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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 September 30, 2010

or



| ̈ | 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.)

201 Spear Street, 3rd 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   ̈    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.



|                        |  |                                                  |  |                           |  |  
|----------------------- |  | ------------------------------------------------ |  | ------------------------- |  | -
|Large accelerated filer |  |  ̈                                                |  | Accelerated filer         |  | x
|                        |  |                                                  | 
|Non-accelerated filer   |  |  ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company |  |  ̈

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 November 1, 2010, 34,572,163 shares of the registrants Common Stock, $0.01 par value per share, were issued and
outstanding.









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##### Table of Contents



TABLE
OF CONTENTS



|                               |  |          |  |                                                                                       |  |   
|------------------------------ |  | -------- |  | ------------------------------------------------------------------------------------- |  | --
|PART I  FINANCIAL INFORMATION |  | 3       
|                               |  |          | 
|                               |  | ITEM 1.  |  | FINANCIAL STATEMENTS (UNAUDITED)                                                      |  | 3 
|                               |  |          | 
|                               |  |          |  | CONDENSED CONSOLIDATED BALANCE SHEETS                                                 |  | 3 
|                               |  |          | 
|                               |  |          |  | CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                       |  | 4 
|                               |  |          | 
|                               |  |          |  | CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS                                       |  | 5 
|                               |  |          | 
|                               |  |          |  | NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS                                  |  | 6 
|                               |  |          | 
|                               |  | ITEM 2.  |  | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |  | 15
|                               |  |          | 
|                               |  | ITEM 3.  |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            |  | 25
|                               |  |          | 
|                               |  | ITEM 4.  |  | CONTROLS AND PROCEDURES                                                               |  | 25
|                               | 
|PART II  OTHER INFORMATION    |  | 25      
|                               |  |          | 
|                               |  | ITEM 1.  |  | LEGAL PROCEEDINGS                                                                     |  | 25
|                               |  |          | 
|                               |  | ITEM 1A. |  | RISK FACTORS                                                                          |  | 26
|                               |  |          | 
|                               |  | ITEM 2.  |  | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                           |  | 38
|                               |  |          | 
|                               |  | ITEM 3.  |  | DEFAULTS UPON SENIOR SECURITIES                                                       |  | 38
|                               |  |          | 
|                               |  | ITEM 4.  |  | (REMOVED AND RESERVED)                                                                |  | 38
|                               |  |          | 
|                               |  | ITEM 5.  |  | OTHER INFORMATION                                                                     |  | 38
|                               |  |          | 
|                               |  | ITEM 6.  |  | EXHIBITS                                                                              |  | 38



2



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PART I  FINANCIAL INFORMATION



|ITEM 1. | FINANCIAL STATEMENTS
|------- | --------------------

MEDIVATION, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in
thousands, except share and per share data)

(unaudited)



|                                                                                                                                 |  |                   |          |   |                  |   |          |  
|-------------------------------------------------------------------------------------------------------------------------------- |  | ----------------- | -------- | - | ---------------- | - | -------- | -
|                                                                                                                                 |  | September 30,2010 |          |   | December 31,2009 |  
|ASSETS                                                                                                                           |  |                   |          |   |                  |   |          |  
|Current assets:                                                                                                                  |  |                   |          |   |                  |   |          |  
|Cash and cash equivalents                                                                                                        |  | $                 | 159,936  |   |                  | $ | 57,463   |  
|Short-term investments                                                                                                           |  |                   | 51,562   |   |                  |   | 220,781  |  
|Receivable from collaboration partners                                                                                           |  |                   | 17,865   |   |                  |   | 6,490    |  
|Prepaid expenses and other current assets                                                                                        |  |                   | 12,256   |   |                  |   | 9,343    |  
|                                                                                                                                 |  |                   |          |   |                  |   |          |  
|Total current assets                                                                                                             |  |                   | 241,619  |   |                  |   | 294,077  |  
|Property and equipment, net                                                                                                      |  |                   | 925      |   |                  |   | 1,092    |  
|Restricted cash                                                                                                                  |  |                   | 843      |   |                  |   | 843      |  
|Other non-current assets                                                                                                         |  |                   | 918      |   |                  |   | 678      |  
|                                                                                                                                 |  |                   |          |   |                  |   |          |  
|Total assets                                                                                                                     |  | $                 | 244,305  |   |                  | $ | 296,690  |  
|                                                                                                                                 |  |                   |          |   |                  |   |          |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                             |  |                   |          |   |                  |   |          |  
|Current liabilities:                                                                                                             |  |                   |          |   |                  |   |          |  
|Accounts payable                                                                                                                 |  | $                 | 5,482    |   |                  | $ | 4,840    |  
|Accrued expenses                                                                                                                 |  |                   | 22,612   |   |                  |   | 12,054   |  
|Deferred revenue                                                                                                                 |  |                   | 57,225   |   |                  |   | 86,570   |  
|Other current liabilities                                                                                                        |  |                   | 158      |   |                  |   | 800      |  
|                                                                                                                                 |  |                   |          |   |                  |   |          |  
|Total current liabilities                                                                                                        |  |                   | 85,477   |   |                  |   | 104,264  |  
|Deferred revenue, net of current                                                                                                 |  |                   | 150,067  |   |                  |   | 166,598  |  
|Other non-current liabilities                                                                                                    |  |                   | 978      |   |                  |   | 554      |  
|                                                                                                                                 |  |                   |          |   |                  |   |          |  
|Total liabilities                                                                                                                |  |                   | 236,522  |   |                  |   | 271,416  |  
|                                                                                                                                 |  |                   |          |   |                  |   |          |  
|Contingencies (Note 12)                                                                                                          |  |                   |          |   |                  |   |          |  
|                                                                                                                                 |  |                  
|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;                                                                                         |  |                   |          |   |                  |   |          |  
|50,000,000 shares authorized; issued and outstanding 34,571,329 shares at September 30, 2010 and 33,823,062 at
December 31, 2009 |  |                   | 346      |   |                  |   | 338      |  
|Additional paid-in capital                                                                                                       |  |                   | 214,995  |   |                  |   | 202,361  |  
|Accumulated other comprehensive gain (loss)                                                                                      |  |                   | 3        |   |                  |   | (12      | )
|Accumulated deficit                                                                                                              |  |                   | (207,561 | ) |                  |   | (177,413 | )
|                                                                                                                                 |  |                   |          |   |                  |   |          |  
|Total stockholders equity                                                                                                       |  |                   | 7,783    |   |                  |   | 25,274   |  
|                                                                                                                                 |  |                   |          |   |                  |   |          |  
|Total liabilities and stockholders equity                                                                                       |  | $                 | 244,305  |   |                  | $ | 296,690  |  
|                                                                                                                                 |  |                   |          |   |                  |   |          |  

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



3



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MEDIVATION, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

(unaudited)



|                                                                                              |  |                                 |        |   |                                |   |         |      |  |   |         |   |  |   |         |  
|--------------------------------------------------------------------------------------------- |  | ------------------------------- | ------ | - | ------------------------------ | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                                              |  | Three months endedSeptember 30, |        |   | Nine months endedSeptember 30, |  
|                                                                                              |  | 2010                            |        |   | 2009                           |   |         | 2010 |  |   | 2009    |  
|Collaboration revenue                                                                         |  | $                               | 14,350 |   |                                | $ | 16,341  |      |  | $ | 45,876  |   |  | $ | 49,021  |  
|                                                                                              |  |                                 |        |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Operating expenses:                                                                           |  |                                 |        |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Research and development                                                                      |  |                                 | 15,633 |   |                                |   | 21,530  |      |  |   | 59,470  |   |  |   | 54,851  |  
|Selling, general and administrative                                                           |  |                                 | 5,454  |   |                                |   | 6,034   |      |  |   | 18,267  |   |  |   | 18,950  |  
|                                                                                              |  |                                 |        |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Total operating expenses                                                                      |  |                                 | 21,087 |   |                                |   | 27,564  |      |  |   | 77,737  |   |  |   | 73,801  |  
|                                                                                              |  |                                 |        |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Loss from operations                                                                          |  |                                 | (6,737 | ) |                                |   | (11,223 | )    |  |   | (31,861 | ) |  |   | (24,780 | )
|Other income (expense), net                                                                   |  |                                 | (174   | ) |                                |   | 96      |      |  |   | 245     |   |  |   | 813     |  
|                                                                                              |  |                                 |        |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Net loss before income tax                                                                    |  |                                 | (6,911 | ) |                                |   | (11,127 | )    |  |   | (31,616 | ) |  |   | (23,967 | )
|Income tax benefit (expense)                                                                  |  |                                 | 1,468  |   |                                |   | (2,846  | )    |  |   | 1,468   |   |  |   | (4,538  | )
|                                                                                              |  |                                 |        |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Net loss                                                                                      |  | $                               | (5,443 | ) |                                | $ | (13,973 | )    |  | $ | (30,148 | ) |  | $ | (28,505 | )
|                                                                                              |  |                                 |        |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Basic and diluted net loss per common share                                                   |  | $                               | (0.16  | ) |                                | $ | (0.42   | )    |  | $ | (0.88   | ) |  | $ | (0.90   | )
|                                                                                              |  |                                 |        |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Weighted average common shares used in thecalculation of basic and diluted net loss per share |  |                                 | 34,570 |   |                                |   | 33,468  |      |  |   | 34,198  |   |  |   | 31,588  |  
|                                                                                              |  |                                 |        |   |                                |   |         |      |  |   |         |   |  |   |         |  

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



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MEDIVATION, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)



|                                                                                  |  |                                |         |   |      |   |          |  
|--------------------------------------------------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | -------- | -
|                                                                                  |  | Nine months endedSeptember 30, |        
|                                                                                  |  | 2010                           |         |   | 2009 |  
|Cash flows from operating activities:                                             |  |                                |         |   |      |   |          |  
|Net loss                                                                          |  | $                              | (30,148 | ) |      | $ | (28,505  | )
|Adjustments to reconcile net loss to net cash flows used in operating activities: |  |                                |         |   |      |   |          |  
|Depreciation and amortization                                                     |  |                                | 355     |   |      |   | 213      |  
|Accretion of discount on securities                                               |  |                                | (230    | ) |      |   | (930     | )
|Stock-based compensation                                                          |  |                                | 9,972   |   |      |   | 7,667    |  
|Changes in operating assets and liabilities:                                      |  |                                |         |   |      |   |          |  
|Receivable from collaboration partners                                            |  |                                | (11,375 | ) |      |   | (696     | )
|Prepaid expenses and other current assets                                         |  |                                | (4,849  | ) |      |   | (4,054   | )
|Other non-current assets                                                          |  |                                | (352    | ) |      |   | 12       |  
|Accounts payable                                                                  |  |                                | 642     |   |      |   | (1,719   | )
|Accrued expenses                                                                  |  |                                | 10,558  |   |      |   | 7,226    |  
|Other current liabilities                                                         |  |                                | (642    | ) |      |   | 28       |  
|Deferred revenue                                                                  |  |                                | (45,876 | ) |      |   | (49,021  | )
|Other non-current liabilities                                                     |  |                                | 424     |   |      |   | (39      | )
|                                                                                  |  |                                |         |   |      |   |          |  
|Net cash used in operating activities                                             |  |                                | (71,521 | ) |      |   | (69,818  | )
|                                                                                  |  |                                |         |   |      |   |          |  
|Cash flows from investing activities:                                             |  |                                |         |   |      |   |          |  
|Purchase of short-term investments                                                |  |                                | (69,962 | ) |      |   | (207,651 | )
|Maturities of short-term investments                                              |  |                                | 241,000 |   |      |   | 200,000  |  
|Purchase of property and equipment                                                |  |                                | (150    | ) |      |   | (512     | )
|                                                                                  |  |                                |         |   |      |   |          |  
|Net cash provided by (used in) investing activities                               |  |                                | 170,888 |   |      |   | (8,163   | )
|                                                                                  |  |                                |         |   |      |   |          |  
|Cash flows from financing activities:                                             |  |                                |         |   |      |   |          |  
|Net proceeds from issuances of common stock                                       |  |                                |        |   |      |   | 62,060   |  
|Excess tax benefits from stock-based compensation                                 |  |                                | 45      |   |      |   |         |  
|Stock option exercises                                                            |  |                                | 3,061   |   |      |   | 969      |  
|                                                                                  |  |                                |         |   |      |   |          |  
|Net cash provided by financing activities                                         |  |                                | 3,106   |   |      |   | 63,029   |  
|                                                                                  |  |                                |         |   |      |   |          |  
|Net increase (decrease) in cash and cash equivalents                              |  |                                | 102,473 |   |      |   | (14,952  | )
|Cash and cash equivalents at beginning of period                                  |  |                                | 57,463  |   |      |   | 71,454   |  
|                                                                                  |  |                                |         |   |      |   |          |  
|Cash and cash equivalents at end of period                                        |  | $                              | 159,936 |   |      | $ | 56,502   |  
|                                                                                  |  |                                |         |   |      |   |          |  

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



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MEDIVATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010

(unaudited)

NOTE 1  THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company

Medivation, Inc. (the Company) is a biopharmaceutical company focused on the rapid development of novel small molecule drugs to treat serious diseases for which there are limited treatment
options. The Companys product candidates in clinical development are dimebon (latrepirdine), which is in Phase 3 development for the treatment of Alzheimers disease and Huntington disease, and MDV3100, which is in Phase 3 development for
the treatment of castration-resistant prostate cancer. The Companys dimebon program is partnered with Pfizer Inc., or Pfizer, and its MDV3100 program is partnered with Astellas Pharma Inc., or Astellas.

In September 2008, the Company announced a Collaboration Agreement with Pfizer, which became effective in October 2008. Under the terms
of the agreement, the Company and Pfizer agreed to develop and commercialize dimebon for the treatment of Alzheimers disease and Huntington disease. The Company and Pfizer share the costs and expenses of developing and commercializing dimebon
for the United States market on a 60% Pfizer/40% Medivation basis, and will share profits (or losses) resulting from commercialization of dimebon in the United States in the same proportions. Outside the United States, Pfizer will bear all
development and commercialization costs, and will pay the Company tiered royalties on aggregate net sales of dimebon. In the fourth quarter of 2008, the Company received a non-refundable, up-front cash payment of $225.0 million pursuant to its
Collaboration Agreement with Pfizer.

