delivery Date”). The period between the Expansion Space Delivery Date and the Expansion Space Commencement Date is referred to herein as the “Design and Construction Period.” In the event that the Expansion Space Delivery Date occurs later than the sixteenth (16^th) day following the Target Delivery Date (unless such delay is caused by Tenant), then the Abated Rent Period referred to in Section 3(b) below shall be increased by one day for each day of delay in Landlord’s delivery of the Additional 37th Floor Expansion Premises beyond the sixteenth (16^th) day following the Target Delivery Date. The period of time commencing on the Expansion Space Commencement Date and expiring on the Expiration Date shall be referred to herein as the “Expansion Space Term.” In the event the Expansion Space Commencement Date is not the first day of a calendar month (such month in which the Expansion Space Commencement Date occurs being referred to herein as the “Partial Month”) the Monthly Base Rent for the Additional 37th Floor Expansion Premises for such Partial Month shall be prorated as provided in the Lease. Once the Expansion

Space Commencement Date has been determined, Landlord and Tenant shall execute a written confirmation stating the actual Expansion Space Commencement Date, but failure of the parties to execute such a writing shall have no impact on the Expansion Space Commencement Date,

(b) From and after the Expansion Space Commencement Date, all references in the Lease to the “Premises” shall be deemed to refer to the Current Premises and the Additional 37th Floor Expansion Premises, collectively. All terms, covenants and conditions of the Lease applicable to the Current Premises shall apply to the Additional 37th Floor Expansion Premises, except as expressly set forth in this Amendment,

(c) From and after the Expansion Space Commencement Date, and for all purposes of the Lease (as amended), the definition of the term “Rentable Area of the Premises” set forth in Article 1(g) of the Original Lease is hereby deleted and the following text is substituted in lieu thereof: “142,946 rentable square feet”.

(d) Landlord hereby agrees that subsequent to the Expansion Space Delivery Date and prior to the expiration of the Design and Construction Period (the “Early Occupancy Period”), Tenant shall have the right to occupy the Additional 37th Floor Expansion Premises to make the improvements outlined in the Workletter, provided that all of the terms and conditions of the Lease shall apply, other than Tenant’s obligation to pay (i) Monthly Base Rent for the Additional 37th Floor Expansion Premises or (ii) Tenant’s Percentage Share (Direct Expenses) or Tenant’s Percentage Share (Taxes) for the Additional 37th Floor Expansion Premises, during the Early Occupancy Period. Tenant’s obligation to pay Monthly Base Rent, Tenant’s Percentage Share of Direct Expenses and Tenant’s Percentage Share of Taxes with respect to the Additional 37th Floor Expansion Premises shall commence as provided in Section 3 below, regardless of whether Tenant has taken occupancy of the Additional 37th Floor Expansion Space during the Early Occupancy Period. During the Early Occupancy Period, Tenant shall, in accordance with the terms of this Amendment, be responsible for any Additional Rent for any above-Building standard services (e.g., after-hours HVAC) payable during such Early Occupancy.

2. Additional 37th Floor Expansion Premises As-Is; Tenant Improvements. Landlord shall deliver the Additional 37th Floor Expansion Premises to Tenant in its as-is, broom clean condition, and Landlord shall have no obligation to make or, except as provided below in Paragraph 3.b. of the Workletter, pay for, any alterations, additions, improvements or renovations thereto to prepare the same for Tenant’s occupancy. The parties acknowledge that Tenant intends to make certain Tenant Improvements, as defined in the Workletter, to the Additional 37th Floor Additional Premises to make the same more suitable for Tenant’s occupancy during the term of the Lease. Tenant’s construction of the Tenant Improvements to the Additional 37th Floor Expansion Premises shall be in accordance with the terms of the Workletter.

3. Base Rent.

(a) Commencing on the Expansion Space Commencement Date, and continuing through the Expiration Date, unless otherwise provided for in the Lease, Tenant shall pay the Base Rent for the Additional 37th Floor Expansion Premises subject to Section 3(b) hereof as follows:


Months of Additional 37th Floor Expansion Premises Term	Annual Base Rent		Monthly Base Rent		Annual Rental Rate per RSF of the Additional 37th Floor Expansion Premises
Month 1 through end of Month 12	$	1,154,860.00	$	96,238.33	$	73.00
Month 13 through end of Month 24	$	1,189,505.80	$	99,125.48	$	75.19
Month 25 through end of Month 36	$	1,225,190.97	$	102,099.25	$	77.45
Month 37 through the end of Month 48	$	1,261,946.70	$	105,162.23	$	79.77
Month 49 through the Expiration Date	$	1,299,805.10	$	108,317.09	$	82,16

The foregoing Monthly Rent amounts payable by Tenant for the Additional 37th Floor Expansion Premises shall be in addition to the Monthly Rent payable by Tenant under the Lease for the Current Premises.

(b) Provided that there is not a continuing Event of Default, Landlord hereby agrees (i) to conditionally abate Tenant’s obligation to pay Monthly Base Rent (the “Abated Rent”) for the Additional 37th Floor Expansion Premises only (and not with respect to any portion of the Current Premises) for the first forty-five (45) days of the Expansion Space Term (the “Abated Rent Period”); provided that, in the event that the Expansion Space Delivery Date occurs later than the sixteenth (16^th) day following the Target Delivery Date (unless such delay is caused by Tenant), then the Abated Rent Period shall be increased one day for each day of delay in Landlord’s delivery of the Additional 37th Floor Expansion Premises beyond the sixteenth (16^th) day following the Target Delivery Date. During the Abated Rent Period, Tenant shall remain responsible for the payment of all of its other monetary obligations under the Lease. In the event an Event of Default shall occur during or subsequent to the Abated Rent Period, all or any portion of the Abated Rent credited to Tenant during the Abated Rent Period shall be immediately due and payable by Tenant and shall constitute “rent” payable under the Lease.

4. Operating Expenses and Tax Expenses.

(a) Tenant’s Percentage Share (Direct Expenses) is 12.4885% for the Current Premises and shall, as of the Expansion Space Commencement Date, be increased by 1.55% with respect to the Additional 37th Floor Expansion Premises to an aggregate of 14.039%. Tenant’s

Percentage Share (Taxes) is 12.3126% for the Current Premises and shall, as of the Expansion Space Commencement Date, be increased by 1.53% with respect to the Additional 37th Floor Expansion Premises to an aggregate of 13.8426%. With respect to the Additional 37th Floor Expansion Premises, the Rentable Office Area of the Building set forth in Section 1(f) of the Original Lease shall be deemed to be (i) 1,021,419 rentable square feet for purposes of determining Tenant’s Percentage Share (Direct Expenses) and (ii) 1,034,329 rentable square feet for purposes of determining Tenant’s Percentage Share (Taxes).

(b) The Base Year used to calculate increases in Tenant’s Percentage Share (Direct Expenses) and Tenant’s Percentage Share (Taxes) with respect to the Additional 37th Floor Expansion Premises only shall be the 2015 calendar year. The Base Year used to calculate Tenant’s Percentage Share (Direct Expenses) and Tenant’s Percentage Share (Taxes) with respect to (i) the 33rd Floor Expansion Premises and the 37th Floor Expansion Premises shall remain the 2014 calendar year; (ii) the 38th Floor Expansion Premises shall remain the 2013 calendar year, and (iii) the Original Premises shall remain the 2012 calendar year. The parties acknowledge that Section 5(b) of the Fifth Amendment incorrectly stated that calendar year 2013 shall remain the Base Year used to calculate Tenant’s Percentage Share (Direct Expenses) and Tenant’s Percentage Share (Taxes) with respect to 37th Floor Expansion Premises; and the parties agree that, pursuant to the Fourth Amendment, the Base Year used to calculate the 37th Floor Expansion Premises shall remain the 2014 calendar year. Tenant shall pay Tenant’s Percentage Share (Direct Expanses) and Tenant’s Percentage Share (Taxes) with respect to the Current Premises and the Additional 37th Floor Expansion Premises in accordance with the Lease.

