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Did Bernie Sanders Attack Medivation Without Reading Its Annual Reports?

Summary

Medivation has spent all its profits and a lot more on trying to cure cancer. Basic addition and subtraction is all that is required to see this.

Bernie Sanders and several Democrat Senators and Congressmen attacked Medivation on March 28.

If they had read Medivation's annual reports, they would have no basis for their attacks. Their attacks hit the 401(k) savings of many people.

Don't expect other countries to pay US prices because almost all the biotech shareholders and employees are American.

This attack proves that lawmakers either haven't looked at any data, or expect their listeners to not look at data. Either way, clearly biotech investors can ignore this irrationality.

Introduction

On March 28, Bernie Sanders and several of his colleagues attacked Medivation (NASDAQ:MDVN). Medivation is a San Francisco-based company that is trying to cure cancer. It has a prostate cancer drug Xtandi that is its only source of revenue. Bernie and his colleagues attacked Xtandi's pricing; they complained that the compound had been discovered at the University of California, Los Angeles (UCLA), but cost a lot more in the United States than in Japan or Europe. Note that Medivation gets half of US revenue and a lot less of international revenue, the rest goes to its Japanese partner, Astellas.

To see what was so evil about this company, I looked at its annual report. A total of 12 lawmakers attacked Medivation. I doubt the attackers read Medivation's annual reports. The annual reports show a company that has spent all its profits and a lot more on trying to cure cancer. Very simple addition and subtraction show that its combined profits over the last ten years are much smaller than what it has spent on cancer drug discovery and development.

Medivation fell 25% in an already depressed biotech stock market due to the attack. Sanofi (NYSE:SNY), the French drug company, grabbed the opportunity to unveil a hostile takeover effort for Medivation. The takeover would be a good thing because it would remind investors that these political attacks could be ignored. It looks like the takeover might happen at a 100% premium to where Medivation traded in the aftermath of Bernie's attack.

Unless 2 + 2 = 25, the politicians don't have a case. Very clearly, either they didn't read the annual reports, or assumed their audience wouldn't read the annual reports. They have completely ignored the cost of clinical trials and FDA approval. This is proof that investors should ignore this kind of rhetoric; it defies logic and basic arithmetic. Biotech investors have become unnecessarily frightened.

The top two shareholders of Medivation are Fidelity and Vanguard. They own 22% of Medivation. That means Bernie Sanders and his colleagues hit the 401(k) savings of many people when they attacked Medivation. The Medivation founder and CEO owns less than 1% of the company.

Medivation's financial history

Based on what these Senators said, I had expected to find rogue behavior in Medivation's SEC filings. I was surprised to find a blameless company.

It is not surprising...


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