In March 2010, the Company and Pfizer reported negative results from the CONNECTION
study, a randomized, double-blind, placebo-controlled, six-month Phase 3 study of dimebon in patients with mild-to-moderate Alzheimers disease. In the CONNECTION trial, dimebon failed to show a statistically significant improvement over
placebo on any of the primary or secondary efficacy endpoints, and thus did not meet any of the studys efficacy endpoints. Given the negative results in the CONNECTION trial, Pfizer has the right to terminate the Collaboration Agreement with
the Company at any time.

In October 2009, the Company entered into a Collaboration Agreement with Astellas. Under the terms
of the agreement, the Company and Astellas agreed to develop and commercialize MDV3100 for the treatment of both late- and early-stage prostate cancer. The Company and Astellas share equally the costs and expenses of developing and commercializing
MDV3100 for the United States market, except that development costs for studies useful in both the United States market and either Europe or Japan are shared two-thirds by Astellas and one-third by the Company. The Company and Astellas will share
equally profits (or losses) resulting from the commercialization of MDV3100 in the United States. Outside the United States, Astellas will bear all development and commercialization costs, and will pay the Company tiered royalties on aggregate net
sales of MDV3100. In the fourth quarter of 2009, the Company received a non-refundable, up-front cash payment of $110.0 million pursuant to its Collaboration Agreement with Astellas, ten percent of which the Company paid to the academic institution
from which it licensed its rights to MDV3100.

The Company has funded its operations primarily through private and public
offerings of its common stock, and from the up-front and cost-sharing payments from its Collaboration Agreements with Pfizer and Astellas. As of September 30, 2010, the Company had an accumulated deficit of $207.6 million and the Company
expects to incur substantial additional losses for the foreseeable future as it continues to finance clinical and preclinical studies of its existing and potential future product candidates and its corporate overhead costs.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the U.S. 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 accounting principles generally accepted in the U.S. for complete financial statements. The unaudited
condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements. In the opinion of management, all adjustments, consisting of normal recurring adjustments necessary for the fair
statement of results 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.



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MEDIVATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

September 30, 2010

(unaudited)





The preparation of
unaudited condensed consolidated financial statements requires management to make estimates and assumptions that affect the recorded amounts reported therein. A change in facts or circumstances surrounding the estimate could result in a change to
estimates and impact future operating results.

The balance sheet at December 31, 2009 has been derived from the audited
financial statements at that date.

The unaudited condensed consolidated financial statements and related disclosures have
been prepared with the presumption that users of the interim unaudited condensed consolidated financial statements have read or have access to the audited consolidated financial statements for the preceding fiscal year. Accordingly, these unaudited
condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended December 31, 2009 included in the Companys Annual Report on Form 10-K
filed with the Securities and Exchange Commission (the Commission) on March 15, 2010.

The unaudited
condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Medivation Neurology, Inc., Medivation Prostate Therapeutics, Inc. and Medivation Therapeutics, Inc. and reflect the elimination of
intercompany accounts and transactions.

Reference is made to Summary of Significant Accounting Policies included
in the Companys Annual Report on Form 10-K for the year ended December 31, 2009. As of the date of the filing of this Quarterly Report, the Company did not identify any significant changes to the critical accounting policies discussed in
its Annual Report for the year ended December 31, 2009.

Recently Issued Accounting Pronouncements

In March 2010, the Financial Accounting Standards Board (FASB) ratified Emerging Issues Task Force (EITF) Issue
No. 08-9, Milestone Method of Revenue Recognition (Issue 08-9). The Accounting Standards Update resulting from Issue 08-9 amends Accounting Standards Codification (ASC) 605-28. The Task Force concluded that the milestone method is a
valid application of the proportional performance model when applied to research or development arrangements. Accordingly, the consensus states that an entity can make an accounting policy election to recognize a payment that is contingent upon the
achievement of a substantive milestone in its entirety in the period in which the milestone is achieved. A milestone is defined in the consensus as an event: (1) that can only be achieved based in whole or in part on either (a) the
entitys performance or (b) on the occurrence of a specific outcome resulting from the entitys performance; (2) for which there is substantive uncertainty at the date the arrangement is entered into that the event will be
achieved; and (3) that would result in additional payments being due to the entity. Issue 08-9 is effective for fiscal years, and interim periods within those years, beginning on or after June 15, 2010, and may be applied either
prospectively to milestones achieved after the adoption date, or; retrospectively for all periods presented. The Company does not expect Issue 08-9 to have any material impact on its consolidated financial statements.

In January 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-06, Fair Value Measurements and Disclosures (ASU
2010-06), which amends ASC 820, adding new requirements for disclosures for Levels 1 and 2, separate disclosures of purchases, sales, issuances, and settlements relating to Level 3 measurements and clarification of existing fair value
disclosures. ASU 2010-06 is effective for interim and annual periods beginning after December 15, 2009, except for the requirement to provide Level 3 activity of purchases, sales, issuances, and settlements on a gross basis, which will be
effective for fiscal years beginning after December 15, 2010. The Company adopted this statement on January 1, 2010, analyzed its impact on its consolidated financial statements and concluded that there was no such impact.

In October 2009, the FASB issued Accounting Standards Update (ASU) No. 2009-13, Multiple-Deliverable Revenue
Arrangements (ASU 2009-13). This update removes the criterion that entities must use objective and reliable evidence of fair value in separately accounting for deliverables and provides entities with a hierarchy of evidence that must be
considered when allocating arrangement consideration. The new guidance also requires entities to allocate arrangement consideration to the separate units of accounting based on the deliverables relative selling price. The provisions will be
effective for revenue arrangements entered into or materially modified in the Companys fiscal year 2011. The Company is currently evaluating the impact on its consolidated financial statements of the provisions of ASU 2009-13 but does not
intend to early adopt.



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MEDIVATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

September 30, 2010

(unaudited)





NOTE 2  COLLABORATION
AGREEMENTS

(a) The Pfizer Collaboration Agreement

In September 2008, the Company announced a Collaboration Agreement with Pfizer. Under this agreement, the Company and Pfizer agreed to
collaborate on the development of dimebon for Alzheimers disease and Huntington disease for the United States market, including associated regulatory filings with the U.S. Food and Drug Administration (the FDA). In addition, if
approved by the FDA, following such approval and the launch of dimebon in the United States, the Company, at its option, and Pfizer will co-promote dimebon to specialty physicians in the United States, and Pfizer will promote dimebon to primary care
physicians in the United States. Pfizer will be responsible for development and seeking regulatory approval for, and commercialization of, dimebon outside the United States. Pfizer is responsible for all manufacture of product for both clinical and
commercial purposes. Both the Company and Pfizer have agreed not to commercialize for the treatment of specified indications any other products directed to the same primary molecular target as dimebon for a specified time period, subject to certain
exceptions.

The agreement establishes several joint committees consisting of an equal number of representatives from both
parties that operate by consensus to oversee the collaboration. In the event that a joint committee is unable to reach consensus on a particular issue, then, depending on the issue, a dispute may be decided at the joint committee level by the party
with the final decision on the issue or escalated to senior management of the parties. If a dispute is escalated to senior management and no consensus is reached, then the dispute may be decided by the party to whom the contract grants final
decision on such issue. Other issues can only be decided by consensus of the parties, and unless and until the parties representatives reach agreement on such issue, no decision on such issue will be made, and the status quo will be
maintained.

Under the Pfizer Collaboration Agreement, Pfizer paid the Company an up-front cash payment of $225.0 million in
the fourth quarter of 2008. The Company is also eligible to receive payments of up to $500 million upon the attainment of development and regulatory milestones plus additional milestone payments upon the achievement of certain net sales levels for
dimebon. The Company and Pfizer will share the costs and expenses of developing and commercializing dimebon for the United States market on a 60%/40% basis, with Pfizer assuming the larger share, and the Company and Pfizer will share profits (or
losses) resulting from the commercialization of dimebon in the United States in such proportions. Outside the United States, Pfizer will bear all development and commercialization costs and will pay the Company tiered royalties on the aggregate net
sales of dimebon.

The Company is permitted to terminate the Pfizer Collaboration Agreement for an uncured material breach by
Pfizer. Pfizer has the right to terminate the Pfizer Collaboration Agreement unilaterally at any time. In the event of an uncured material breach of the Pfizer Collaboration Agreement by the Company, Pfizer may elect either to terminate the Pfizer
Collaboration Agreement or to keep the Pfizer Collaboration Agreement in place, but terminate the Companys right to participate in development, commercialization (other than co-promoting dimebon) and other activities for dimebon, including the
joint committees and decision making for dimebon. However, such termination would not affect the Companys financial return or, unless the Company commits an uncured material breach of its co-promotion obligations, the Companys
co-promotion rights. Following any termination of the Pfizer Collaboration Agreement, all rights to develop and commercialize dimebon will revert to the Company, and Pfizer will grant a license to the Company to enable the Company to continue such
development and commercialization, remain responsible for its ongoing financial and other obligations under the Collaboration Agreement for a transition period of six months following termination, and is obligated to supply product to the Company
for a reasonable period of time, not to exceed eighteen months following termination, on terms to be negotiated between the parties in good faith.

(b) The Astellas Collaboration Agreement

In October 2009, the
Company announced a Collaboration Agreement with Astellas. Under the Astellas Collaboration Agreement, the Company and Astellas agreed to collaborate on the development of MDV3100 for prostate cancer for the United States market, including
associated regulatory filings with the FDA. In addition, if approved by the FDA, following such approval and the launch of MDV3100 in the United States, the Company, at its option, and Astellas will co-promote MDV3100 in the United States. Astellas
is responsible for development of, seeking regulatory approval for and commercialization of MDV3100 outside the United States. Astellas will be responsible for commercial manufacture of MDV3100 on a global basis. Both Medivation and Astellas have
agreed not to commercialize certain other products having a similar mechanism of action as MDV3100 for the treatment of specified indications for a specified time period, subject to certain exceptions.

The agreement establishes several joint committees consisting of an equal number of representatives from
both parties that operate by consensus to oversee the collaboration. In the event that a joint committee is unable to reach consensus on a particular issue, then, depending on the issue, a dispute may be decided at the joint committee level by the
party with the final decision on the issue or escalated to senior management of the parties. If a dispute is escalated to senior management and no consensus is reached, then the dispute may be decided by the party to whom the contract grants final
decision on such issue. Other issues can only be decided by consensus of the parties, and unless and until the parties representatives reach agreement on such issue, no decision on such issue will be made, and the status quo will be
maintained.



8



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##### Table of Contents

MEDIVATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

September 30, 2010

(unaudited)





Under the Astellas
Collaboration Agreement, Astellas paid the Company an up-front cash payment of $110.0 million in the fourth quarter of 2009. The Company is also entitled to receive up to $335.0 million in development milestone payments, plus up to an additional
$320.0 million in commercial milestone payments. The Company is required to share 10% of the up-front payment and any development milestone payments received under the Astellas Collaboration Agreement with the academic institution from which it
licensed its rights to MDV3100. The Company paid 10% of the up-front payment, or $11.0 million, to the academic institution in the fourth quarter of 2009. The Company and Astellas will share equally the costs and expenses of developing and
commercializing MDV3100 for the United States market, except that development costs for studies useful in both the United States market and either Europe or Japan are shared two-thirds by Astellas and one-third by the Company. The Company and
Astellas will share profits (or losses) resulting from the commercialization of MDV3100 in the United States equally. Outside the United States, Astellas will bear all development and commercialization costs and will pay the Company tiered,
double-digit royalties on the aggregate net sales of MDV3100.

The Company and Astellas each are permitted to terminate the
Astellas Collaboration Agreement for an uncured material breach by, or the insolvency of, the other party. Astellas has a right to terminate the Astellas Collaboration Agreement unilaterally by advance written notice to the Company, but except in
certain specific circumstances, generally cannot exercise that termination right until the first anniversary of MDV3100s first commercial sale. Following any termination of the Astellas Collaboration Agreement in its entirety, all rights to
develop and commercialize MDV3100 will revert to the Company, and Astellas will grant a license to the Company to enable the Company to continue such development and commercialization. In addition, except in the case of a termination by Astellas for
an uncured material breach, Astellas will supply MDV3100 to the Company during a specified transition period.

(c)
Revenue Recognition

The Company records up-front payments under its collaboration agreements as deferred revenue and
amortizes them on a straight-line basis over the expected performance period of its deliverables under the applicable collaboration agreement. The Company presently estimates that its performance periods under the Pfizer Collaboration Agreement and
the Astellas Collaboration Agreement will end in the fourth quarter of 2013 and the fourth quarter of 2014, respectively. Milestone payments earned by the Company under its collaboration agreements are recognized as revenue in their entirety in the
period in which the underlying milestone event is achieved, except that any milestone payments triggered by events that occur during the performance period and not qualifying as substantive milestones are recorded as deferred revenue and amortized
on a straight-line basis over the performance period. Any profit sharing and royalty payments earned by the Company under its collaboration agreements will be recognized as revenue in the period in which the underlying product sales occur.

To date the Company has recorded $225.0 million of deferred revenue with respect to the Pfizer Collaboration Agreement and
$110.0 million of deferred revenue with respect to the Astellas Collaboration Agreement, consisting in both cases of the up-front payments under those agreements. At September 30, 2010, deferred revenue balances with respect to the Pfizer
Collaboration Agreement and the Astellas Collaboration Agreement were $117.0 million and $90.2 million, respectively.

Revenue
recognized with respect to the Pfizer Collaboration Agreement and the Astellas Collaboration Agreement for the three and nine months ended September 30, 2010 and 2009 is as follows:



|                                                         |  |                                 |        |  |                                |   |        |      |  |   |        |  |  |   |        | 
|-------------------------------------------------------- |  | ------------------------------- | ------ |  | ------------------------------ | - | ------ | ---- |  | - | ------ |  |  | - | ------ | 
|                                                         |  | Three months endedSeptember 30, |        |  | Nine months endedSeptember 30, |  
|                                                         |  | 2010                            |        |  | 2009                           |   |        | 2010 |  |   | 2009   | 
|                                                         |  | (in thousands)                  |        |  | (in thousands)                 |  
|Revenue recognized from Pfizer Collaboration Agreement   |  | $                               | 9,004  |  |                                | $ | 16,341 |      |  | $ | 30,012 |  |  | $ | 49,021 | 
|Revenue recognized from Astellas Collaboration Agreement |  |                                 | 5,346  |  |                                |   |       |      |  |   | 15,864 |  |  |   |       | 
|                                                         |  |                                 |        |  |                                |   |        |      |  |   |        |  |  |   |        | 
|Total revenue recognized                                 |  | $                               | 14,350 |  |                                | $ | 16,341 |      |  | $ | 45,876 |  |  | $ | 49,021 | 
|                                                         |  |                                 |        |  |                                |   |        |      |  |   |        |  |  |   |        | 

Given the negative results in the CONNECTION trial and the subsequent revisions to the dimebon development
plan, the Company revised its estimates of the performance period under the Pfizer Collaboration Agreement in the first and third quarters of 2010. The cumulative effect of these changes, which were applied on a prospective basis, was to extend the
performance period by seven quarters and correspondingly reduce amortized revenue related to the Pfizer Collaboration Agreement by $7.3 million per quarter.