5. Security Deposit; First Month’s Rent.

(a) Concurrently with the execution of this Amendment, Tenant shall, as security for the payment and performance of Tenant’s obligations under the Lease, deliver to Landlord a supplemental irrevocable standby letter of credit (the “Letter of Credit”), the form of which is attached hereto as Exhibit “C”, issued by Bank of America, N.A. (or such other financial institution acceptable to Landlord) with an initial stated amount of $1,574,462.00 (the “Stated Amount”). Nothing in this Section shall modify Tenant’s obligations with respect to any other letters of credit issued in favor of Landlord pursuant to the Lease.

Provided that, as of the applicable “Reduction Date” set forth below, Tenant (i) has not previously committed an Event of Default which is not then continuing and (ii) is not then in a voluntary or involuntary bankruptcy proceeding and has not made an assignment for the benefit of creditors, and provided further that, on or prior to the applicable Reduction Date, Tenant tenders to Landlord a replacement Letter of Credit or an amendment to the existing Letter of Credit, conforming in all respects to the requirements of this Section, setting forth the applicable Stated Amount as of such Reduction Date, the Stated Amount shall be reduced in accordance with the following schedule:


Reduction Date	Stated Amount
First day of the 25th month following the Expansion Space Commencement Date	$	1,265,102.00
First day of the 37th month following the Expansion Space Commencement Date	$	949,615.00

No further reductions to the Stated Amount are otherwise scheduled after the 37th month of the Expansion Space Term. In the event the Stated Amount is reduced pursuant to the foregoing, and provided that Tenant timely tenders the replacement or amended Letter of Credit to Landlord in the form required herein, Landlord shall exchange the Letter of Credit then held by Landlord for the replacement or amended Letter of Credit tendered by Tenant. Landlord shall reasonably cooperate with Tenant in memorializing the above-scheduled reductions in the Stated Amount.

Landlord may, in its sole discretion, require that the Letter of Credit be confirmed by a financial institution satisfactory to Landlord. If, at any time, an Event of Default occurs, Landlord shall have the right to draw down on the Letter of Credit, or so much thereof as necessary, in payment of Rent, in reimbursement of any expense incurred by Landlord in accordance with this Amendment and the Lease, and in payment of any damages incurred by Landlord by reason of such Event of Default for which Tenant is responsible in accordance with the terms of this Amendment and the Lease. In such event, Tenant shall within two (2) business day following written request therefor from Landlord remit to Landlord a sufficient amount in cash to restore the Letter of Credit to the original amount or, at Landlord’s election, cause the Stated Amount to be fully reinstated to its amount immediately prior to such Event of Default. If the entire Letter of Credit has not been utilized, the remaining amount of the Letter of Credit will be delivered to Tenant or to whoever is then the holder of Tenant’s interest in the Lease, without interest, within sixty (60) days after full performance of this Amendment by Tenant. Tenant shall not be entitled to any interest on the Letter of Credit. Tenant hereby waives the provisions of California Civil Code Section 1950.7, and all other provisions of law, now or hereafter in force, which provide that Landlord may claim from a security deposit only those sums reasonably necessary to remedy any Events of Default with respect to the payment of Rent, to repair damage caused by Tenant or to clean the Premises, it being agreed that Landlord may, in addition, claim those sums reasonably necessary to compensate Landlord for any other loss or damage, foreseeable or unforeseeable, caused by the act or omission of Tenant or any officer, employee, agent or invitee of Tenant which led to the Event of Default. Upon the occurrence of an Event of Default, in addition to Landlord’s right to draw on the Letter of Credit in whole or in part, Tenant shall, at Landlord’s option, replace the Letter of Credit with a cash deposit equal to then outstanding Stated Amount (and the Letter of Credit shall be returned to Tenant upon such payment and the expiration of any applicable preference period). Any cash remaining in Landlord’s possession after a partial or full draw on the Letter of Credit shall be retained as an additional security deposit and the terms of this Article shall apply with respect thereto, mutatis mutandis.

Landlord will return the Letter of Credit to Tenant as soon as practicable after the expiration or termination of the Lease (but not greater than sixty (60) days after such expiration or termination), less any amounts that are necessary, as determined by Landlord in its reasonable discretion, to remedy any defaults by Tenant under the Lease.

6. Option to Extend.

(a) The option to extend the Term set forth in Exhibit “H” of the Original Lease (the “Option”) shall, by virtue of this Amendment, apply to

(i) the Original Premises, the 37th Floor Expansion Premises, the Additional 37th Floor Expansion Premises, and the 33rd Floor Expansion Premises (i.e., the 33rd floor, 35th floor, 36th floor, and 37th floor) (“Option A”); or

(ii) the Current Premises and the Additional 37th Floor Expansion Premises (i.e., the 33rd floor, 35th floor, 36th floor, 37th floor, and the 38th floor) (“Option B”); or

(iii) the Original Premises and the 33rd Floor Expansion Premises (i.e., the 33rd, 35th and the 36th floor) (“Option C”); or

(iv) the Original Premises, the 37th Floor Expansion Premises, the Additional 37th Floor Expansion Premises, and the 38th Floor Expansion Premises (i.e. the 35th floor, 36th floor, 37th floor, and 38th floor) (“Option D”); or

(v) the 36th floor, the 37th Floor Expansion Premises, the Additional 37th Floor Expansion Premises, and the 38th Floor Expansion Premises (i.e. the 36th floor, 37th floor, and 38th floor) (“Option E”).

If Tenant exercises the Option in accordance with the terms of such Exhibit “H”, Tenant’s Interest Notice delivered in accordance with such Exhibit “H” shall expressly and irrevocably elect to apply the Option to Option A, Option B, Option C, Option D or Option E (the “Option Space Election”). If Tenant fails to expressly include the Option Space Election in the Interest Notice, Tenant shall be irrevocably deemed to apply the Option to the entire Premises (i.e. Option B) and not to any lesser part thereof. All other terms and provisions of such Exhibit “H” shall continue in full force and effect.

7. Amendment Brokers. Each of Landlord and Tenant hereby represents and warrants to the other that it has not had any dealings with any real estate broker or agent in connection with the negotiation of this Amendment other than Cushman & Wakefield of California, Inc. for Landlord and Colliers International CA, Inc. for Tenant (collectively, the “Amendment Brokers”). Each party agrees to indemnify and defend the other party harmless from any and all claims, demands, losses, liabilities, lawsuits, judgments, and costs and expenses (including, without limitation, reasonable attorneys’ fees) with respect to any leasing commission or equivalent compensation claimed by any broker or agent other than the Amendment Brokers. Landlord agrees to compensate the Amendment Brokers in accordance with a separate agreement.

8. No Event of Default. In the event an Event of Default shall occur under the Lease prior to the Expansion Space Commencement Date, at Landlord’s election, this Amendment shall terminate and be of no further force and effect.

9. Special Access Provision: No CASP Inspection. Landlord hereby discloses to Tenant pursuant to California Civil Code Section 1938 that, as of the date of this Lease, neither the Additional 37th Floor Expansion Premises nor the Building has been inspected by a California-approved Certified Access Specialist.

10. Right of First Offer. Landlord and Tenant agree that as of the Expansion Space Commencement Date, Tenant shall have the right to occupy the entire 37th floor of the Building, and the parties agree that as of the date of this Amendment, Tenant’s Right of First Offer set forth in Exhibit “G” of the Lease is hereby deleted in its entirety and of no further force and effect.

11. No Offer. Submission of this instrument for examination and signature by Tenant does not constitute an offer to amend the Lease or a reservation of or option to amend the Lease, and this instrument is not effective as a lease amendment or otherwise until executed and delivered by both Landlord and Tenant.

12. Authority. Tenant and each person executing this Amendment on behalf of Tenant hereby covenants and warrants that (a) Tenant is duly incorporated or otherwise established or formed and validly existing under the laws of its state of incorporation, establishment or formation, (b) Tenant has and is duly qualified to do business in the state in which the Premises is located, (c) Tenant has full corporate, partnership, trust, association or other appropriate power and authority to enter into this Amendment and to perform all Tenant’s obligations hereunder, and (d) each person (and all of the persons if more than one signs) signing this Amendment on behalf of Tenant is duly and validly authorized to do so.