9



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##### Table of Contents

MEDIVATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

September 30, 2010

(unaudited)





(d)
Cost-Sharing Payments

Under both the Pfizer Collaboration Agreement and the Astellas Collaboration Agreement, the
parties make quarterly cost-sharing payments to one another in amounts necessary to ensure that each party bears its contractual share of the overall development costs and commercialization costs incurred. The Company presents these cost-sharing
payments, whether to or from the Company, in the applicable expense line in the statement of operations. Cost-sharing payments by the Company to its collaborative partners are thus presented as increases in expense in the Companys statement of
operations, while cost-sharing payments by its collaborative partners to the Company are presented as reductions in expense.

For the three and nine months ended September 30, 2010 and 2009, the Company recorded development cost-sharing payments from its
corporate partners, and corresponding reductions in research and development expense, as follows:



|                                                |  |                                 |        |  |                                |   |       |      |  |   |        |  |  |   |        | 
|----------------------------------------------- |  | ------------------------------- | ------ |  | ------------------------------ | - | ----- | ---- |  | - | ------ |  |  | - | ------ | 
|                                                |  | Three months endedSeptember 30, |        |  | Nine months endedSeptember 30, |  
|                                                |  | 2010                            |        |  | 2009                           |   |       | 2010 |  |   | 2009   | 
|                                                |  | (in thousands)                  |        |  | (in thousands)                 |  
|Development cost-sharing payments from Pfizer   |  | $                               | 8,709  |  |                                | $ | 4,393 |      |  | $ | 19,551 |  |  | $ | 15,565 | 
|Development cost-sharing payments from Astellas |  |                                 | 9,743  |  |                                |   |      |      |  |   | 22,634 |  |  |   |       | 
|                                                |  |                                 |        |  |                                |   |       |      |  |   |        |  |  |   |        | 
|Total development cost-sharing payments         |  | $                               | 18,452 |  |                                | $ | 4,393 |      |  | $ | 42,185 |  |  | $ | 15,565 | 
|                                                |  |                                 |        |  |                                |   |       |      |  |   |        |  |  |   |        | 

For the three and nine months ended September 30, 2010 and 2009, the Company recorded commercialization
cost-sharing payments from (to) its corporate partners, and corresponding reductions (increases) in selling, general and administrative expense, as follows:



|                                                           |  |                                 |      |   |                                |   |      |      |  |   |        |   |  |   |     | 
|---------------------------------------------------------- |  | ------------------------------- | ---- | - | ------------------------------ | - | ---- | ---- |  | - | ------ | - |  | - | --- | 
|                                                           |  | Three months endedSeptember 30, |      |   | Nine months endedSeptember 30, |  
|                                                           |  | 2010                            |      |   | 2009                           |   |      | 2010 |  |   | 2009   |  
|                                                           |  | (in thousands)                  |      |   | (in thousands)                 |  
|Commercialization cost-sharing payments from (to) Pfizer   |  | $                               | (712 | ) |                                | $ | (174 | )    |  | $ | (1,049 | ) |  | $ | 598 | 
|Commercialization cost-sharing payments from (to) Astellas |  |                                 | 125  |   |                                |   |     |      |  |   | 375    |   |  |   |    | 
|                                                           |  |                                 |      |   |                                |   |      |      |  |   |        |   |  |   |     | 
|Total development cost-sharing payments                    |  | $                               | (587 | ) |                                | $ | (174 | )    |  | $ | (674   | ) |  | $ | 598 | 
|                                                           |  |                                 |      |   |                                |   |      |      |  |   |        |   |  |   |     | 

NOTE 3  BASIC AND DILUTED NET LOSS PER SHARE

Basic net loss per share is computed by dividing the net loss by the weighted-average number of common shares outstanding during the
period. Diluted net loss per share is computed similarly to basic net loss per share, except that the denominator is increased to include all dilutive potential common shares, including outstanding options and warrants. Potentially dilutive common
shares have been excluded from the diluted loss per common share computations in all periods presented because such securities have an anti-dilutive effect on loss per common share due to the Companys net loss. There are no reconciling items
used to calculate the weighted average number of total common shares outstanding for basic and diluted net loss per share data. At September 30, 2010 and 2009 these potentially dilutive securities were as follows:



|                              |  |                |       |  |      |  |       | 
|----------------------------- |  | -------------- | ----- |  | ---- |  | ----- | 
|                              |  | September 30,  |      
|                              |  | 2010           |       |  | 2009 | 
|                              |  | (in thousands) |      
|Outstanding options           |  |                | 4,448 |  |      |  | 4,853 | 
|Outstanding warrants          |  |                | 23    |  |      |  | 209   | 
|Outstanding restricted shares |  |                | 3     |  |      |  | 13    | 
|                              |  |                |       |  |      |  |       | 
|Total                         |  |                | 4,474 |  |      |  | 5,075 | 
|                              |  |                |       |  |      |  |       | 



10



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##### Table of Contents

MEDIVATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

September 30, 2010

(unaudited)





NOTE 4  COMPREHENSIVE
LOSS

Comprehensive loss is comprised of net loss adjusted for changes in market values of securities available-for-sale.
Below is a reconciliation of net loss to comprehensive loss for the periods presented.



|                                                                    |  |                                 |        |   |                                |   |         |      |  |   |         |   |  |   |         |  
|------------------------------------------------------------------- |  | ------------------------------- | ------ | - | ------------------------------ | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                    |  | Three months endedSeptember 30, |        |   | Nine months endedSeptember 30, |  
|                                                                    |  | 2010                            |        |   | 2009                           |   |         | 2010 |  |   | 2009    |  
|                                                                    |  | (in thousands)                  |        |   | (in thousands)                 |  
|Net loss                                                            |  | $                               | (5,443 | ) |                                | $ | (13,973 | )    |  | $ | (30,148 | ) |  | $ | (28,505 | )
|Change in unrealized gain / (loss) on securities available-for-sale |  |                                 | 4      |   |                                |   | (100    | )    |  |   | 15      |   |  |   | (594    | )
|                                                                    |  |                                 |        |   |                                |   |         |      |  |   |         |   |  |   |         |  
|Total comprehensive loss                                            |  | $                               | (5,439 | ) |                                | $ | (14,073 | )    |  | $ | (30,133 | ) |  | $ | (29,099 | )
|                                                                    |  |                                 |        |   |                                |   |         |      |  |   |         |   |  |   |         |  

NOTE 5  STOCK-BASED COMPENSATION

The Companys Amended and Restated 2004 Equity Incentive Award Plan, or the Plan, which is stockholder-approved, provides for the issuance of options and other stock-based awards, including
restricted stock and stock appreciation rights, covering up to 7,500,000 shares of the Companys common stock. Shares issued upon exercise of stock-based awards are new shares that have been reserved for issuance under the Plan. The amendment
and restatement of the Plan was approved by the Board and by the stockholders in March and May 2007, respectively.

The Plan is administered by the Board, or a committee appointed by the Board, which determines recipients and types of awards to be
granted, including the number of shares subject to the awards, the exercise price and the vesting schedule. The term of stock options granted under the Plan cannot exceed ten years. Options generally have an exercise price equal to the fair market
value of the common stock on the grant date and generally vest over a period of four years. The options may contain an early exercise feature, pursuant to which the optionee may exercise the option before it has vested. However, so long as an
option remains unvested, all shares purchased upon early exercise remain subject to repurchase by the Company at the option exercise price if the optionees service with the Company terminates. For purposes of the following disclosures, early
exercise options are not considered to have been exercised, or to be exercisable, until this repurchase right has lapsed. To date, the Company has not issued any shares upon early exercise of stock options. In addition, all outstanding awards under
the Plan will accelerate and become immediately exercisable upon a change of control of the Company, as defined in the Plan.

The following table summarizes stock option activity for the nine months ended September 30, 2010:



|                                         |  |                  |           |  |                              |   |       |                                                   |  |  |                                       |  |  |   |     | 
|---------------------------------------- |  | ---------------- | --------- |  | ---------------------------- | - | ----- | ------------------------------------------------- |  |  | ------------------------------------- |  |  | - | --- | 
|                                         |  | Number ofOptions |           |  | WeightedAverageExercisePrice |   |       | WeightedAverageRemainingContractualTerm(in years) |  |  | AggregateIntrinsicValue(in 
millions) | 
|Outstanding at December 31, 2009         |  |                  | 5,603,960 |  |                              | $ | 16.71 |                                                   |  |  |                                       |  |  |   |     | 
|Granted                                  |  |                  | 99,875    |  |                              | $ | 19.80 |                                                   |  |  |                                       |  |  |   |     | 
|Exercised                                |  |                  | 733,589   |  |                              | $ | 4.29  |                                                   |  |  |                                       |  |  |   |     | 
|Forfeited                                |  |                  | 521,870   |  |                              | $ | 25.24 |                                                   |  |  |                                       |  |  |   |     | 
|                                         |  |                  |           |  |                              |   |       |                                                   |  |  |                                       |  |  |   |     | 
|Outstanding at September 30, 2010        |  |                  | 4,448,376 |  |                              | $ | 17.83 |                                                   |  |  | 7.23                                  |  |  | $ | 8.9 | 
|                                         |  |                  |           |  |                              |   |       |                                                   |  |  |                                       |  |  |   |     | 
|Exercisable/vested at September 30, 2010 |  |                  | 2,625,808 |  |                              | $ | 12.88 |                                                   |  |  | 6.41                                  |  |  | $ | 8.6 | 
|                                         |  |                  |           |  |                              |   |       |                                                   |  |  |                                       |  |  |   |     | 



11



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##### Table of Contents

MEDIVATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

September 30, 2010

(unaudited)





The following
table summarizes information about restricted stock award activity for the nine months ended September 30, 2010:



|                              |  |        |        |  |                                     |   |       |                                                   |  |  |                                      |  |  |   |      | 
|----------------------------- |  | ------ | ------ |  | ----------------------------------- | - | ----- | ------------------------------------------------- |  |  | ------------------------------------ |  |  | - | ---- | 
|                              |  | Shares |        |  | WeightedAverageGrant DateFair Value |   |       | WeightedAverageRemainingContractualTerm(in years) |  |  | AggregateIntrinsicValue(in millions) | 
|Restricted Stock Awards:      |  |        |        |  |                                     |   |       |                                                   |  |  |                                      |  |  |   |      | 
|Balance at December 31, 2009  |  |        | 10,834 |  |                                     | $ | 15.71 |                                                   |  |  |                                      |  |  |   |      | 
|Granted                       |  |        |       |  |                                     | $ |      |                                                   |  |  |                                      |  |  |   |      | 
|Vested                        |  |        | 7,500  |  |                                     | $ | 15.71 |                                                   |  |  |                                      |  |  |   |      | 
|Cancelled                     |  |        |       |  |                                     | $ |      |                                                   |  |  |                                      |  |  |   |      | 
|                              |  |        |        |  |                                     |   |       |                                                   |  |  |                                      |  |  |   |      | 
|Balance at September 30, 2010 |  |        | 3,334  |  |                                     | $ | 15.71 |                                                   |  |  | 0.29                                 |  |  | $ | 0.04 | 
|                              |  |        |        |  |                                     |   |       |                                                   |  |  |                                      |  |  |   |      | 

The Company estimates the fair value of stock options and warrants using the Black-Scholes option
valuation model. Estimated volatility is based on the historical stock price volatility of the Companys common stock, the historical stock price volatility of comparable companies common stock and the implied volatility of the
Companys common stock inherent in the market prices of publicly traded options in its common stock. Estimated dividend yield is 0%. The risk-free rate is estimated to equal U.S. Treasury security rates for the applicable terms. Prior to the
first quarter of 2010, due to its limited history of option exercise behavior, the Company used the simplified method of estimating option term provided for in the Commissions Staff Accounting Bulletins 107 and 110 for options granted to
employees and directors, which resulted in an estimated option term of six years. Beginning in the first quarter of 2010, the Company changed to a method based on its actual exercise experience and an assumption that unexercised options will remain
outstanding for a period equal to the midpoint between the date the option vests in full and the contractual option termination date. Beginning the first quarter of 2010, this new methodology produced an estimated term of 5.92 years for options
granted to employees and directors. For options granted to consultants, the Company uses an estimated option term of four years, which is equal to the period required for the options to vest in full. Different estimates of volatility, dividend
yield, risk-free rate and expected term could materially change the value of an option and the resulting expense.

Stock-based
awards granted to employees and directors are valued at their respective grant dates and expensed over the remaining vesting period of the award. Stock-based awards granted to consultants are valued at their respective measurement dates and
recognized as expense based on the portion of the total consulting services provided during the applicable period. As further consulting services are provided in future periods, the Company will revalue the associated awards and recognize additional
expense based on their then-current fair values.

Total stock-based compensation recognized by the Company in the three and
nine months ended September 30, 2010 and 2009 was as follows:



|                                            |  |                                 |       |  |                                |   |       |      |  |   |       |  |  |   |       | 
|------------------------------------------- |  | ------------------------------- | ----- |  | ------------------------------ | - | ----- | ---- |  | - | ----- |  |  | - | ----- | 
|                                            |  | Three months endedSeptember 30, |       |  | Nine months endedSeptember 30, |  
|                                            |  | 2010                            |       |  | 2009                           |   |       | 2010 |  |   | 2009  | 
|                                            |  | (in thousands)                  |       |  | (in thousands)                 |  
|Research and development expense            |  | $                               | 1,882 |  |                                | $ | 1,345 |      |  | $ | 5,573 |  |  | $ | 4,054 | 
|Selling, general and administrative expense |  |                                 | 1,385 |  |                                |   | 1,192 |      |  |   | 4,399 |  |  |   | 3,613 | 
|                                            |  |                                 |       |  |                                |   |       |      |  |   |       |  |  |   |       | 
|Total stock-based compensation expense      |  | $                               | 3,267 |  |                                | $ | 2,537 |      |  | $ | 9,972 |  |  | $ | 7,667 | 
|                                            |  |                                 |       |  |                                |   |       |      |  |   |       |  |  |   |       | 

Unearned stock-based compensation attributable to employee and director awards totaled $27.0 million at
September 30, 2010 and will be recognized as expense over a weighted-average period of 2.3 years.

NOTE 6  SHORT-TERM
INVESTMENTS

As of September 30, 2010, short-term investments consisted of United States treasury notes maturing in
December 2010 and certificates of deposit. The amortized cost, gross unrealized gain and estimated fair value of short-term investments at September 30, 2010 were $50.0 million, $0.0 million and $50.0 million, respectively. As of
December 31, 2009, short-term investments consisted solely of United States treasury notes maturing in February, July and August 2010. The amortized cost, gross unrealized gain and estimated fair value of short-term investments at
December 31, 2009 were $220.8 million, $0.0 million and $220.8 million, respectively.



12



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##### Table of Contents

MEDIVATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

September 30, 2010

(unaudited)





NOTE 7  FAIR VALUE
DISCLOSURES

The Company determines fair value for marketable securities with Level 1 inputs through quoted market prices
in active markets for identical assets. The following table presents the Companys assets that are measured at fair value on a recurring basis as of September 30, 2010 (in thousands):



|                   |  |                    |         |  |                               |   |         |         |  |   |         |  |  |   |   | 
|------------------ |  | ------------------ | ------- |  | ----------------------------- | - | ------- | ------- |  | - | ------- |  |  | - | - | 
|                   |  | Fair value         |         |  | Fair value measurements using |  
|                   |  | September 30, 2010 |         |  | Level 1                       |   |         | Level 2 |  |   | Level 3 | 
|Money market funds |  | $                  | 158,856 |  |                               | $ | 158,856 |         |  | $ |        |  |  | $ |  | 
|US Treasury Bills  |  |                    | 49,987  |  |                               |   | 49,987  |         |  |   |        |  |  |   |  | 

NOTE 8  ACCRUED EXPENSES

At September 30, 2010 and December 31, 2009, accrued expenses consisted of the following (in thousands):



|                                |  |                   |        |  |                  |   |        | 
|------------------------------- |  | ----------------- | ------ |  | ---------------- | - | ------ | 
|                                |  | September 30,2010 |        |  | December 31,2009 |  
|Payroll and payroll related     |  | $                 | 1,218  |  |                  | $ | 759    | 
|Preclinical and clinical trials |  |                   | 18,519 |  |                  |   | 10,529 | 
|Income tax provision            |  |                   | 2,229  |  |                  |   |       | 
|Other                           |  |                   | 646    |  |                  |   | 766    | 
|                                |  |                   |        |  |                  |   |        | 
|Total accrued expenses          |  | $                 | 22,612 |  |                  | $ | 12,054 | 
|                                |  |                   |        |  |                  |   |        | 

NOTE 9  DEFERRED REVENUE

Deferred revenue at September 30, 2010 and December 31, 2009 consisted of the following (in thousands):



|                                                  |  |                   |         |  |                  |   |         | 
|------------------------------------------------- |  | ----------------- | ------- |  | ---------------- | - | ------- | 
|                                                  |  | September 30,2010 |         |  | December 31,2009 |  
|Current portion:                                  |  |                   |         |  |                  |   |         | 
|Deferred revenue related to Pfizer (see Note 2)   |  | $                 | 36,015  |  |                  | $ | 65,361  | 
|Deferred revenue related to Astellas (see Note 2) |  |                   | 21,210  |  |                  |   | 21,209  | 
|                                                  |  |                   |         |  |                  |   |         | 
|Total                                             |  | $                 | 57,225  |  |                  | $ | 86,570  | 
|                                                  |  |                   |         |  |                  |   |         | 
|Long-term portion:                                |  |                   |         |  |                  |   |         | 
|Deferred revenue related to Pfizer (see Note 2)   |  | $                 | 81,034  |  |                  | $ | 81,701  | 
|Deferred revenue related to Astellas (see Note 2) |  |                   | 69,033  |  |                  |   | 84,897  | 
|                                                  |  |                   |         |  |                  |   |         | 
|Total                                             |  | $                 | 150,067 |  |                  | $ | 166,598 | 
|                                                  |  |                   |         |  |                  |   |         | 

NOTE 10  INCOME TAXES

The Company calculates its quarterly tax provision consistent with the guidance provided by ASC 740-270 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). The Company has recorded tax benefit of $1.5 million for the three and nine months ended September 30, 2010, respectively. The Company has established and continues to maintain a full valuation
allowance against its deferred tax assets as the Company does not currently believe that realization of those assets is more likely than not.

At September 30, 2010, the Companys 2008 Federal 1120 tax filing is under examination by the Internal Revenue Service. Since the audit is at its preliminary stage, the Company has not recorded
any audit adjustment as no finding or adjustments have been proposed to the Company. There is no other on-going tax audit with state tax jurisdictions. As a result of the Companys net operating loss carry forwards, all of its tax years are
subject to federal and state tax examination.



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MEDIVATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)

September 30, 2010

(unaudited)





NOTE 11  RESTRUCTURING

In response to the negative CONNECTION data, the Company implemented a restructuring in March 2010 in which it eliminated
23 full-time positions and vacated approximately 3,700 square feet of office space. Terminated individuals were eligible for a package consisting of a severance payment, continuing medical coverage and outplacement services. Aggregate restructuring
charges, all of which were recorded in the period ended March 31, 2010, were $0.9 million, of which $0.4 million was classified as selling, general and administrative expense and $0.5 million was classified as research and development expense.

The following table summarizes the restructuring charges discussed above, as well as the remaining unpaid balance at
September 30, 2010 (in thousands):



|                              |  |                |      |   |                   |   |     |       |  |   |      |  
|----------------------------- |  | -------------- | ---- | - | ----------------- | - | --- | ----- |  | - | ---- | -
|                              |  | Personnelcosts |      |   | Facilitiesrelated |   |     | Total | 
|Balance at December 31, 2009  |  | $              |     |   |                   | $ |    |       |  | $ |     |  
|Additions                     |  |                | 798  |   |                   |   | 72  |       |  |   | 870  |  
|Payments                      |  |                | (763 | ) |                   |   | (72 | )     |  |   | (835 | )
|                              |  |                |      |   |                   |   |     |       |  |   |      |  
|Balance at September 30, 2010 |  | $              | 35   |   |                   | $ |    |       |  | $ | 35   |  
|                              |  |                |      |   |                   |   |     |       |  |   |      |  

NOTE 12  CONTINGENCIES

On March 9, 2010, the first of three purported securities class action lawsuits was commenced against the Company based on the negative CONNECTION data reported in March 2010. The lawsuits are
largely identical, and allege violations of the Securities Exchange Act of 1934 in connection with allegedly false and misleading statements made by the Company related to dimebon. The plaintiffs allege, among other things, that the defendants
disseminated false and misleading statements about the effectiveness of dimebon for the treatment of Alzheimers disease, making it impossible for stockholders to gain a realistic understanding of the drugs progress toward FDA approval.
The plaintiffs purport to seek damages, an award of their costs and injunctive relief on behalf of a class of stockholders who purchased or otherwise acquired the Companys common stock between July 17, 2008 and March 2, 2010. These
lawsuits are subject to inherent uncertainties, and the actual cost will depend upon many unknown factors. The outcome of the litigation is necessarily uncertain, the Company could be forced to expend significant resources in the defense of those
suits and it may not prevail. The Company has not established any reserve for any potential liability relating to these lawsuits. The Companys management believes that the Company has meritorious defenses and intends to defend these lawsuits
vigorously. The Company believes it is entitled to coverage under its relevant insurance policies, subject to a $350,000 retention, but coverage could be denied or prove to be insufficient.



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|ITEM 2. | MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|------- | --------------------------------------------------------------------------------------

The following discussion should be read in conjunction with our audited consolidated financial statements and notes thereto for the
fiscal year ended December 31, 2009, included in our Annual Report on Form 10-K for the year ended December 31, 2009 filed with the Commission on March 15, 2010. The following Managements Discussion and Analysis of Financial
Condition and Results of Operations contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. 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, should,
forecast, could, expect, suggest, believe, anticipate, intend, plan, or other similar words. The forward-looking statements contained in this Quarterly
Report on Form 10-Q involve a number of risks and uncertainties, 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, which include risks associated with (1) the negative results we reported from our CONNECTION trial in March 2010
and the potential impact of those results and/or any future dimebon clinical trial results on continued clinical development of dimebon, including risks associated with Pfizers potential termination of our dimebon collaboration agreement,
which Pfizer has the right to do at any time, as well as the risk that we and/or Pfizer may determine to further curtail or discontinue the development of dimebon, (2) our ability to successfully conduct clinical and preclinical trials for our
product candidates, (3) our ability to obtain required regulatory approvals to develop and market our product candidates, (4) our ability to raise additional capital on favorable terms, (5) our ability to execute our development plan
on time and on budget, (6) our ability to obtain commercial partners and maintain our relationships with our current and/or potential partners, (7) our ability, whether alone or with commercial partners, to successfully commercialize any
of our product candidates that may be approved for sale, and (8) our ability to identify and obtain additional product candidates. Although we believe that the assumptions underlying the forward-looking statements contained in this Quarterly
Report on Form 10-Q are reasonable, any of the assumptions could be inaccurate, and therefore we cannot be certain that such statements will be accurate. 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 and share price is not necessarily indicative of future performance. We disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

The Company

We are a biopharmaceutical company focused on the rapid development of novel small molecule drugs to treat serious diseases for which there are limited treatment options. Our product candidates in
clinical development are dimebon (latrepirdine), which is in Phase 3 development for the treatment of Alzheimers disease and Huntington disease, and MDV3100, which is in Phase 3 development for the treatment of castration-resistant prostate
cancer. Our dimebon program is partnered with Pfizer Inc., or Pfizer, and our MDV3100 program is partnered with Astellas Pharma Inc., or Astellas.

In September 2008, we announced a Collaboration Agreement with Pfizer, which became effective in October 2008. Under the terms of the agreement, we and Pfizer agreed to develop and commercialize dimebon
for the treatment of Alzheimers disease and Huntington disease. We and Pfizer share the costs and expenses of developing and commercializing dimebon for the United States market on a 60% Pfizer/40% Medivation basis, and will share profits (or
losses) resulting from commercialization of dimebon in the United States in the same proportions. Outside the United States, Pfizer will bear all development and commercialization costs, and will pay us tiered royalties on aggregate net sales of
dimebon.

In March 2010, we and Pfizer reported negative results from the CONNECTION study, a randomized, double-blind,
placebo-controlled, six-month Phase 3 study of dimebon in patients with mild-to-moderate Alzheimers disease. In the CONNECTION trial, dimebon failed to show a statistically significant improvement over placebo on any of the primary or
secondary efficacy endpoints, and thus did not meet any of the studys efficacy endpoints. Given the negative results in the CONNECTION trial, Pfizer has the right to terminate the Collaboration Agreement with us at any time.

In response to the negative CONNECTION data, we implemented a restructuring in March 2010 in which we eliminated 23 full-time positions
and vacated approximately 3,700 square feet of office space. Terminated individuals were eligible for a package consisting of a severance payment, continuing medical coverage and outplacement services. Aggregate restructuring charges, all of which
were recorded in the period ended March 31, 2010, were $0.9 million, of which $0.4 million was classified as selling, general and administrative expense and $0.5 million was classified as research and development expense.



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In October 2009, we
entered into a Collaboration Agreement with Astellas. Under the terms of the agreement, we and Astellas agreed to develop and commercialize MDV3100 for the treatment of both late- and early-stage prostate cancer. We and Astellas share equally the
costs and expenses of developing and commercializing MDV3100 for the United States market, except that development costs for studies useful in both the United States market and either Europe or Japan are shared two-thirds by Astellas and one-third
by us. We and Astellas will share equally profits (or losses) resulting from commercialization of MDV3100 in the United States. Outside the United States, Astellas will bear all development and commercialization costs, and will pay us tiered
royalties on aggregate net sales of MDV3100.

We have funded our operations primarily through private and public offerings of
our common stock, and from the up-front and cost-sharing payments from our Collaboration Agreements with Pfizer and Astellas. As of September 30, 2010, we had an accumulated deficit of $207.6 million and we expect to incur substantial
additional losses for the foreseeable future as we continue to finance clinical and preclinical studies of our existing and potential future product candidates and our corporate overhead costs.

Our Pipeline

Dimebon (latrepirdine)

Alzheimers disease. Our product
candidate dimebon (latrepirdine) is in Phase 3 development for Alzheimers disease, in collaboration with Pfizer. Our ongoing Phase 3 CONCERT study is evaluating the potential benefits of dimebon when added to treatment with Aricept, the
leading global Alzheimers disease medicine, in approximately 1,000 patients with mild-to-moderate Alzheimers disease. This randomized, double-blind, placebo-controlled Phase 3 trial is scheduled to complete enrollment on
November 30, 2010. Patients in the trial are being randomized to dimebon (20 mg three times daily) plus Aricept, dimebon (5 mg three times daily) plus Aricept, or placebo plus Aricept, and are treated for a period of twelve months. The
co-primary endpoints in the CONCERT trial are the Alzheimers Disease Assessment Scale-cognitive subscale, or ADAS-cog, which measures cognition, and the Alzheimers Disease Cooperative Study  Activities of Daily Living, or ADCS-ADL,
which measures global function.

In March 2010, we reported negative results from our CONNECTION trial. CONNECTION was a
randomized, double-blind, placebo-controlled six-month study of 598 patients with mild-to-moderate Alzheimers disease in the United States, Western Europe, Russia and Chile in which patients were randomized to receive dimebon 20 mg three times
daily, dimebon 5 mg three times daily or placebo. Patients in the CONNECTION trial were not permitted to take any approved Alzheimers disease medicines for a period of 90 days before, or at any time during, the study. Dimebon failed to show a
statistically significant improvement over placebo on any of the primary or secondary efficacy endpoints in the CONNECTION trial, and thus did not meet any of the studys efficacy endpoints. We designed the CONNECTION trial to confirm the
results of our first trial of dimebon in 183 patients with mild-to-moderate Alzheimers disease in Russia, or the Russian Study, the results of which were published in 2008 in The Lancet. In the Russian Study, dimebon showed a
statistically significant improvement over placebo on all of the same primary and secondary efficacy endpoints used in the CONNECTION trial. Thus, the CONNECTION trial failed to replicate the efficacy results seen in the Russian Study.