13. No Further Modification. Except as set forth in this Amendment, all of the terms and provisions of the Lease shall remain unmodified and in full force and effect.

[signatures on following page]

IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed by their duly authorized representatives as of the date first above written.


“LANDLORD”:	KNICKERBOCKER PROPERTIES, INC. XXXIII,
	a Delaware corporation

	By:	/s/ Karen M. Wilbrecht
		Name:	Karen M. Wilbrecht
		Title:	Vice President

“TENANT”:	MEDIVATION, INC.,
	a Delaware corporation

	By:	/s/ Rick Bierly
		Name:	Rick Bierly
		Title:	CFO

EXHIBIT “A”

ADDITIONAL 37th FLOOR EXPANSION PREMISES

LOGO

EXHIBIT A

EXHIBIT “B”

WORKLETTER AGREEMENT

This Workletter Agreement (the “Workletter”) is executed simultaneously with, is dated as of, and is an exhibit to, that certain Sixth Amendment to Lease (the “Amendment”), between KNICKERBOCKER PROPERTIES, INC. XXXIII, a Delaware corporation (“Landlord”), and MEDIVATION, INC., a Delaware corporation (“Tenant”), pursuant to which Tenant is leasing that certain Additional 37th Floor Expansion Premises, more particularly described in the Amendment, at 525 Market Street, San Francisco, California (the “Building”), Capitalized terms not otherwise defined herein shall have the meanings assigned thereto in the Amendment. In consideration of the parties entering into the Amendment and of the mutual promises and covenants hereinafter contained, Landlord and Tenant hereby agree as follows:

1. Proposed and Final Plans. Tenant shall supply Landlord with two (2) copies signed by Tenant of its final space plan for the Additional 37th Floor Expansion Premises before any architectural construction documents or engineering drawings have been commenced. The final space plan (the “Final Space Plan”) shall include a layout and designation of all offices, rooms and other partitioning, their intended use, and equipment to be contained therein. Landlord may request clarification or more specific drawings for special use items not included in the Final Space Plan. Landlord shall advise Tenant within five (5) business days after Landlord’s receipt of the Final Space Plan if the same is unsatisfactory or incomplete in any respect. If Tenant is so advised, Tenant shall promptly cause the Final Space Plan to be revised to correct any deficiencies or other matters Landlord may reasonably require.

(a) Tenant shall cause to be prepared and delivered to Landlord, for Landlord’s approval, the following proposed preliminary design drawings (based on the Landlord-approved Final Space Plan) (“Proposed Plans”) for all improvements Tenant desires to complete or have completed in the Additional 37th Floor Expansion Premises (the “Tenant Improvements”), which shall include the design standards set forth on Schedule “B-1.” Landlord expressly consents to the installation of card readers within the stairwells between the leased floors as part of the Tenant Improvements (provided that Tenant shall, at Landlord’s request, remove any such readers and repair any damage caused thereby upon the expiration or earlier termination of the Lease with respect to such floors):

(i) Architectural drawings (consisting of floor construction plan, ceiling lighting and layout, power, and telephone plan).

(ii) Mechanical drawings (consisting of HVAC, electrical (including any UPS equipment), telephone, and plumbing). Tenant acknowledges that part of the Tenant Improvements shall include (but shall not be limited to) the replacement of the existing Tuttle & Bailey terminal air boxes located in the Additional 37th Floor Expansion Premises with Building-standard Titus VAV boxes, and that all such Titus VAV boxes shall comply with the Building’s Replacement VAV Box Design Criteria (August 26, 2011).

(iii) Finish schedule (consisting of wall finishes and floor finishes and miscellaneous details, including all window treatments which shall be Building-standard “Mecho” shades throughout the Additional 37th Floor Expansion Premises).

EXHIBIT B

(b) All architectural drawings shall be prepared at Tenant’s sole cost and expense (subject to Section 3, below) by a licensed architect (the “Architect”) designated by Tenant and approved by Landlord, whom Tenant shall employ. Tenant shall deliver two sets of reproducible architectural drawing prints to Landlord. All mechanical drawings (to the extent required by the nature and extent of the Tenant Improvements) shall be prepared at Tenant’s sole cost and expense (subject to Section 3, below) by AWA (which entity is hereby approved by Landlord) or other licensed engineer selected by Tenant and approved by Landlord (which approval may be withheld or conditioned in Landlord’s sole and absolute discretion), whom Tenant shall employ. Tenant shall reimburse Landlord for all reasonable out-of-pocket costs incurred by Landlord in reviewing the Proposed Plans and Final Plans. All costs and charges by Landlord’s consultants shall be deducted from the Tenant Improvements Allowance (or charged to Tenant) without mark up on an “open book” basis (and shall not exceed Twenty Thousand Dollars ($20,000.00)).

(c) Within ten (10) business days after Landlord’s receipt of the architectural drawings, Landlord shall advise Tenant of any changes or additional information required to obtain Landlord’s approval.

(d) Within ten (10) business days after receipt of mechanical drawings, if any, Landlord shall advise Tenant of any changes reasonably required to obtain Landlord’s approval.

(e) If Landlord disapproves of or requests additional information regarding the Proposed Plans, Tenant shall, within fifteen (15) days thereafter, revise the Proposed Plans disapproved by Landlord and resubmit such plans to Landlord or otherwise provide such additional information to Landlord. Landlord shall, within ten (10) business days after receipt of Tenant’s revised plans, advise Tenant of any additional changes which may be required to obtain Landlord’s approval. If Landlord reasonably disapproves the revised plans specifying the reason therefor, or requests further additional information, Tenant shall, within ten (10) days of receipt of Landlord’s required changes, revise such plans and resubmit them to Landlord or deliver to Landlord such further information as Landlord has requested. Landlord shall, again within ten (10) business days after receipt of Tenant’s revised plans, advise Tenant of further changes, if any, reasonably required for Landlord’s approval. This process shall continue until Landlord has approved Tenant’s revised Proposed Plans. After the Proposed Plans are finally approved by Landlord, Tenant shall submit to Landlord construction drawings prepared by the Architect (or prepared by a subcontractor with respect to the fire sprinkler and life safety drawings and specifications) (“Final Plans”) which shall contain all (to the extent appropriate) plans to be bid and built from and shall include all fully engineered mechanical, electrical, HVAC, plumbing, and fire life/safety drawings, all based upon the Proposed Plans, and shall be compatible with the design, construction and equipment of the Building, comply with all Laws, be capable of logical measurement and construction, contain all such information as may be required for the construction of the Tenant Improvements. At the same time, Tenant shall submit to Landlord an initial proforma budget (“Budget”) covering all anticipated design and installation costs of the Tenant Improvements, Tenant shall amend and/or modify the Budget on a monthly basis to reflect changes in such costs and shall promptly provide to Landlord any such amendments and/or modifications to the Budget.

EXHIBIT B

Landlord shall approve the Final Plans, or such portion as has from time to time been submitted, within fifteen (15) business days after receipt of same or designate by notice given within such time period to Tenant the specific changes reasonably required to be made to the proposed Final Drawings in order to correct any Design Problem and shall return the proposed Final Drawings to Tenant. Tenant shall make the minimum changes necessary in order to correct any such Design Problem and shall return the proposed Final Drawings to Landlord, which Landlord shall approve or disapprove within fifteen (15) business days after Landlord receives the revised proposed Final Drawings. This procedure shall be repeated until all of the proposed Final Drawings are finally approved by Landlord and written approval has been delivered to and received by Tenant. Landlord agrees not to withhold or condition its approval unreasonably. Tenant shall have no obligation to remove any portion of the Tenant Improvements at the end of the Term unless Landlord notifies Tenant, in a writing concurrently incorporated into Landlord’s approval of the proposed Final Plans, that such removal will be required; provided, however, that Tenant shall, prior to the expiration or earlier termination of the Lease, cause all data and telecommunication installations, including cabling, and any non-Building-standard signage installed by Tenant in the 37th Floor Additional Expansion Premises to be removed and to repair any damage caused by such removal. As used herein, “Design Problem” shall mean the Final Plans are deemed by Landlord in its good faith judgment to likely (i) have an adverse effect on the structural integrity of the Building; (ii) cause possible damage to any of the Building systems (such as HVAC, fire life safety, plumbing, electrical, data/communication, mechanical, or security systems); (iii) be in non-compliance with applicable codes; or (iv) have an adverse effect on the exterior appearance of the Building.

(f) All Proposed Plans and Final Plans shall comply with all applicable statutes, ordinances, regulations, laws, and codes and with the requirements of Landlord’s fire insurance underwriters. Neither review nor approval by Landlord of the Proposed Plans and resulting Final Plans shall constitute a representation or warranty by Landlord that such plans either (i) are complete or suitable for their intended purpose, or (ii) comply with applicable laws, ordinances, codes, regulations, or any insurance requirements, it being expressly agreed by Tenant that Landlord assumes no responsibility or liability whatsoever to Tenant or to any other person or entity for such completeness, suitability or compliance. Tenant shall not make any changes in the approved Final Plans without Landlord’s prior written approval, which shall not be unreasonably withheld or delayed; provided that Landlord may, in the exercise of its sole and absolute discretion, disapprove any proposed changes adversely affecting the Building’s structure, any asbestos-containing materials, systems, equipment or the appearance or value of the Building.

(g) [Intentionally Deleted]

(h) [Intentionally Deleted]

(i) [Intentionally Deleted]

EXHIBIT B

(j) The term “Landlord Delay” as used in this Workletter shall mean: (1) delay in the giving of authorizations or approvals by Landlord beyond the periods set forth in this Workletter; and (2) delay by Landlord in administering and paying when due the Tenant Allowance. In no event shall Tenant’s remedies or entitlements for the occurrence of a Landlord Delay be abated, deferred, diminished or rendered inoperative because of a prior, concurrent, or subsequent delay resulting from any action or inaction of Tenant. No Landlord Delay shall be deemed to have occurred unless and until Tenant has given written notice to Landlord specifying the action or inaction which Tenant contends constitutes a Landlord Delay. If such action or inaction is not cured within two (2) business days after Landlord’s receipt of such notice, then a Landlord Delay, as set forth in such notice, shall be deemed to have occurred commencing as of the date Landlord received such notice and continuing for the number of days the substantial completion of the Tenant Improvements was in fact delayed as a direct result of such action or inaction.

2. Performance of the Tenant Improvements.

(a) Filing of Final Plans, Permits. Tenant, at its sole cost and expense, shall file the Final Plans with the governmental agencies having jurisdiction over the Tenant Improvements. Tenant shall furnish Landlord with copies of all documents submitted to all such governmental agencies and with the authorizations to commence work and the permits for the Tenant Improvements issued by such governmental agencies. Tenant shall not commence the Tenant Improvements until the required governmental authorizations for such work are obtained and delivered to Landlord.

(b) Landlord Approval of Contractors. No later than fifteen (15) days following Landlord’s approval of the Final Plans, Tenant shall enter into a contract for construction of the Tenant Improvements with a general contractor acceptable to Landlord (the “General Contractor”). Landlord hereby approves of Skyline Construction as General Contractor if selected by Tenant. The General Contractor and Tenant’s construction contract with the General Contractor shall be subject to Landlord’s prior approval, which approval shall not be unreasonably withheld, conditioned or delayed. In the event Landlord requires any of Tenant’s Contractors to obtain payment or performance bonds in connection with the installation of the Tenant Improvements, the cost of such bonds shall be the responsibility of Landlord and shall not be deducted from the Tenant Allowance. The General Contractor shall be responsible for all required construction, management and supervision, including bidding by subcontractors for the various components of the work of the Tenant Improvements. In addition, Tenant shall only utilize for purposes of mechanical, electrical, structural, sprinkler, fire and life safety and asbestos-related activities those contractors as specifically designated by Landlord (collectively, the “Essential Subs”). Landlord hereby approves Bilcor Inc./CBF, Inc., of the purposes of fire and life safety, A.G.E. Consulting for purposes of MEP, Nishkian Menninger for purposes of structural engineering, and IMG Technologies for purposes of riser management, each, if selected by Tenant, an “Essential Sub”. Tenant shall submit to Landlord not less than ten (10) days prior to commencement of construction the following information and items:

(i) The names and addresses of the other subcontractors, and sub-subcontractors (collectively, together with the General Contractor and Essential Subs, the “Tenant’s Contractors”) Tenant intends to employ in the construction of the Tenant

EXHIBIT B

Improvements. Landlord shall have the right to approve or disapprove Tenant’s Contractors, and Tenant shall employ, as Tenant’s Contractors, only those persons or entities approved by Landlord, which approval shall not be unreasonably withheld, conditioned or delayed (and failure to respond within ten (10) business days following delivery of a request for approval shall be deemed disapproval). All contractors and subcontractors engaged by or on behalf of Tenant for the Tenant Improvements shall be licensed contractors, possessing good labor relations, capable of performing quality workmanship and working in harmony with Landlord’s contractors and subcontractors and with other contractors and subcontractors on the job site. All work shall be coordinated with any general construction work in the Building, Tenant agrees to give the contractor employed by Landlord in the Building an equal opportunity to submit a bid for the Tenant Improvements, but Tenant shall not be obligated to hire such contractor.

(ii) The scheduled commencement date of construction, the estimated date of completion of construction work, fixturing work, and estimated date of occupancy of the Additional 37th Floor Expansion Premises by Tenant.

(iii) Itemized statement of estimated construction cost, including permits and fees, architectural, engineering, and contracting fees.

(iv) Certified copies of insurance policies or certificates of insurance as hereinafter described. Tenant shall not permit Tenant’s Contractors to commence work until the required insurance has been obtained and certified copies of policies or certificates have been delivered to Landlord.

(c) Access to the Additional 37th Floor Expansion Premises. Tenant, its employees, designers, contractors and workmen shall have access to and primary use of the Additional 37th Floor Expansion Premises to construct the Tenant Improvements, provided that Tenant and its employees, agents, contractors, and suppliers only access the Additional 37th Floor Expansion Premises via the Building freight elevator work in harmony and do not interfere with the performance of other work in the Building by Landlord, Landlord’s contractors, other tenants or occupants of the Building (whether or not the terms of their respective leases have commenced) or their contractors. If at any time such entry shall cause, or in Landlord’s reasonable judgment threaten to cause, such disharmony or interference, Landlord may terminate such permission upon twenty-four (24) hours’ written notice to Tenant, and thereupon, Tenant or its employees, agents, contractors, and suppliers causing such disharmony or interference shall immediately withdraw from the Additional 37th Floor Expansion Premises and the Building until Landlord determines such disturbance no longer exists.

(d) Landlord’s Right to Perform. Landlord shall have the right, but not the obligation, to perform, on behalf of and for the account of Tenant, subject to reimbursement by Tenant, any of the Tenant Improvements which (i) Landlord reasonably deems necessary to be done on an emergency basis, (ii) pertains to structural components or the general Building systems, (iii) pertains to the erection of temporary safety barricades or signs during construction, (iv) affects any asbestos-containing materials. Except in case of emergency, Landlord shall give prior reasonable written notice to Tenant of its intention to perform such work.

EXHIBIT B

(e) Warranties. On completion of the Tenant Improvements, Tenant shall provide Landlord with copies of all warranties of at least one (1) year duration on all the Tenant Improvements. At Landlord’s request, Tenant shall enforce, at Tenant’s expense, all guarantees and warranties made and/or furnished to Tenant with respect to the Tenant Improvements.