Huntington disease. Dimebon is also in Phase 3 clinical development for Huntington disease, also in collaboration with
Pfizer. In July 2010, we completed enrollment in a randomized, double-blind, six-month placebo-controlled Phase 3 study of dimebon to treat Huntington disease, known as the HORIZON study, in which we enrolled 403 patients. Patients in the HORIZON
trial were randomized to dimebon (20 mg three times daily) versus placebo. The co-primary endpoints are the Mini-Mental State Examination, or MMSE, which measures cognition, and the Clinicians Interview-Based Impression of Change-plus
Caregiver Input, or CIBIC-plus, which measures global function. We expect to report top-line results from the HORIZON study in the first half of 2011.

In July 2008, we announced top-line results of a Phase 2 study showing that dimebon was well tolerated and significantly improved cognitive function in Huntington disease patients compared to those
treated with a placebo. The study, which was conducted in the U.S. and the United Kingdom, met its primary endpoint of safety and tolerability; in addition, dimebon showed statistically significant benefit versus placebo in cognition as measured by
the MMSE, a secondary endpoint in the study. However, dimebon failed to show a statistically significant benefit over placebo in this study on two other cognitive endpointsthe cognitive component of the Unified Huntington Disease Rating Scale,
or UHDRS, and the ADAS-cog. The study results were published in March 2010 in Archives of Neurology.

Tolerability .Dimebon has been well tolerated in all clinical trials conducted to date in
both Alzheimers and Huntington disease, including the CONNECTION trial and a separate randomized, double-blind, placebo-controlled safety study of dimebon, or the Safety Study, also reported in March 2010, in which 742 patients in the United
States and Canada were randomized to receive dimebon 20 mg three times daily or placebo and treated for three to six months. Approximately 85% of patients in the Safety Study were taking one or more approved Alzheimers disease medicines while
on the trial.



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Regulatory
interactions. The U.S. Food and Drug Administration, or FDA, informed us in January 2008 that the Russian Study and the CONNECTION trial could be used as the two pivotal studies required to support the approval of dimebon to treat
mild-to-moderate Alzheimers disease, as long as a significant portion of the sites in the CONNECTION trial were located in the United States. Given the failure of the CONNECTION trial, we now propose to rely on the Russian Study and the
CONCERT trial as our two pivotal studies in support of registration for mild-to-moderate Alzheimers disease. In June 2010, we presented the CONNECTION results and our proposed post-CONNECTION development plans to the FDA, and asked whether
that combination of studies would be acceptable to support approval of dimebon to treat mild-to-moderate Alzheimers disease. The FDA answered this question in the affirmative, provided that the results of the CONCERT trial are robustly
positive. We have not presented the CONNECTION data and our proposed post-CONNECTION development plans to the regulatory authorities in any other country, and any or all of such other regulatory authorities may give a different answer than did the
FDA. Such other regulatory authorities may, for example, require one or more additional Phase 3 trials to approve dimebon in mild-to-moderate Alzheimers disease even if the results of the ongoing CONCERT trial are positive. Furthermore, the
FDA may decline to approve dimebon for mild-to-moderate Alzheimers disease even if the data from the CONCERT trial are positive, if the FDA does not consider the CONCERT data to be robustly positive, and may require us to conduct one or more
additional Phase 3 trials to support approval. If this or any other negative regulatory development were to occur, it may not be feasible for us to continue the development of dimebon for Alzheimers disease. Furthermore, even if we are able to
obtain regulatory approval for mild-to-moderate Alzheimers disease based on the Russian Study and the CONCERT study, that approval would not include severe Alzheimers disease, which would decrease the size of the potential market
opportunity for dimebon, as may the negative results of the CONNECTION trial. Furthermore, because of the negative CONNECTION data the FDA and other regulatory agencies may decline to approve dimebon for the treatment of Huntington disease even if
the ongoing HORIZON trial is positive, and may require an additional Phase 3 trial in Huntington disease as a condition for approval. If we and Pfizer (or either of us individually) determines that clinical development of dimebon should be
further curtailed or abandoned as a result of any such negative regulatory development or otherwise, our potential future milestone payments and potential future revenues from the potential commercialization of dimebon would be reduced or
eliminated.

MDV3100

Our product candidate MDV3100 is in Phase 3 development for castration-resistant prostate cancer, in collaboration with Astellas. With Astellas, we are currently conducting two randomized, double-blind,
placebo-controlled Phase 3 studies of MDV3100. The first Phase 3 study, known as AFFIRM, is enrolling patients with castration-resistant prostate cancer who have failed prior chemotherapy. This trial is enrolling approximately 1,200 patients in the
United States, Canada, Europe, South America, Australia and South Africa. The primary endpoint in the AFFIRM trial is overall survival. We expect to complete enrollment in the AFFIRM study on November 15, 2010. The second Phase 3 trial of
MDV3100, known as PREVAIL, is enrolling patients with castration-resistant prostate cancer who have not yet undergone chemotherapy. The co-primary endpoints in the PREVAIL trial are overall survival and progression-free survival. We intend to enroll
approximately 1,700 patients in the United States, Canada, Europe and Australia. Patients in both the AFFIRM and PREVAIL trials are being randomized to MDV3100 (160 mg once daily) plus standard of care versus placebo plus standard of care. We and
Astellas also intend to initiate two additional MDV3100 trials this year in earlier-stage prostate cancer: a Phase 2 head-to-head trial comparing MDV3100 with bicalutamide, a leading marketed androgen-receptor antagonist drug; and a Phase 2
trial in hormone-naïve patients.

In June 2009, we presented data from our ongoing Phase 1-2 clinical trial of MDV3100 at
the American Society of Clinical Oncology Annual Meeting. In the 140 men enrolled in this trial, including both men who had failed prior chemotherapy and men who were chemotherapy-naïve, MDV3100 consistently demonstrated anti-tumor activity
across dose levels and endpoints, as evaluated by reductions in prostate-specific antigen, or PSA, levels, radiographic findings and circulating tumor cell, or CTC, counts. In this trial, MDV3100 was generally well tolerated at doses up to and
including 240 mg per day. Results of this trial were published in April 2010 in The Lancet.

In October 2010, data presented at the European Society of Medical Oncology Annual Meeting showed that,
in a pre-specified interim analysis, the investigational drug abiraterone acetate improved overall survival in a Phase 3 trial of patients with castration-resistant prostate cancer who had previously failed chemotherapy. The Johnson & Johnson
unit developing abiraterone acetate also publicly disclosed its intent to make the drug available under an expanded access program starting in October 2010 in the United States and in the months following outside the United States, and to submit
applications for marketing approval in both the United States and Europe by the end of 2010. The patient population studied in the abiraterone acetate trial is the same patient population being studied in our ongoing AFFIRM trial. In addition, a
separate Phase 3 study of abiraterone acetate is presently ongoing in the same patient population being studied in our ongoing PREVAIL trial, and the developer of abiraterone acetate has publicly stated that it expects to report data from this
trial in 2011. The potential availability of abiraterone acetate, whether under an expanded access program or following regulatory approval, to patients in our AFFIRM and PREVAIL trials could negatively impact the probability of success of those
trials, particularly if patients enrolled in AFFIRM and PREVAIL leave our trials to receive treatment with abiraterone acetate or if potential patients considering enrollment in either AFFIRM or PREVAIL, both of which are placebo-controlled trials,
elect to receive abiraterone acetate rather than enroll in our trials and take the chance of being randomized to placebo.



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New Product
Candidates

We remain actively engaged in identifying new product candidates, both internally and externally, to further
expand our pipeline of product candidates.

Recent Accounting Pronouncements

Refer to Note 1 to our consolidated financial statements included elsewhere in this Report on Form 10-Q for a discussion of recent
accounting pronouncements.

Critical Accounting Policies and the Use of Estimates

Reference is made to Critical Accounting Policies and the Use of Estimates included in our Annual Report on Form 10-K for
the year ended December 31, 2009. As of the date of the filing of this Quarterly Report, we did not identify any significant changes to the critical accounting policies discussed in our Annual Report for the year ended December 31, 2009.

Results of Operations

Three and Nine Months Ended September 30, 2010 and 2009

Collaboration Revenue



|                      |  |                                 |        |    |                                |   |        |      |  |   |        |    |  |   |        | 
|--------------------- |  | ------------------------------- | ------ | -- | ------------------------------ | - | ------ | ---- |  | - | ------ | -- |  | - | ------ | 
|                      |  | Three months endedSeptember 30, |        |    | Nine months endedSeptember 30, |  
|                      |  | 2010                            |        |    | 2009                           |   |        | 2010 |  |   | 2009   |   
|                      |  | (in thousands)                  |        |    | (in thousands)                 |  
|Collaboration revenue |  | $                               | 14,350 |    |                                | $ | 16,341 |      |  | $ | 45,876 |    |  | $ | 49,021 | 
|Percentage decrease   |  |                                 | (12    | %) |                                |   |        |      |  |   | (6     | %) |  |   |        | 

We recorded $14.4 and $16.3 million of amortized collaboration revenue in the quarters ended
September 2010 and 2009, respectively, and $45.9 and $49.0 million of amortized collaboration revenue in the nine-month periods ended September 30, 2010 and 2009, respectively. The decreases in revenue in the three- and nine-month periods ended
September 30, 2010 were driven by reductions of $7.3 and $19.0 million, respectively, due to changed estimates of the performance period under the Pfizer Collaboration Agreement, partially offset by increases of $5.3 and $15.9 million,
respectively, from the Astellas Collaboration Agreement, which was not in effect in the prior year periods.

To date we have
recorded $225.0 million and $110.0 million of deferred revenue with respect to the Pfizer Collaboration Agreement and the Astellas Collaboration Agreement, respectively, consisting of the up-front payments under those agreements. At
September 30, 2010, deferred revenue balances with respect to the Pfizer Collaboration Agreement and the Astellas Collaboration Agreement were $117.0 million and $90.2 million, respectively. We amortize this deferred revenue on a straight-line
basis over the expected performance period of our deliverables under the applicable collaboration agreement.

We presently
estimate that our performance periods under the Pfizer Collaboration Agreement and the Astellas Collaboration Agreement will end in the fourth quarters of 2013 and 2014, respectively. Given the negative results in the CONNECTION trial and the
subsequent revisions to the dimebon development plan, we revised our estimates of our performance period under the Pfizer Collaboration Agreement in the first and third quarters of 2010. The cumulative effect of these changes, which we applied on a
prospective basis, was to extend the performance period by seven quarters and correspondingly reduce amortized revenue related to the Pfizer Collaboration Agreement by $7.3 million per quarter. Subsequent changes in our estimate of the performance
periods under our collaboration agreements could significantly alter the amount of revenue recognized in future periods.

Research and Development Expense



|                                 |  |                                 |        |    |                                |   |        |      |  |   |        |   |  |   |        | 
|-------------------------------- |  | ------------------------------- | ------ | -- | ------------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | 
|                                 |  | Three months endedSeptember 30, |        |    | Nine months endedSeptember 30, |  
|                                 |  | 2010                            |        |    | 2009                           |   |        | 2010 |  |   | 2009   |  
|                                 |  | (in thousands)                  |        |    | (in thousands)                 |  
|Research and development expense |  | $                               | 15,633 |    |                                | $ | 21,530 |      |  | $ | 59,470 |   |  | $ | 54,851 | 
|Percentage increase/(decrease)   |  |                                 | (27    | %) |                                |   |        |      |  |   | 8      | % |  |   |        | 



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Research and
development expenses were $15.6 million for the three months ended September 30, 2010, a net decrease of $5.9 million, or 27%, from $21.5 million in the same period in 2009. The change was primarily due to decreased clinical trial
activities in the dimebon program, partially offset by increased clinical trial activities in the MDV3100 program. For the nine months ended September 30, 2010, research and development expenses were $59.5 million, a net increase of
$4.6 million, or 8%, from $54.9 million in the same period in 2009. The change was primarily due to increased activities in MDV3100 clinical trials. Research and development headcount at September 30, 2010 was 57 compared to 55 at
September 30, 2009. We expect our research and development headcount to increase to approximately 80 over the next two quarters as we expand to staff anticipated 2011 increases in workload.

Our reported research and development expense is presented net of cost-sharing payments receivable from our corporate partners, which
were as follows for the three and nine months ended September 30, 2010 and 2009:



|                                                |  |                                 |        |  |                                |   |       |      |  |   |        |  |  |   |        | 
|----------------------------------------------- |  | ------------------------------- | ------ |  | ------------------------------ | - | ----- | ---- |  | - | ------ |  |  | - | ------ | 
|                                                |  | Three months endedSeptember 30, |        |  | Nine months endedSeptember 30, |  
|                                                |  | 2010                            |        |  | 2009                           |   |       | 2010 |  |   | 2009   | 
|                                                |  | (in thousands)                  |        |  | (in thousands)                 |  
|Development cost-sharing payments from Pfizer   |  | $                               | 8,709  |  |                                | $ | 4,393 |      |  | $ | 19,551 |  |  | $ | 15,565 | 
|Development cost-sharing payments from Astellas |  |                                 | 9,743  |  |                                |   |      |      |  |   | 22,634 |  |  |   |       | 
|                                                |  |                                 |        |  |                                |   |       |      |  |   |        |  |  |   |        | 
|Total development cost-sharing payments         |  | $                               | 18,452 |  |                                | $ | 4,393 |      |  | $ | 42,185 |  |  | $ | 15,565 | 
|                                                |  |                                 |        |  |                                |   |       |      |  |   |        |  |  |   |        | 

To date, we have been engaged in two major research and development programs: the development of dimebon for
the treatment of Alzheimers disease and Huntington disease, and the development of MDV3100 for the treatment of prostate cancer. Other research and development programs consist of preclinical stage programs. Research and development costs are
identified as either directly allocable to one of our research and development programs or as an indirect cost, with only direct costs being tracked by specific program. Direct costs consist primarily of clinical and preclinical study costs, cost of
supplying drug substance and drug product for use in clinical and preclinical studies, contract research organization fees, and other contracted services pertaining to specific clinical and preclinical studies. Indirect costs consist of personnel
costs (including both cash costs and non-cash stock-based compensation costs), corporate overhead costs, and other administrative and support costs. The following table summarizes the direct costs attributable to each program and the total indirect
costs for each respective period.



|                                        |  |                                 |        |  |                                |   |        |      |  |   |        |  |  |   |        | 
|--------------------------------------- |  | ------------------------------- | ------ |  | ------------------------------ | - | ------ | ---- |  | - | ------ |  |  | - | ------ | 
|                                        |  | Three months endedSeptember 30, |        |  | Nine months endedSeptember 30, |  
|                                        |  | 2010                            |        |  | 2009                           |   |        | 2010 |  |   | 2009   | 
|                                        |  | (in thousands)                  |        |  | (in thousands)                 |  
|Direct costs:                           |  |                                 |        |  |                                |   |        |      |  |   |        |  |  |   |        | 
|Dimebon (latrepirdine)                  |  | $                               | 5,473  |  |                                | $ | 10,117 |      |  | $ | 29,863 |  |  | $ | 25,581 | 
|MDV 3100                                |  |                                 | 5,100  |  |                                |   | 4,539  |      |  |   | 11,835 |  |  |   | 9,664  | 
|Other                                   |  |                                 | 1,111  |  |                                |   | 1,274  |      |  |   | 5,184  |  |  |   | 4,083  | 
|                                        |  |                                 |        |  |                                |   |        |      |  |   |        |  |  |   |        | 
|Total direct costs                      |  |                                 | 11,684 |  |                                |   | 15,930 |      |  |   | 46,882 |  |  |   | 39,328 | 
|Indirect costs                          |  |                                 | 3,949  |  |                                |   | 5,600  |      |  |   | 12,588 |  |  |   | 15,523 | 
|                                        |  |                                 |        |  |                                |   |        |      |  |   |        |  |  |   |        | 
|Total research and development expenses |  | $                               | 15,633 |  |                                | $ | 21,530 |      |  | $ | 59,470 |  |  | $ | 54,851 | 
|                                        |  |                                 |        |  |                                |   |        |      |  |   |        |  |  |   |        | 

Our projects or intended projects may be subject to change from time to time as we evaluate our research and
development priorities and available resources.