(f) Protection of Building. All work performed by Tenant shall be performed with a minimum of interference with other tenants and occupants of the Building and shall conform to the Building Rules and Regulations attached as Exhibit “B” to the Original Lease and those rules and regulations governing construction in the Building as Landlord or Landlord’s Agent may impose. Tenant will take all reasonable and customary precautionary steps to protect its facilities and the facilities of others affected by the Tenant Improvements and to properly police same and Landlord shall have no responsibility for any loss by theft or otherwise. Construction equipment and materials are to be located in confined areas and delivery and loading of equipment and materials shall be done at such reasonable locations and at such time as Landlord shall direct so as not to burden the operation of the Building. Landlord shall advise Tenant in advance of any special delivery and loading dock requirements. Tenant shall at all times keep the Additional 37th Floor Expansion Premises and adjacent areas free from accumulations of waste materials or rubbish caused by its suppliers, contractors or workmen. Landlord may require daily clean-up if required for fire prevention and life safety reasons or applicable laws and reserves the right to do clean-up at the expense of Tenant if Tenant fails to comply with Landlord’s cleanup requirements. At the completion of the Tenant Improvements, Tenant’s Contractors shall forthwith remove all rubbish and all tools, equipment and surplus materials from and about the Additional 37th Floor Expansion Premises and Building. Any damage caused by Tenant’s Contractors to any portion of the Building or to any property of Landlord or other tenants shall be repaired forthwith after written notice from Landlord to its condition prior to such damage by Tenant at Tenant’s expense.

(g) Compliance by all Tenant Contractors. Tenant shall impose and enforce all terms hereof on Tenant’s Contractors and its designers, architects and engineers. Landlord shall have the right to order Tenant or any of Tenant’s Contractors, designers, architects or engineers who willfully violate the provisions of this Workletter to cease work and remove himself or itself and his or its equipment and employees from the Building.

(h) Accidents, Notice to Landlord. Tenant’s Contractors shall assume responsibility for the prevention of accidents to its agents and employees and shall take all reasonable safety precautions with respect to the work to be performed and shall comply with all reasonable safety measures initiated by the Landlord and with all applicable laws, ordinances, rules, regulations and orders of any public authority for the safety of persons or property. Tenant shall advise the Tenant’s Contractors to report to Landlord any injury to any of its agents or employees and shall furnish Landlord a copy of the accident report filed with its insurance carrier within three (3) days of its occurrence.

(i) Required Insurance. Tenant shall cause Tenant’s Contractors to secure, pay for, and maintain during the performance of the construction of the Tenant Improvements, insurance in the following minimum coverages and limits of liability:

(i) Workmen’s Compensation and Employer’s Liability Insurance as required by law.

EXHIBIT B

(ii) Commercial General Liability Insurance (including Owner’s and Contractors’ Protective Liability) in an amount not less than Two Million Dollars ($2,000,000) per occurrence, whether involving bodily injury liability (or death resulting therefrom) or property damage liability or a combination thereof with a minimum aggregate limit of Two Million Dollars ($2,000,000), and with umbrella coverage with limits not less than Ten Million Dollars ($10,000,000). Such insurance shall provide for explosion and collapse, completed operations coverage with a two-year extension after completion of the work, and broad form blanket contractual liability coverage and shall insure Tenant’s Contractors against any and all claims for bodily injury, including death resulting therefrom and damage to the property of others and arising from its operations under the contracts whether such operations are performed by Tenant’s Contractors, or by anyone directly or indirectly employed by any of them,

(iii) Comprehensive Automobile Liability Insurance, including the ownership, maintenance, and operation of any automotive equipment, owned, hired, or nonowned in an amount not less than Five Hundred Thousand Dollars ($500,000) for each person in one accident, and One Million Dollars ($1,000,000) for injuries sustained by two or more persons in any one accident and property damage liability in an amount not less than One Million Dollars ($1,000,000) for each accident. Such insurance shall insure Tenant’s Contractors against any and all claims for bodily injury, including death resulting therefrom, and damage to the property of others arising from its operations under the contracts, whether such operations are performed by Tenant’s Contractors, or by anyone directly or indirectly employed by any of them,

(iv) “All-risk” builder’s risk insurance upon the entire Tenant Improvements to the full insurance value thereof. Such insurance shall include the interest of Landlord and Tenant (and their respective contractors and subcontractors of any tier to the extent of any insurable interest therein) in the Tenant Improvements and shall insure against the perils of fire and extended coverage and shall include “all-risk” builder’s risk insurance for physical loss or damage including, without duplication of coverage, theft, vandalism, and malicious mischief. If portions of the Tenant Improvements are stored off the site of the Building or in transit to such site are not covered under such “all-risk” builder’s risk insurance, then Tenant shall effect and maintain similar property insurance on such portions of the Tenant Improvements. Any loss insured under such “all-risk” builder’s risk insurance is to be adjusted with Landlord and Tenant and made payable to Landlord as trustee for the insureds, as their interest may appear, subject to the agreement reached by such parties in interest, or in the absence of any such agreement, then in accordance with a final, nonappealable order of a court of competent jurisdiction. If after such loss no other special agreement is made, the decision to replace or not replace any such damaged Tenant Improvements shall be made in accordance with the terms and provisions of the Amendment including, without limitation, this Workletter. The waiver of subrogation provisions contained in Article 15 of the Original Lease shall apply to the “all-risk” builder’s risk insurance policy to be obtained by Tenant pursuant to this paragraph.

All policies (except the workmen’s compensation policy) shall be endorsed to include as additional named insureds Landlord and its officers, employees, and agents, Landlord’s contractors, Landlord’s architect, and such additional persons as Landlord may

EXHIBIT B

designate. Such endorsements shall also provide that all additional insured parties shall be given thirty (30) days’ prior written notice of any reduction, cancellation, or nonrenewal of coverage by certified mail, return receipt requested (except that ten (10) days’ notice shall be sufficient in the case of cancellation for nonpayment of premium) and shall provide that the insurance coverage afforded to the additional insured parties thereunder shall be primary to any insurance carried independently by such additional insured parties. Landlord shall furnish a list of names and addresses of parties to be named as additional insureds. The insurance policies required hereunder shall be considered as the primary insurance and shall not call into contribution any insurance then maintained by Landlord. Additionally, where applicable, such policy shall contain a cross-liability and severability or interest clause.

To the fullest extent permitted by law, Tenant (and Tenant’s Contractors) and Landlord (and its contractors) shall indemnify and hold harmless the other party, its officers, agents and employees, from and against all claims, damages, liabilities, losses and expenses of whatever nature, including but not limited to reasonable attorneys’ fees, the cost of any repairs to the Additional 37th Floor Expansion Premises or Building necessitated by activities of the indemnifying party’s contractors, bodily injury to persons or damage to property of the indemnified party, its employees, agents, invitees, licensees, or others, arising out of or resulting from the performance of work by the indemnifying party or its contractors. The foregoing indemnity shall be in addition to the insurance requirements set forth above and shall not be in discharge or substitution of the same, and shall not be limited in any way by any limitations on the amount or type of damages, compensation or benefits payable by or for Tenant’s Contractors under Workers’ or Workmen’s Compensation Acts, Disability Benefit Acts or other Employee Benefit Acts.

(j) Quality of Work. The Tenant Improvements shall be constructed in a first-class workmanlike manner using only good grades of material and in compliance with the Final Plans, all insurance requirements, applicable laws and ordinances and rules and regulations of governmental departments or agencies and the rules and regulations adopted by Landlord for the Building.

(k) “As-Built” Plans. Upon completion of the Tenant Improvements. Tenant shall furnish Landlord with “as built” plans for the Additional 37th Floor Expansion Premises, final waivers of lien for the Tenant Improvements, a detailed breakdown of the costs of the Tenant Improvements (which may be in the form of an owner’s affidavit) and evidence of payment reasonably satisfactory to Landlord, and an occupancy permit, certificate of occupancy, or other evidence of the legal right to occupy the Additional 37th Floor Expansion Premises issued by the City of San Francisco for comparable projects in the Building for the Additional 37th Floor Expansion Premises. In addition, upon completion of the Tenant Improvements, Tenant will provide the Building’s architect a CAD file with the construction floor plan showing partitions, doors, door swings and sidelights and such other information as the Building’s architect may require to allow the Building’s architect to update and maintain the “Space Utilization Data Base”. Tenant shall pay the Building’s architect’s fee for this service.

(l) Mechanics’ Liens. Tenant shall not permit any of the Tenant’s Contractors to place any lien upon the Building, and if any such lien is placed upon the Building, Tenant shall within ten (10) days of notice thereof, cause such lien to be discharged of record, by

EXHIBIT B

bonding or otherwise. If Tenant shall fail to cause any such lien to be discharged, Landlord shall have the right to have such lien discharged and Landlord’s expense in so doing, including bond premiums, reasonable legal fees and filing fees, shall be immediately due and payable by Tenant.