The research and development of each of dimebon and MDV3100 will be completed
upon the earlier to occur of the following two events: (1) receipt of regulatory approvals to market the applicable product candidate for all indications for which we and our corporate partners seek such approvals or (2) our decision to
abandon development of the applicable product candidate.

In order to obtain the necessary regulatory approvals, we will need
to establish to the satisfaction of the applicable regulatory authorities in the United States, Europe and other relevant countries that the applicable product candidate is both safe and effective for each of its intended indications. The process of
conducting the preclinical and clinical testing required to establish safety and efficacy and obtain regulatory approvals is expensive, uncertain and takes many years. We are not able to reasonably estimate the time or cost required to obtain such
regulatory approvals, and failure to receive the necessary regulatory approvals would prevent us from commercializing the product candidates affected. The length of time required for clinical development of a particular product candidate and our
development costs for that product candidate may be impacted by the scope and timing of enrollment in clinical trials for the product candidate, unanticipated additional clinical trials that may be required, future decisions to develop a product



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candidate for subsequent indications, and whether in the future we decide to pursue development of the product candidate with a corporate partner or independently. For example, each of dimebon
and MDV3100 may have the potential to be approved for multiple indications, and we do not yet know how many of those indications we and our corporate partners will pursue. The decision to pursue regulatory approval for subsequent indications will
depend on several variables outside of our control, including the strength of the data generated in our prior and ongoing clinical studies and the willingness of our corporate partners to jointly fund such additional work. Furthermore, the scope and
number of clinical studies required to obtain regulatory approval for each pursued indication is subject to the input of the applicable regulatory authorities, we have not yet sought such input for all potential indications that we and our corporate
partners may elect to pursue, and even after having given such input applicable regulatory authorities may subsequently require additional clinical studies prior to granting regulatory approval based on new data generated by us or other companies,
or for other reasons outside of our control. Moreover, we or our current or potential future corporate partners may decide to discontinue development of any development project at any time for regulatory, commercial, scientific or other reasons. To
date, we have not commercialized any of our product candidates and in fact may never do so.

Selling, General and
Administrative Expense



|                                            |  |                                 |       |    |                                |   |       |      |  |   |        |    |  |   |        | 
|------------------------------------------- |  | ------------------------------- | ----- | -- | ------------------------------ | - | ----- | ---- |  | - | ------ | -- |  | - | ------ | 
|                                            |  | Three months endedSeptember 30, |       |    | Nine months endedSeptember 30, |  
|                                            |  | 2010                            |       |    | 2009                           |   |       | 2010 |  |   | 2009   |   
|                                            |  | (in thousands)                  |       |    | (in thousands)                 |  
|Selling, general and administrative expense |  | $                               | 5,454 |    |                                | $ | 6,034 |      |  | $ | 18,267 |    |  | $ | 18,950 | 
|Percentage decrease                         |  |                                 | (10   | )% |                                |   |       |      |  |   | (4     | )% |  |   |        | 

Selling, general and administrative expense decreased by $0.6 million (10%) and by $0.7
million (4%), respectively, for the three- and nine-month periods ended September 30, 2010, in each case as compared to the comparable periods in 2009. The decreases were driven by the 20% workforce reduction we implemented in the first quarter
of 2010 in response to the negative CONNECTION data, the related termination of office leases, and decreased intellectual property expenses related to our dimebon analog program. Selling, general and administrative headcount decreased to 26
employees at September 30, 2010 compared to 33 at September 30, 2009. We expect our selling, general and administrative headcount to increase to approximately 35 over the next two quarters as we expand to staff anticipated 2011 increases
in workload.

Our reported selling, general and administrative expense is presented net of cost-sharing payments receivable
from (payable to) our corporate partners, which were as follows for the three and nine months ended September 30, 2010 and 2009:



|                                                           |  |                                 |      |   |                                |   |      |      |  |   |        |   |  |   |     | 
|---------------------------------------------------------- |  | ------------------------------- | ---- | - | ------------------------------ | - | ---- | ---- |  | - | ------ | - |  | - | --- | 
|                                                           |  | Three months endedSeptember 30, |      |   | Nine months endedSeptember 30, |  
|                                                           |  | 2010                            |      |   | 2009                           |   |      | 2010 |  |   | 2009   |  
|                                                           |  | (in thousands)                  |      |   | (in thousands)                 |  
|Commercialization cost-sharing payments from (to) Pfizer   |  | $                               | (712 | ) |                                | $ | (174 | )    |  | $ | (1,049 | ) |  | $ | 598 | 
|Commercialization cost-sharing payments from (to) Astellas |  |                                 | 125  |   |                                |   |     |      |  |   | 375    |   |  |   |    | 
|                                                           |  |                                 |      |   |                                |   |      |      |  |   |        |   |  |   |     | 
|Total development cost-sharing payments                    |  | $                               | (587 | ) |                                | $ | (174 | )    |  | $ | (674   | ) |  | $ | 598 | 
|                                                           |  |                                 |      |   |                                |   |      |      |  |   |        |   |  |   |     | 

In the first nine-months of 2010, three purported securities class action lawsuits were filed against us in
response to the negative CONNECTION data. We intend to vigorously defend these lawsuits, and thus expect our legal expenses to increase in the remainder of 2010 and beyond. We believe we are entitled to coverage under our relevant insurance
policies, subject to a $350,000 retention, but coverage could be denied or prove to be insufficient.

Other Income
(Expense), net



|                            |  |                                 |      |   |                                |   |    |      |  |   |      |  |  |   |     | 
|--------------------------- |  | ------------------------------- | ---- | - | ------------------------------ | - | -- | ---- |  | - | ---- |  |  | - | --- | 
|                            |  | Three months endedSeptember 30, |      |   | Nine months endedSeptember 30, |  
|                            |  | 2010                            |      |   | 2009                           |   |    | 2010 |  |   | 2009 | 
|                            |  | (in thousands)                  |      |   | (in thousands)                 |  
|Other income (expense), net |  | $                               | (174 | ) |                                | $ | 96 |      |  | $ | 245  |  |  | $ | 813 | 



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Other expense was $0.2
million in the third quarter of 2010 compared to other income of $0.1 million in the third quarter of 2009. Other income was $0.2 million in the first nine months of 2010 compared to $0.8 million in the first nine months of 2009. The decrease
in the three and nine-month periods is primarily due to lower interest income earned in the invested balances and recognized losses on foreign exchange payables, related to our clinical vendor payable balances.

Income Tax Expense (Benefit)

The following table summarizes our effective tax rates and income tax expense (benefit) for the three- and nine-month periods ended September 30, 2010 and 2009:



|                             |  |                                 |        |    |                                |   |       |      |  |   |        |    |  |   |       |  
|---------------------------- |  | ------------------------------- | ------ | -- | ------------------------------ | - | ----- | ---- |  | - | ------ | -- |  | - | ----- | -
|                             |  | Three months endedSeptember 30, |        |    | Nine months endedSeptember 30, |  
|                             |  | 2010                            |        |    | 2009                           |   |       | 2010 |  |   | 2009   |   
|                             |  | (in thousands)                  |        |    | (in thousands)                 |  
|Income tax expense (benefit) |  | $                               | (1,468 | )  |                                | $ | 2,846 |      |  | $ | (1,468 | )  |  | $ | 4,538 |  
|Effective tax rate           |  |                                 | (29    | )% |                                |   | 26    | %    |  |   | (5     | )% |  |   | 19    | %

The tax benefit for the
three- and nine-month periods ended September 30, 2010 was $1.5 million. The tax benefit was primarily due to an anticipated state tax refund resulting from changes in the California state income tax apportionment regulations, partially offset
by tax liability resulting from recognition for tax purposes of a portion of the $110.0 million up-front payment under the Astellas Collaboration Agreement.

The tax provision for the three- and nine-month periods ended September 30, 2009 was $2.8 million and $4.5 million, respectively. This tax expense resulted primarily from recognition for tax purposes
of a portion of the $225.0 million up-front payment under the Pfizer Collaboration Agreement and the suspension by the State of California of net operating loss carryforwards for the 2009 tax year.

Based upon the weight of available evidence, which includes our historical operating performance, reported cumulative net losses since
inception and difficulty in accurately forecasting our future results, we maintained a full valuation allowance on our net deferred tax assets as of September 30, 2010. The valuation allowance was determined pursuant to the ASC 740, Income
Taxes, which requires an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable; such assessment is required on a jurisdiction by jurisdiction basis. We intend
to maintain a full valuation allowance on the deferred tax assets until sufficient positive evidence exists to support reversal of the valuation allowance.

Liquidity and Capital Resources

Sources of Liquidity

We have incurred cumulative net losses of $207.6 million through September 30, 2010, and we expect to incur
substantial additional losses for the foreseeable future as we continue to finance clinical and preclinical studies of our existing and potential future product candidates and our corporate overhead costs. We have not generated any revenue from
product sales to date, and we do not expect to generate product revenue for several years, if ever. All of our operations to date have been funded through the sale of our debt and equity securities, the $225.0 million up-front payment we received
from Pfizer in October 2008, the $110.0 million up-front payment we received from Astellas in November 2009 and cost-sharing true-up payments from Pfizer and Astellas.

At September 30, 2010 we had cash, cash equivalents and short-term investments of $211.5 million available to fund operations. Based upon our current expectations, we believe our capital resources at
September 30, 2010 will be sufficient to fund our currently planned operations beyond the end of 2012, regardless of whether Pfizer elects to terminate our Collaboration Agreement. This estimate is based on a number of assumptions that may
prove to be wrong and we could exhaust our available cash reserves earlier than we currently anticipate. Our future capital requirements will depend on many factors, including those described in Risk FactorsRisks Related to Our
Business in Item 1A of Part II of this Quarterly Report on Form 10-Q under the heading  Because we depend on financing from third parties for our operations, our business may fail if such financing becomes unavailable or is
offered on commercially unreasonable terms.

Pfizer Collaboration Agreement

In September 2008, we announced a Collaboration Agreement with Pfizer for the development and commercialization of dimebon. Given the
negative results in the CONNECTION trial, Pfizer has the right to terminate the Collaboration Agreement with us at any time. A more comprehensive discussion of the risks and uncertainties related to development and commercialization of dimebon can
be found in the section entitled Risk FactorsRisks Related to Our Product Development Candidates under Item 1A, Part II of this Quarterly Report on Form 10-Q.



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Under the Pfizer
Collaboration Agreement, we and Pfizer agreed to collaborate on development of dimebon for Alzheimers disease and Huntington disease for the United States market, including associated regulatory filings with the FDA. In addition, if approved
by the FDA, following such approval and the launch of dimebon in the United States, we, at our option, and Pfizer have the right to co-promote dimebon to specialty physicians in the United States, and Pfizer has the sole right to promote dimebon to
primary care physicians in the United States. Pfizer has responsibility for development and seeking regulatory approval for, and commercialization of, dimebon outside the United States. Following a period of transition from our contract
manufacturers to Pfizer, Pfizer has responsibility for all manufacture of product for both clinical and commercial purposes. Both we and Pfizer have agreed not to commercialize for the treatment of specified indications any other products directed
to the same primary molecular target as dimebon for a specified time period, subject to certain exceptions.

The agreement
establishes several joint committees consisting of an equal number of representatives from both parties that operate by consensus to oversee the collaboration. In the event that a joint committee is unable to reach consensus on a particular issue,
then, depending on the issue, a dispute may be decided at the joint committee level by the party with the final decision on the issue or escalated to senior management of the parties. If a dispute is escalated to senior management and no consensus
is reached, then the dispute may be decided by the party to whom the contract grants final decision on such issue. Other issues can only be decided by consensus of the parties, and unless and until the parties representatives reach agreement
on such issue, no decision on such issue will be made, and the status quo will be maintained.

Under the Pfizer Collaboration
Agreement, Pfizer paid us an up-front cash payment of $225 million in the fourth quarter of 2008. We are also eligible to receive payments of up to $500 million upon the attainment of development and regulatory milestones plus additional undisclosed
milestone payments upon the achievement of certain net sales levels for the product. We and Pfizer share the costs and expenses of developing and commercializing dimebon for the United States market on a 60%/40% basis, with Pfizer assuming the
larger share, and we and Pfizer will share profits (or losses) resulting from the commercialization of dimebon in the United States in such proportions. Outside the United States, Pfizer will bear all development and commercialization costs and will
pay us tiered royalties on the aggregate net sales of dimebon.