3. Payment of Costs of the Tenant Improvements.

(a) Subject to the provisions of Paragraph 3(b) below, the Tenant Improvements (including the cost of acquiring and installing the Building Standard window blinds to the extent not in place) shall be installed by Tenant at Tenant’s sole cost and expense, The cost of the Tenant Improvements shall include, and Tenant agrees to pay Landlord for, the following costs, to the extent such costs are triggered by or are attributable to the scope of the work entailed in the Tenant Improvements (“Landlord’s Costs”): (i) the cost of any work performed by Landlord on behalf of Tenant and for any materials and labor furnished on Tenant’s behalf (it being understood that Tenant and Tenant’s Contractor are solely responsible for the installation of the Tenant Improvements), (ii) all permit, design and engineering fees, all HVAC and sprinkler reconfiguration costs, and all life safety costs, (iii) the cost of any services provided to Tenant or Tenant’s Contractors including but not limited to the cost for rubbish removal, hoisting, and utilities to the extent not included in general conditions charges by the general contractor, and (iv) the Supervision Fee plus Landlord’s actual out-of-pocket expenses for review of Tenant’s Proposed Plans and Final Plans (subject to Section 1(b), above). Landlord may render bills to Tenant monthly for Landlord’s Costs (provided that the Supervision Fee shall be billed based on the cost of the Tenant Improvements performed during the period in question). All bills shall be due and payable no later than the thirtieth (30th) day after delivery of such bills to Tenant, and Landlord may apply the Tenant Allowance against such Landlord’s Costs. Except as provided in Section 3(b) below, the Tenant Allowance may not be applied against any costs associated with data cabling, telecommunication equipment installation, Tenant’s signage, or rent. The “Supervision Fee” shall be an amount equal to three percent (3%) of the total cost of installation and construction of the Tenant Improvements and shall be deducted from the Tenant Allowance.

(b) Landlord shall provide Tenant with an allowance of up to Three Hundred Sixteen Thousand Four Hundred and No/100 Dollars ($316,400.00) (which equals $20.00 per rentable square foot of the Additional 37th Floor Expansion Premises) (the “Tenant Allowance”) to be used toward payment of the costs incurred by Tenant for hard construction costs, permits, design and engineering fees (not to exceed $2.00 per rentable square foot of the Additional 37th Floor Expansion Premises), upgrades to the shell and core, Building mechanical, plumbing, HVAC, electrical, structural, and fire life safety systems, and Landlord’s Costs in connection with the Tenant Improvements. No portion of the Tenant Allowance may be applied to the cost of personal property, equipment, trade fixtures, moving expenses, furniture (including work stations and modular office furniture, regardless of the method of attachment to walls and/or floors), special signage, voice, data or other cabling, Tenant’s legal fees, telecom installation or Base Rent, Tenant’s Percentage Share of Increased Direct Expenses, Tenant’s Percentage Share of Increased Taxes, or other amounts payable pursuant to the Lease.

If Landlord reasonably anticipates that the Tenant Improvement costs may exceed the Tenant Allowance based on the then-current Budget or otherwise (such excess shall be referred to herein as the “Over Allowance Amount”), then Tenant shall pay the Over-

EXHIBIT B

Allowance Amount directly to the Contractor during the construction of the Tenant Improvements as a condition precedent to Landlord’s obligation to disburse the Tenant Allowance. The Tenant Improvements must be completed, and Tenant must have submitted its request for reimbursement in accordance with the terms of this Paragraph 3, no later than February 28, 2016 (subject to a day for day extension for each day of Landlord Delay). If the cost of all items of the Tenant Improvements is less than the Tenant Allowance or if Tenant has not submitted its request for reimbursement for the entire Tenant Allowance in accordance with this Workletter by the foregoing deadline, Tenant shall not be entitled to any payment or credit for such excess or unused amount. Funds may be drawn against the Tenant Allowance hereunder at any time and from time to time prior to February 28, 2016 (subject to a day for day extension for each day of Landlord Delay), subject to the following:

(i) Tenant may not make more than one draw in any calendar month;

(ii) With each draw request, Tenant shall submit to Landlord the following documents:

(A) A true and correct copy of the application for payment by Tenant’s Contractors for the Tenant Improvements completed to date, including sworn statements evidencing the cost of the Tenant Improvements performed to date (or in the case of subcontractors and materialmen, sworn statements for the last preceding draw request) together with copies on all receipted bills and invoices;

(B) Conditional or final lien waivers with respect to the Tenant Improvements performed to date from Tenant’s Contractors and any materialmen (or in the case of subcontractors and materialmen and except for the final disbursement of the Tenant Allowance, unconditional lien waivers for the last preceding draw request);

(C) Tenant’s certification to Landlord that the amounts set forth in all contractor’s sworn statements are owed to Tenant’s Contractors for the Tenant Improvements performed to date;

(D) The total cost of the Tenant Improvements based on the Final Plans, as such cost may change from time to time;

(E) With the final draw request, Tenant shall submit to Landlord a certificate from Tenant’s Architect stating that the Tenant Improvements has been completed in accordance with the Final Plans and applicable zoning, building, environmental and other laws and Unconditional Waiver and Release Upon Progress Payment from the General Contractor and each of Tenant’s Contractors who have not theretofore delivered such unconditional waiver and release.

(iii) Landlord will disburse the portion of the Tenant Allowance allocable to each draw request to Tenant or at Tenant’s request or at Landlord’s option directly to Tenant’s Contractors within thirty (30) days after Tenant has submitted the required information for such draw and has otherwise complied with the requirements hereof.

EXHIBIT B

(c) (i) Landlord shall perform all work necessary (if any) to cause the elevators and the ground floor lobby of the Building to comply with all City of San Francisco-required path of travel work (using Building standard plans and finishes), to the extent such work is required as of the Expansion Space Commencement Date under the City of San Francisco’s requirements that are applicable as of such date. In consideration of Tenant’s agreeing that Tenant shall be responsible for ensuring that the 37th Floor restrooms are compliant with all applicable codes, laws, ordinances, rules and regulations, Landlord shall provide Tenant with a one-time special allowance of Twelve Thousand One Hundred Fifty Dollars and No/100 ($12,150.00) (the “Special Allowance”). The Special Allowance shall be disbursed in the same manner as the Tenant Allowance. Tenant agrees to assume the risk that the cost of any compliance work may exceed the Special Allowance.

(ii) Landlord shall be responsible at its sole cost for any restriping of the Building’s parking garage if required by the City of San Francisco as a condition for the approval of the Tenant Improvements. Tenant agrees to diligently coordinate and work with Landlord to resolve any restriping issues with the City of San Francisco.

(d) Tenant shall pay for the Tenant Improvements and shall not permit the Additional 37th Floor Expansion Premises, the Current Premises or Building or underlying property to become subject to any lien on account of labor, material, or services furnished to Tenant.

(e) In the event Landlord wrongfully fails to disburse any amount of the Tenant Allowance as required hereunder after Tenant has submitted all documents required hereunder with respect to such disbursement request and such failure continues for sixty (60) days after notice delivered to Landlord strictly in accordance with the Amendment, Tenant shall have the right to (i) disburse such unpaid amounts to the General Contractor and (ii) offset such amounts against Base Rent next due and owing (up to an amount not to exceed 20% of the then scheduled Base Rent amount in any month).

4. Miscellaneous.

(a) Tenant agrees that, in connection with the Tenant Improvements and its use of the Additional 37th Floor Expansion Premises prior to the Expansion Premises Commencement Date, Tenant shall have those duties and obligations with respect thereto that it has pursuant to the Lease during the Term, except the obligation for payment of rent, and further agrees that Landlord shall not be liable in any way for injury, loss, or damage which may occur to any of the Tenant Improvements or installations made in the Additional 37th Floor Expansion Premises, or to any personal property placed therein, the same being at Tenant’s sole risk, except to the extent caused by the gross negligence or willful misconduct of Landlord or Landlord Parties.