If one of the parties merges with, or acquires or is acquired
by, a third party and as a result such party must divest its interest in the dimebon collaboration due to a governmental requirement, then the other party has the first right to purchase the divesting partys interest in the collaboration, on
terms to be negotiated by the parties. In the event that the parties are unable to agree on the terms of this purchase after following the negotiation procedure outlined in the Collaboration Agreement, the divesting party will have a time-limited
right to sell its interest in the collaboration to a third party. However, the terms of this sale must be more favorable than any terms offered by the non-divesting party and the third party will remain bound by the terms of the Collaboration
Agreement. In the event the non-divesting party declines to purchase the divesting partys interest, the divesting party may sell its interest in the collaboration to a third party on any terms but such third party will remain bound by the
terms of the Collaboration Agreement.

We are permitted to terminate the Collaboration Agreement for an uncured material
breach by Pfizer. Pfizer has a right to terminate the Collaboration Agreement unilaterally at any time. In the event of our uncured material breach of the Collaboration Agreement, Pfizer may elect either to terminate the Collaboration Agreement or
to keep the Collaboration Agreement in place, but terminate our right to participate in development, commercialization (other than co-promoting dimebon) and other activities for dimebon, including the joint committees and decision making for
dimebon. However, such termination would not affect our financial return or, unless we commit an uncured material breach of our co-promotion obligations, our co-promotion rights. Following any termination of the Collaboration Agreement, all rights
to develop and commercialize dimebon will revert to us, and Pfizer will grant a license to us to enable us to continue such development and commercialization, remain responsible for its ongoing financial and other obligations under the Collaboration
Agreement for a transition period of six months following termination, and is obligated to supply product to us for a reasonable period, not to exceed eighteen months following termination, on terms to be negotiated between the parties in good
faith.

Astellas Collaboration Agreement

In October 2009, we entered into a Collaboration Agreement with Astellas for the development and commercialization of MDV3100. A more comprehensive discussion of the risks and uncertainties related to
development and commercialization of MDV3100 can be found in the section entitled Risk FactorsRisks Related to Our Product Development Candidates under Item 1A, Part II of this Quarterly Report on Form 10-Q.

Under the Astellas Collaboration Agreement, which became effective in October 2009, we and Astellas agreed to collaborate on the
development of MDV3100 for prostate cancer for the United States market, including associated regulatory filings with the FDA. In addition, if approved by the FDA, following such approval and the launch of MDV3100 in the United States, we, at our
option, and Astellas have the right to co-promote MDV3100 in the United States. Astellas is responsible for development of, and seeking regulatory approval for, and commercialization of MDV3100 outside the United States. Astellas will be responsible
for commercial manufacture of MDV3100 on a global basis. Both Medivation and Astellas have agreed not to commercialize certain other products having a similar mechanism of action as MDV3100 for the treatment of specified indications for a specified
time period, subject to certain exceptions.



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We and Astellas share
the costs of developing and commercializing MDV3100 for the United States market on a 50%/50% basis, and we and Astellas will share profits (or losses) resulting from the commercialization of MDV3100 in the United States in such proportions. Costs
of clinical trials supporting development in both the United States and in either Europe or Japan, including the ongoing Phase 3 AFFIRM and PREVAIL trials and the two additional planned Phase 2 trials in earlier-stage prostate cancer that we expect
to initiate in 2010, are borne two-thirds by Astellas and one-third by us. Outside the United States, Astellas will bear all development and commercialization costs and will pay us tiered, double-digit royalties on the aggregate net sales of
MDV3100.

The agreement establishes several joint committees consisting of an equal number of representatives from both
parties that operate by consensus to oversee the collaboration. In the event that a joint committee is unable to reach consensus on a particular issue, then, depending on the issue, a dispute may be decided at the joint committee level by the party
with the final decision on the issue or escalated to senior management of the parties. If a dispute is escalated to senior management and no consensus is reached, then the dispute may be decided by the party to whom the contract grants final
decision on such issue. Other issues can only be decided by consensus of the parties, and unless and until the parties representatives reach agreement on such issue, no decision on such issue will be made, and the status quo will be
maintained.

Under the Astellas Collaboration Agreement, Astellas paid us a non-refundable, up-front cash payment of $110.0
million in November 2009. We are also entitled to receive up to $335.0 million in development milestone payments, plus up to an additional $320.0 million in commercial milestone payments. We are required to share 10% of the up-front payment and
any development milestone payments received under the Astellas Collaboration Agreement with the academic institution from which we licensed our rights to MDV3100. We paid 10% of the up-front payment, or $11.0 million, to the academic institution in
the fourth quarter of 2009.

Each of Medivation and Astellas is 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 us, but, except in certain specific
circumstances, generally cannot exercise that termination right until the first anniversary of MDV3100s first commercial sale. Following any termination of the Astellas Collaboration Agreement in its entirety, all rights to develop and
commercialize MDV3100 will revert to us, and Astellas will grant a license to us to enable us to continue such development and commercialization. In addition, except in the case of a termination by Astellas for our uncured material breach, Astellas
will supply MDV3100 to us during a specified transition period.

Cash Flow



|                                        |  |                                |         |   |      |   |         |  
|--------------------------------------- |  | ------------------------------ | ------- | - | ---- | - | ------- | -
|                                        |  | Nine months endedSeptember 30, |        
|                                        |  | 2010                           |         |   | 2009 |  
|                                        |  | (in thousands)                 |        
|Net cash provided by (used in):         |  |                                |         |   |      |   |         |  
|Operating activities                    |  | $                              | (71,521 | ) |      | $ | (69,818 | )
|Investing activities                    |  |                                | 170,888 |   |      |   | (8,163  | )
|Financing activities                    |  |                                | 3,106   |   |      |   | 63,029  |  
|                                        |  |                                |         |   |      |   |         |  
|Net change in cash and cash equivalents |  | $                              | 102,473 |   |      | $ | (14,952 | )
|                                        |  |                                |         |   |      |   |         |  

Operating Activities

Net cash used in operating activities was $71.5 million in the nine months ended September 30, 2010, and was primarily driven by our net loss of $30.1 million, decreased deferred revenue of $45.9
million due to partial amortization of the up-front payments from our corporate partners, increased receivables from our corporate partners of $11.4 million and increased prepaid expenses and other current assets of $4.8 million, partially offset by
$10.0 million in non-cash stock-based compensation expense and increased accrued expenses and accounts payable of $11.2 million.

Net cash used in operating activities was $69.8 million in the nine months ended September 30, 2009, and was primarily driven by our net operating loss of $28.5 million, decreased deferred revenue of
$49.0 million due to partial amortization of the up-front payments from our corporate partners, increased prepaid expenses and other current assets of $4.1 million and reduced accounts payable of $1.7 million, partially offset by non-cash
stock-based compensation expense of $7.7 million and increased accrued expenses of $7.2 million.



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Investing
Activities

Net cash provided by investing activities totaled $170.9 million in the nine months ended September 30,
2010, consisting primarily of net maturities of short-term investment securities. Net cash used in investing activities totaled $8.2 million in the nine months ended September 30, 2009, consisting primarily of net purchases of short-term
investment securities.

Financing Activities

Net cash provided by financing activities totaled $3.1 million and $63.0 million in the nine months ended September 30, 2010 and 2009, respectively. Net cash provided by financing activities in the
first nine months of 2010 was due primarily to proceeds from the exercise of employee stock options. Net cash provided by financing activities in the first nine months of 2009 consists of net proceeds of $62.0 million from an underwritten public
offering of common stock and $1.0 million in proceeds from the exercise of employee stock options.



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Commitments and
Contingencies

Except as described in Part II, Item 1, Legal Proceedings, of this Quarterly Report on Form
10-Q, during the three and nine months ended September 30, 2010, there were no material changes to our commitments and contingencies as set forth under the caption Commitments and Contingencies in Part II, Item 7,
Managements Discussion and Analysis of Financial Condition and Results of Operations, of our Annual Report on Form 10-K for the year ended December 31, 2009.

Off-Balance Sheet Arrangements

We have no material off-balance
sheet arrangements as defined in Regulation S-K 303(a)(4)(ii).



|ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
|------- | -----------------------------------------------------------

During the nine months ended September 30, 2010, there were no material changes to our market risk disclosures as set forth in Part II, Item 7A, Quantitative and Qualitative Disclosures About
Market Risk, of our Annual Report on Form 10-K for the year ended December 31, 2009.



|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 Securities Exchange Act of 1934, or 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 Commissions rules and forms and that such
information is communicated to our management, including our Chief Executive Officer and Chief 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 conceived 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 and Chief Financial Officer, of the effectiveness of the design and operation
of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and
procedures were effective as of September 30, 2010 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
September 30, 2010 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.
|------- | ------------------

On
March 9, 2010, the first of three purported securities class action lawsuits was commenced in the United States District Court for the Northern District of California, naming as defendants us and certain of our officers. The lawsuits are
largely identical and allege violations of the Securities Exchanges Act of 1934 in connection with allegedly false and misleading statements made by us related to dimebon. The plaintiffs allege among other things that the defendants disseminated
false and misleading statements about the effectiveness of dimebon for the treatment of Alzheimers disease, making it impossible for stockholders to gain a realistic understanding of the drugs progress toward FDA approval. The plaintiffs
purport to seek damages, an award of its costs and injunctive relief on behalf of a class of stockholders who purchased or otherwise acquired our common stock between July 17, 2008



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and March 2, 2010. On September 17, 2010, the court entered an order consolidating the actions and setting a discovery and briefing schedule for issues related to appointment of a lead
plaintiff. Once a lead plaintiff is appointed, the plaintiffs will have 30 days to file their consolidated, amended complaint.

Our management believes that we have meritorious defenses and intends to defend these lawsuits vigorously. However, these lawsuits are
subject to inherent uncertainties, the actual cost may be significant, and we may not prevail. We believe we are entitled to coverage under our relevant insurance policies, subject to a $350,000 retention, but coverage could be denied or prove to be
insufficient.



|ITEM 1A. | RISK FACTORS.
|-------- | -------------

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 our business. You should carefully consider these risk factors as
each of these risks could adversely affect our business, operating results and financial condition. If any of the events or circumstances described in the following risks actually occurs, our business may suffer, the trading price of our common
stock 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 on Form 10-Q. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us, or that we currently believe to be
immaterial, may also adversely affect our business.

We have marked with an asterisk (*) those risks described
below that reflect substantive changes from the risks described in our Annual Report on Form 10-K for the year ended December 31, 2009, filed with the SEC on March 15, 2010.

Risks Related to Our Business

We have incurred net losses since inception, expect to incur additional losses in the future as we continue our development activities and may never achieve sustained revenues or profitability. Our
only revenue to date has been collaboration revenue under our collaboration agreements with Pfizer and Astellas. We have not completed development of any of our product candidates and do not expect that any of our present or future product
candidates will be commercially available for a number of years, if at all. We have incurred losses since inception and expect to continue to incur substantial additional losses for the foreseeable future as we continue to finance clinical and
preclinical studies of our existing and potential future product candidates and our corporate overhead costs. Our operating losses have had, and will continue to have, an adverse impact on our working capital, total assets and stockholders
equity. We do not know when or if we will ever generate any additional revenue, including any milestone payments, profit sharing payments or royalty payments under our collaboration agreements with Pfizer and Astellas, or become profitable, because
of the significant uncertainties with respect to our ability to generate product revenue from, and obtain approval from the FDA or comparable foreign regulatory authorities for, any of our current or future product candidates.

*Because we depend on financing from third parties for our operations, our business may fail if such financing becomes unavailable or
is offered on commercially unreasonable terms. To date, we have financed our operations primarily through the sale of our debt and equity securities, and from up-front and cost-sharing payments received pursuant to our collaboration agreements
with Pfizer and Astellas. As of September 30, 2010 we had cash, cash equivalents and short-term investments of $211.5 million available to fund operations. Based upon our current expectations, we believe our capital resources at
September 30, 2010 will be sufficient to fund our currently planned operations beyond the end of 2012, regardless of whether Pfizer elects to terminate our collaboration agreement. This estimate is based on a number of assumptions that may
prove to be wrong and we could exhaust our available cash reserves earlier than we currently anticipate. Our future capital requirements will depend on many factors, including without limitation:



| |  |  | whether any changes are made to the scope of our ongoing clinical development activities;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | the scope and results of our and our corporate partners preclinical and clinical trials;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | whether we experience delays in our preclinical and clinical development programs, including potential delays in recruiting, or inability to recruit,
patients into our ongoing PREVAIL trial of MDV3100 in chemotherapy-naïve castration-resistant prostate cancer as a result of the availability of abiraterone acetate or other investigational and approved prostate cancer therapies, or slower than
anticipated product development;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  |  | whether opportunities to acquire additional product candidates arise and the timing and costs of acquiring and developing those product candidates;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | whether we are able to enter into additional third-party collaborative partnerships to develop and/or commercialize any of our product candidates on
terms, including development cost share terms, that are acceptable to us;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the timing and requirements of, and the costs involved in, conducting studies required to obtain regulatory approvals for our product candidates from
the FDA and comparable foreign regulatory agencies;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the availability of third parties to perform the key development tasks for our product candidates, including conducting preclinical and clinical
studies and manufacturing our product candidates to be tested in those studies, and the associated costs of those services;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | expenses associated with the pending purported securities class action lawsuits, as well as any unforeseen litigation; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------



| |  |  | the costs involved in preparing, filing, prosecuting, maintaining, defending the validity of and enforcing patent claims and other costs related to
patent rights and other intellectual property rights, including litigation costs and the results of such litigation.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

We may not be able to obtain additional financing when we need it on acceptable terms or at all. If we cannot raise funds on acceptable terms, we may not be able to continue developing our product
candidates, acquire or develop additional product candidates or respond to competitive pressures or unanticipated requirements. For these reasons, any inability to raise additional capital when we require it would seriously harm our business. In
March 2010, we announced a reduction of approximately 20% of our workforce in order to reduce our operating costs and focus our resources on prioritized dimebon trials and the continued development of MDV3100, and we may need to further reduce our
operating costs in the future, perhaps significantly, to preserve our cash. The cost-cutting measures we have taken and may take in the future may not be sufficient to enable us to meet our cash requirements, and they may negatively affect our
business and growth prospects.

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 because the risk of failure of any particular development program in the pharmaceutical field, including our ongoing dimebon and MDV3100 development programs, is high.

*Because we depend on our management to oversee the execution of development plans for our existing product candidates and to identify
and acquire promising new product candidates, the loss of any of our executive officers would harm our business. Our future success depends upon the continued services of our executive officers. 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 all of our existing product candidates 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. In addition, we do not have key person life insurance policies covering any of our executive officers. The loss of the services of any of our executive officers could delay the development of our
existing product candidates and delay or preclude the identification and acquisition of new product candidates, either of which events could harm our business. In addition, our March 2010 workforce reduction and any future workforce reductions may
negatively affect our ability to retain or attract key scientific and executive personnel.