(b) Except as expressly set forth in the Amendment or the Lease, Landlord has no other agreement with Tenant and Landlord has no other obligation to do any other work or pay any amounts with respect to the Additional 37th Floor Expansion Premises. Any other work in the Additional 37th Floor Expansion Premises which may be permitted by Landlord pursuant to the terms and conditions of the Amendment shall be done at Tenant’s sole cost and expense and in accordance with the terms and conditions of the Lease.

EXHIBIT B

(c) This Workletter shall not be deemed applicable to any additional space added to the Original Premises at any time or from time to time, whether by any options under the Amendment or otherwise, or to any portion of the Original Premises or any additions thereto in the event of a renewal or extension of the initial term of the Lease, whether by any options under the Lease or otherwise, unless expressly so provided in the Lease or any amendment or supplement thereto.

(d) The failure by Tenant to pay any monies due to Landlord pursuant to this Workletter within five (5) business days (or such longer period as expressly set forth herein) after notice from Landlord to Tenant shall be deemed an Event of Default under the terms of the Lease for which Landlord shall be entitled to exercise all remedies available to Landlord for nonpayment of Rent. All late payments shall bear interest pursuant to Section 18.04 of the Lease.

(e) Neither Landlord’s Agent nor the partners compromising Landlord or Landlord’s Agent, nor the shareholders (nor any of the partners comprising same), directors, officers, or shareholders of any of the foregoing (collectively, the “Parties”) shall be liable for the performance of Landlord’s obligations under this Workletter. Tenant shall look solely to Landlord to enforce Landlord’s obligations hereunder and shall not seek any damages against any of the Parties. The liability of Landlord for Landlord’s obligations under this Workletter shall not exceed and shall be limited to Landlord’s interest in the Building and Tenant shall not look to the property or assets of any of the Parties in seeking either to enforce Landlord’s obligations under this Workletter or to satisfy a judgment for Landlord’s failure to perform such obligations. Upon a sale of the Building by Landlord, if the buyer has assumed Landlord’s duties, obligations and liabilities hereunder, Tenant shall look solely to the buyer to enforce Tenant’s rights under this Workletter arising after the date of such sale.

(f) Tenant shall be solely responsible to determine at the site all dimensions of the Additional 37th Floor Expansion Premises and the Building which affect any work to be performed by Tenant hereunder.


LANDLORD:	KNICKERBOCKER PROPERTIES, INC. XXXIII,
	a Delaware corporation

	By:	/s/ Karen M. Wilbrecht
		Name:	Karen M. Wilbrecht
		Title:	Vice President

EXHIBIT B


TENANT:	MEDIVATION, INC.,
	a Delaware corporation

	By:	/s/ Rick Bierly
		Name:	Rick Bierly
		Title:	CFO

EXHIBIT B

SCHEDULE “B-1”

DESIGN STANDARDS

HVAC

a. Outside summer: 79 degrees FDB

b. Inside summer: 74 degrees + or - 2.5 degrees FDB (shades drawn)

c. Outside winter: 38 degrees FDB

d. Inside winter: 72 degrees FDB + or - 2.5 degrees FDB (shades drawn)

e. Population Density: One occupant per 150 usable square feet. The greater of 15 cfm outside air per occupant or 0.15 cfm outside air per usable square foot in accordance with Title 24 of the California Code of Regulations

Electrical

a. Subject to Title 24 of the California Code of Regulations, 1.5 watts per usable square foot connected load/lighting/power — 480/277 volts

b. Subject to Title 24 of the California Code of Regulations, 3.5 watts per usable square foot connected load/miscellaneous power — 120/208 volts

Total of 5 watts per usable square foot connected load

SCHEDULE B-1

EXHIBIT “C”

FORM OF LETTER OF CREDIT

EXHIBIT C

DATE: [ ]

IRREVOCABLE STANDBY LETTER OF CREDIT NUMBER:

ISSUING BANK

BANK OF AMERICA, N.A.

1000 W. TEMPLE STREET

7TH FLOOR, CA9-705-07-05

LOS ANGELES, CA 90012-1514

APPLICANT

MEDIVATION, INC.

525 MARKET STREET, 36TH FLOOR

SAN FRANCISCO, CA 94105

ATTN: [ ]

BENEFICIARY

KNICKERBOCKER PROPERTIES, INC.

XXXIII

C/O CUSHMAN WAKEFIELD

525 MARKET STREET, SUITE 1870

SAN FRANCISCO, CA 94105

ATTN: PROPERTY MANAGER

AMOUNT

USD [ ]

EXPIRATION

[ ]

WE HEREBY ESTABLISH OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO. [ ] IN YOUR FAVOR AVAILABLE BY YOUR DRAFT DRAWN ON US AT SIGHT (IN THE FORM ATTACHED HERETO AS ANNEX A) AND ACCOMPANIED BY THE FOLLOWING DOCUMENT:

A DATED CERTIFICATE IN THE FORM ATTACHED HERETO AS ANNEX B FROM THE BENEFICIARY SIGNED BY AN AUTHORIZED OFFICER, FOLLOWED BY ITS NAME AND DESIGNATED TITLE AND A COPY OF THIS LETTER OF CREDIT AND ANY AMENDMENTS THERETO.

PARTIAL DRAWING AND MULTIPLE PRESENTATIONS ARE ALLOWED.

THIS LETTER OF CREDIT SHALL BE AUTOMATICALLY EXTENDED FOR ADDITIONAL PERIODS OF ONE YEAR, WITHOUT AMENDMENT, FROM THE PRESENT OR EACH FUTURE EXPIRATION DATE UNLESS AT LEAST NINETY (90) DAYS PRIOR TO THE THEN CURRENT EXPIRATION DATE WE NOTIFY YOU BY REGISTERED MAIL/OVERNIGHT COURIER SERVICE AT THE ABOVE ADDRESS THAT THIS LETTER OF CREDIT WILL NOT BE EXTENDED BEYOND THE CURRENT EXPIRATION DATE. IN NO EVENT SHALL THIS LETTER OF CREDIT BE AUTOMATICALLY EXTENDED BEYOND AUGUST 29, 2019.

EXHIBIT C

THIS LETTER OF CREDIT IS TRANSFERABLE ONE OR MORE TIMES, BUT IN EACH INSTANCE ONLY TO A SINGLE TRANSFEREE AND ONLY IN THE FULL AMOUNT AVAILABLE TO BE DRAWN UNDER THIS LETTER OF CREDIT AT THE TIME OF SUCH TRANSFER. SHOULD YOU WISH TO EFFECT A TRANSFER UNDER THIS CREDIT, SUCH TRANSFER WILL BE SUBJECT TO THE RETURN TO US OF THE ORIGINAL LETTER OF CREDIT INSTRUMENT, ACCOMPANIED BY OUR FORM OF TRANSFER ATTACHED HERETO AS ANNEX C, PROPERLY COMPLETED AND SIGNED BY AN AUTHORIZED SIGNATORY OF BENEFICIARY. EACH TRANSFER SHALL BE EVIDENCED BY OUR ENDORSEMENT ON THE REVERSE OF THE ORIGINAL OF THIS LETTER OF CREDIT, AND WE SHALL DELIVER SUCH ORIGINAL TO THE TRANSFEREE. THE TRANSFEREE’S NAME SHALL AUTOMATICALLY BE SUBSTITUTED FOR THAT OF THE BENEFICIARY WHEREVER SUCH BENEFICIARY’S NAME APPEARS WITHIN THIS STANDBY LETTER OF CREDIT. ALL CHARGES IN CONNECTION WITH ANY TRANSFER OF THIS LETTER OF CREDIT SHALL BE CHARGED TO THE APPLICANT’S ACCOUNT.

ALL DEMANDS FOR PAYMENT SHALL BE MADE BY PRESENTATION OF THE APPROPRIATE DOCUMENTS, ON A BUSINESS DAY AT OUR OFFICE (THE “BANK’S OFFICE”) AT: [ ]; AND SIMULTANEOUSLY UNDER TELEPHONE ADVICE TO: [ ], PROVIDED THAT THE GIVING OF SUCH TELEPHONIC ADVICE SHALL NOT BE A CONDITION TO OUR OBLIGATION TO MAKE PAYMENT HEREUNDER. IN SUCH EVENT THE ORIGINAL DOCUMENTS ARE NOT REQUIRED FOR PRESENTATION.

IF THE REQUISITE DOCUMENTS ARE PRESENTED BY FACSIMILE OR OTHERWISE ON OR BEFORE EXPIRATION OF THIS LETTER OF CREDIT, BANK, WILL HONOR THE DRAFT(S) DRAWN UNDER AND IN COMPLIANCE WITH THE TERMS OF THIS LETTER OF CREDIT UPON PRESENTATION, AND PAYMENT WILL BE EFFECTED THE SAME DAY IF PRESENTATION IS MADE ON OR BEFORE 7:00 A.M. (PACIFIC TIME) THAT DAY. IF PRESENTATION IS MADE AFTER 7:00 A.M. (PACIFIC TIME), THEN PAYMENT WILL BE EFFECTED BEFORE THE CLOSE OF BUSINESS OF THE FOLLOWING BUSINESS DAY.

EXCEPT AS OTHERWISE SET FORTH HEREIN, THIS LETTER OF CREDIT IS SUBJECT TO THE UNIFORM CUSTOMES AND PRACTICE FOR DOCUMENTARY CREDITS (2007 REVISION), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 600.

IF YOU REQUIRE ANY ASSISTANCE OR HAVE ANY QUESTIONS REGARDING THIS TRANSACTION, PLEASE CALL [ ].

AUTHORIZED SIGNATURE

EXHIBIT C

ANNEX A

SIGHT DRAFT

TO:

BANK OF AMERICA, N.A.

1000 W. TEMPLE STREET

7TH FLOOR, CA9-705-07-05

LOS ANGELES, CA 90012-1514

, 20

AT SIGHT, PAY TO THE ORDER OF (NAME OF BENEFICIARY) THE AMOUNT OF ( ($ )).

DRAWN UNDER BANK OF AMERICA, N.A. LETTER OF CREDIT NO. [ ].


(BENEFICIARY)

,
A
BY:
NAME:
TITLE:

EXHIBIT C

ANNEX B

CERTIFICATE

LETTER OF CREDIT: IRREVOCABLE STANDBY LETTER OF CREDIT NO. [ ] ISSUER: BANK OF AMERICA, N.A.

BENEFICIARY:

THE UNDERSIGNED, BEING A DULY AUTHORIZED OFFICER OF (NAME OF BENEFICIARY) CERTIFIES TO ISSUER AS FOLLOWS:

1. PURSUANT TO THE LETTER OF CREDIT, BENEFICIARY HAS CONCURRENTLY PRESENTED ITS SIGHT DRAFT DRAWN ON ISSUER IN THE AMOUNT OF

( ($ )).

2. THIS DRAW IN THE AMOUNT OF U.S. DOLLARS ($ ) UNDER YOUR IRREVOCABLE STANDBY LETTER OF CREDIT NO. [ ] REPRESENTS FUNDS DUE AND OWING TO US PURSUANT TO THE TERMS OF THAT CERTAIN LEASE DATED BY AND BETWEEN (NAME OF BENEFICIARY) AND MEDIVATION, INC. AND/OR ANY AMENDMENT TO SUCH LEASE OR ANY OTHER AGREEMENT BETWEEN SUCH PARTIES RELATED TO SUCH LEASE.


DATED:


(NAME OF AUTHORIZED OFFICER OF BENEFICIARY),
AS (TITLE OF AUTHORIZED OFFICER) OF (NAME OF BENEFICIARY)

EXHIBIT C

ANNEX C

TRANSFER FORM

, 20

Bank of America N.A.

1000 W. Temple Street, 7th Floor

Los Angeles, CA 90012-1514

Mail Code CA9-705-07-05

Re:	Irrevocable Standby Letter of Credit No,

We request you to transfer all of our rights as beneficiary under the Letter of Credit referenced above to the transferee, named below:

Name of Transferee

Address

By this transfer all our rights as the transferor, including all rights to make drawings under the Letter of Credit, go to the transferee. The transferee shall have sole rights as beneficiary, whether existing now or in the future, including sole rights to agree to any amendments, including increases or extensions or other changes. All amendments will be sent directly to the transferee without the necessity of consent by or notice to us.

We enclose the original letter of credit and any amendments. Please indicate your acceptance of our request for the transfer by endorsing the letter of credit and sending it to the transferee with your customary notice of transfer.


The signature and title at the right conform with those shown in our files as authorized to sign for the beneficiary. Policies governing signature authorization as required for withdrawals from customer accounts shall also be applied to the authorization of signatures on this form. The authorization of the Beneficiary’s signature and title on this form also acts to certify that the authorizing financial institution (i) is regulated by a U.S. federal banking agency; (ii) has implemented anti-money laundering policies and procedures that comply with applicable requirements of law, including a Customer Identification Program (CIP) in accordance with Section 326 of the USA PATRIOT Act; (iii) has approved the Beneficiary under its anti-money laundering compliance program; and (iv) acknowledges that Bank of America, N.A. is relying on the foregoing certifications pursuant to 31 C.F.R. Section 103.121 (b)(6).				NAME OF TRANSFEROR NAME OF AUTHORIZED SIGNER AND TITLE AUTHORIZED SIGNATURE


NAME OF BANK


AUTHORIZED SIGNATURE AND TITLE


PHONE NUMBER

EXHIBIT C

Exhibit 12.1

Medivation, Inc.

Computation of Ratio of Earnings to Fixed Charges

(Unaudited)

(in thousands, except ratios)


	Three Months Ended March 31, 2015			Years Ended December 31,
	Three Months Ended March 31, 2015			2014		2013			2012			2011			2010
Earnings
(Loss) income before income taxes	$	(4,898	)	$	260,194	$	(42,498	)	$	(41,250	)	$	(43,172	)	$	(32,465	)
Add: Fixed charges		6,968			25,849		21,982			16,528			933			733

Earnings, as defined	$	2,070		$	286,043	$	(20,516	)	$	(24,722	)	$	(42,239	)	$	(31,732	)

Fixed Charges
Interest expense	$	1,698		$	6,792	$	6,793		$	5,332		$	—		$	—
Capitalized interest		527			1,459		—			—			—			—
Amortization of debt discount and issuance costs		3,910			14,898		13,456			9,663			—			—
Interest component of rentals ⁽¹⁾		833			2,700		1,733			1,533			933			733

Total	$	6,968		$	25,849	$	21,982		$	16,528		$	933		$	733

(Deficiency in earnings) earnings available to cover fixed charges	$	(4,898	)	$	286,043	$	(42,498	)	$	(41,250	)	$	(43,172	)	$	(32,465	)

Ratio of earnings to fixed charges		*			11.07		*			*			*			*

(1)	Represents the estimated portion of operating lease rental expense that is considered by us to be a reasonable representation of interest.

*	Because of the deficiency in earnings to cover fixed charges, the ratio information is not applicable.

Exhibit 31.1

CERTIFICATIONS

I, David T. Hung, M.D., certify that:

1. I have reviewed this Form 10-Q of Medivation, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 7, 2015


/s/ David T. Hung, M.D.
Name:		David T. Hung, M.D.
Title:		President and Chief Executive Officer

Exhibit 31.2

CERTIFICATIONS

I, Richard A. Bierly, certify that:

1. I have reviewed this Form 10-Q of Medivation, Inc.;

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 7, 2015


/s/ Richard A. Bierly
Name:		Richard A. Bierly
Title:		Chief Financial Officer

Exhibit 32.1

CERTIFICATION

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. § 1350), David T. Hung, M.D., President and Chief Executive Officer of Medivation, Inc. (the “Company”), and Richard A. Bierly, Chief Financial Officer of the Company, each hereby certifies that, to the best of his knowledge:

(1) The Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2015, to which this Certification is attached as Exhibit 32.1 (the “Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and

(2) The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

In Witness Whereof, each of the undersigned has set his hand hereto as of the 7th day of May, 2015.


/s/ David T. Hung, M.D.		/s/ Richard A. Bierly
Name:	David T. Hung, M.D.	Name:	Richard A. Bierly
Title:	President and Chief Executive Officer	Title:	Chief Financial Officer

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Medivation, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

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