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 rely on outside 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 and, in situations where we are unable to transfer those responsibilities to a corporate partner, for commercial use as well. In order
to manage our business successfully, we will need to identify, engage and properly manage qualified external vendors that will perform these



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development 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 programs, as well as other material disruptions to our business.

Risks Related to Our Product Development
Candidates

Our product candidates require extensive, time-consuming and expensive preclinical and clinical testing
to establish safety and efficacy. We may never attract additional partners for our technologies or receive marketing approval in any jurisdiction. The research and development of pharmaceuticals is an extremely risky industry. Only a small
percentage of product candidates that enter the development process ever receive marketing approval. Except for dimebons approval in Russia as an antihistamine, which is not a commercially attractive opportunity for us, none of our product
candidates is currently approved for sale anywhere in the world, and none of them may ever receive such approval. The process of conducting the preclinical and clinical testing required to establish safety and efficacy and obtain marketing approval
is expensive and uncertain and takes many years. If we are unable to complete preclinical or clinical trials of any of our current or future product candidates, or if the results of these trials are not satisfactory to convince regulatory
authorities or partners of their safety or efficacy, we will not be able to obtain marketing approval or attract additional partners for those product candidates. Furthermore, even if we or our partners are able to obtain marketing 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 will be materially harmed and our ability to generate revenue will be severely impaired.

*Enrollment and
retention of patients in clinical trials is an expensive and time-consuming process, could be made more difficult or rendered impossible by multiple factors outside our control, including the availability of competing treatments or clinical trials
of competing drugs for the same indication, 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 a sufficient number of
patients to complete our clinical trials. Patient enrollment 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. For example, our ongoing Phase 3 AFFIRM and
PREVAIL trials in castration-resistant prostate cancer are attempting to demonstrate a statistically significant difference in survival between drug-treated and placebo-treated patients. Patients participating in our trials may elect to leave our
trials and switch to alternative treatments that are available to them, either commercially or on an expanded access basis. The survival of any such patients would continue to be included in the analysis of our trials. Thus, use of other treatments
by these patients could make it more difficult for our AFFIRM and PREVAIL trials to succeed, or could prevent them from succeeding, if such treatments prolong survival. Furthermore, because patients in our AFFIRM and PREVAIL trials have a chance of
being randomized to placebo, the availability of competing treatments may make it more difficult, or impossible, to complete enrollment in our trials, particularly our PREVAIL trial. Such competing treatments include a chemotherapy drug from
sanofi-aventis which demonstrated an overall survival benefit in a Phase 3 castration-resistant prostate cancer trial and was approved by the FDA in June 2010, a prostate cancer vaccine from Dendreon which demonstrated an overall survival benefit in
castration-resistant prostate cancer patients and was approved by the FDA in April 2010, and abiraterone acetate, an investigational hormonal drug from a unit of Johnson & Johnson which, like MDV3100, operates by inhibiting the
androgen signaling pathway and is ahead of MDV3100 in clinical development. In October 2010, data presented at the European Society of Medical Oncology Annual Meeting showed that, in a pre-specified interim analysis, abiraterone acetate improved
overall survival in a Phase 3 trial in the same patient population being studied in our ongoing AFFIRM trial. The Johnson & Johnson unit developing abiraterone acetate has publicly disclosed its intent to make the drug available under an
expanded access program starting in October 2010 in the United States and in the months following outside the United States, and to submit applications for marketing approval in both the United States and Europe by the end of 2010. In addition, a
separate Phase 3 study of abiraterone acetate is presently ongoing in the same patient population being studied in our ongoing PREVAIL trial, and the developer of abiraterone acetate has publicly stated that it expects to report data from this
trial in 2011. 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 dimebon, MDV3100 or any other product candidates, or
could render further development impossible.

*Positive results in the Russian Study were not predictive of results in the
CONNECTION study, which was designed as a confirmatory study, and positive results seen in any of our other clinical trials, including our Phase 2 clinical trial of dimebon in Huntington disease and our Phase 1-2 clinical trial of MDV3100 in
castration-resistant prostate cancer, may not be predictive of



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results of our ongoing and potential future clinical trials. The CONNECTION study was designed expressly to replicate the positive results seen in the Russian Study but failed to do so. As
evidenced by this example, even where we achieve positive results in clinical trials, subsequent clinical trials may fail, even if those subsequent trials are designed very similarly to their predecessors. Accordingly, despite the positive results
seen in our Phase 2 clinical trial of dimebon in Huntington disease, our ongoing Phase 3 HORIZON trial of dimebon in Huntington disease may fail, and despite the positive results seen to date in our Phase 1-2 trial of MDV3100 in castration-resistant
prostate cancer, our ongoing Phase 3 AFFIRM trial of MDV3100 in post-chemotherapy castration-resistant prostate cancer, our ongoing Phase 3 PREVAIL trial in chemotherapy-naïve castration-resistant prostate cancer, and any other of our
planned studies of MDV3100 may fail. In addition, despite the positive results seen in our Russian Study, our ongoing Phase 3 CONCERT trial may fail. Product candidates in clinical trials, including Phase 3 clinical trials, often fail to show the
desired safety and efficacy outcomes despite having progressed successfully through prior stages of preclinical and clinical testing.

*Given the negative results in the CONNECTION trial, our revised dimebon clinical development plan, even if completed successfully, may be inadequate to obtain approval in mild-to-moderate
Alzheimers disease. The FDA informed us in January 2008 that the Russian Study and the CONNECTION trial could be used as the two pivotal studies required to support the approval of dimebon to treat mild-to-moderate Alzheimers
disease, as long as a significant portion of the sites in the CONNECTION trial were located in the United States. Given the failure of the CONNECTION trial, we now propose to rely on the Russian Study and the CONCERT trial as our two pivotal studies
in support of registration for mild-to-moderate Alzheimers disease. In June 2010, we presented the CONNECTION results and our proposed post-CONNECTION development plans to the FDA, and asked whether that combination of studies would be
acceptable to support approval of dimebon to treat mild-to-moderate Alzheimers disease. The FDA answered this question in the affirmative, provided that the results of the CONCERT trial are robustly positive. We have not presented the
CONNECTION data and our proposed post-CONNECTION development plans to the regulatory authorities in any other country, and any or all of such other regulatory authorities may give a different answer than did the FDA. Such other regulatory
authorities may, for example, require one or more additional Phase 3 trials to approve dimebon in mild-to-moderate Alzheimers disease even if the results of the ongoing CONCERT trial are positive. Furthermore, the FDA may decline to approve
dimebon for mild-to-moderate Alzheimers disease even if the data from the CONCERT trial are positive, if the FDA does not consider the CONCERT data to be robustly positive, and may require us to conduct one or more additional Phase 3 trials to
support approval for this reason or other reasons. If this or any other negative regulatory development were to occur, it may not be feasible for us to continue the development of dimebon for Alzheimers disease. Furthermore, even if we are
able to obtain regulatory approval for mild-to-moderate Alzheimers disease based on the Russian Study and the CONCERT study, that approval would not include severe Alzheimers disease, which would decrease the size of the potential market
opportunity for dimebon, as may the negative results of the CONNECTION trial. If we and Pfizer (or either of us individually) determines that clinical development of dimebon should be further curtailed or abandoned as a result of any such negative
regulatory development or otherwise, our potential future milestone payments and potential future revenues from the potential commercialization of dimebon would be reduced or eliminated.

*We are dependent upon our collaborative relationships with Pfizer and Astellas to further develop, manufacture and commercialize
dimebon and MDV3100, respectively. There may be circumstances that delay or prevent Pfizers or Astellas ability to develop, manufacture and commercialize dimebon or MDV3100, respectively, or that result in Pfizer or Astellas terminating
our agreements with each of them. In September 2008, we announced that we had entered into a collaboration agreement with Pfizer for the development, manufacture and commercialization of dimebon to treat Alzheimers disease and Huntington
disease. Under the agreement, Pfizer is responsible for development and seeking regulatory approval for, and commercialization of, dimebon outside the United States and is responsible globally for all manufacture of product for both clinical and
commercial purposes. In the United States, we and Pfizer are responsible for jointly developing and commercializing dimebon, and we share the costs, profits and losses on a 60%/40% basis, with Pfizer assuming the larger share. Under the terms of the
agreement, Pfizer has the unilateral right to terminate the agreement at any time based on the negative results of the CONNECTION trial. In October 2009, we announced that we had entered into a collaboration agreement with Astellas for the
development, manufacture and commercialization of MDV3100 to treat prostate cancer. Under the agreement, Astellas is responsible for developing, seeking regulatory approval for, and commercializing MDV3100 outside the United States and, following a
transition period, is responsible globally for all manufacture of product for both clinical and commercial purposes. We and Astellas are jointly responsible for developing, seeking regulatory approval for, and commercializing MDV3100 in the United
States. We and Astellas share equally the costs, profits and losses arising from development and commercialization of MDV3100 in the United States. For clinical trials useful both in the United States and in Europe or Japan, including the ongoing
Phase 3 AFFIRM trial, the ongoing Phase 3 PREVAIL trial, and the two additional planned trials in earlier-stage prostate cancer that we expect to initiate in the fourth quarter of 2010, we will be responsible for one-third of the total costs and
Astellas will be responsible for the remaining two-thirds.



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We are subject to a
number of risks associated with our dependence on our collaborative relationships with Pfizer and Astellas, including:



| |  |  | the rights of Pfizer or Astellas to terminate the respective collaboration agreement with us on limited notice for convenience (subject to certain
limitations in the case of Astellas), or for other reasons specified in the respective collaboration agreements;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the need for us to identify and secure on commercially reasonable terms the services of third parties to perform key activities currently performed by
Pfizer and Astellas in the event that either or both of our partners were to terminate their collaborations with us, including clinical and commercial manufacturing, development activities outside of the United States and commercialization
activities globally;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | adverse decisions by Pfizer or Astellas regarding the amount and timing of resource expenditures for the development and commercialization of dimebon
or MDV3100, respectively;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | possible disagreements as to the timing, nature and extent of our development plans, including clinical trials or regulatory approval strategy;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in key management personnel that are members of each collaborations various committees; and
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | possible disagreements with Pfizer or Astellas, including those regarding the development and/or commercialization of products, interpretation of the
collaboration agreement and ownership of proprietary rights.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Due to these factors and other possible
disagreements with Pfizer or Astellas, we may be delayed or prevented from further developing, manufacturing or commercializing dimebon or MDV3100, respectively, or we may become involved in litigation or arbitration, which would be time consuming
and expensive.

If Pfizer or Astellas were to unilaterally terminate our collaborative relationship, we would need to
undertake development, manufacturing and marketing activities for dimebon or MDV3100, respectively, 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 and could prevent us from effectively developing and commercializing dimebon and MDV3100. 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 relationships
with Pfizer and Astellas.

*We are dependent on the efforts of, and funding by, Pfizer and Astellas for the development of
dimebon and MDV3100, respectively. Under the terms of both the Pfizer collaboration agreement and the Astellas collaboration agreement, we and each of Pfizer and Astellas must agree on any changes to the development plan for dimebon or
MDV3100, respectively, that is set forth in each agreement. If we and Pfizer or we and Astellas cannot agree on any such changes, clinical trial progress could be significantly delayed or halted. Pfizer has the unilateral right to terminate our
collaboration agreement at any time based on the negative results of the CONNECTION trial. If Pfizer terminates its co-funding of our dimebon program, we may be unable to fund the development and commercialization costs on our own and may be unable
to find a new collaborator, which could cause our dimebon program to fail. Subject to certain limitations set forth in the Astellas Collaboration Agreement, Astellas is generally free to terminate the Astellas agreement at its discretion on limited
notice to us. Similarly, in the event of an uncured material breach of the Astellas agreement by us, Astellas may elect to terminate the agreement, in which case all rights to develop and commercialize MDV3100 will revert to us. If Astellas
terminates its co-funding of our MDV3100 program, we may be unable to fund the development and commercialization costs on our own and may be unable to find another partner, which could cause our MDV3100 program to fail. In the event of an uncured
material breach of the Pfizer agreement by us, Pfizer may elect either to terminate the agreement or to keep the agreement in place, but terminate our right to participate in development, commercialization (other than co-promoting dimebon, which
right Pfizer may terminate only if our uncured material breach pertains to our exercise of that right) and other activities for dimebon, including the joint committees and decision making for dimebon. If Pfizer terminates our right to participate in
such activities, we would be entirely dependent on Pfizers actions with respect to the development and commercialization of dimebon. In addition, under the Pfizer agreement, Pfizer is solely responsible for the development and regulatory
approval of dimebon outside the United States, so we are entirely dependent on Pfizer for the successful completion of those activities. Similarly, under the Astellas agreement, Astellas is solely responsible for the development and regulatory
approval of MDV3100 outside the United States, so we are entirely dependent on Astellas for the successful completion of those activities.

The financial returns to us, if any, under our collaboration agreements with Pfizer and Astellas depend in large part on the achievement of development and commercialization milestones, plus a share of
any profits from any product sales in the United States and royalties on any product sales outside of the United States. Therefore, our success, and any associated financial returns to us and our investors, will depend in large part on the
performance of Pfizer and Astellas under each respective agreement. If Pfizer or



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Astellas fails to perform or satisfy its obligations to us, the development, regulatory approval or commercialization of dimebon or MDV3100, respectively, would be delayed or may not occur and
our business and prospects could be materially and adversely affected for that reason.

We are dependent on the efforts of
Pfizer and Astellas to market and promote dimebon and MDV3100, respectively, if approved for commercial sale. Under our collaboration with Pfizer, we and Pfizer have the right to co-promote dimebon to specialty physicians in the United States
and Pfizer has the sole right to promote dimebon to primary care physicians in the United States. Outside the United States, Pfizer has the sole right to promote dimebon. We are thus solely dependent on Pfizer to successfully promote dimebon to
primary care physicians in the United States and to all customers outside of the United States and are partially dependent on Pfizer to successfully promote dimebon to specialty physicians in the United States. Under our collaboration with Astellas,
we and Astellas have the right to co-promote MDV3100 to all customers in the United States, and Astellas has the sole right to promote MDV3100 to all customers outside of the United States. We are thus partially dependent on Astellas to successfully
promote MDV3100 in the United States and solely dependent on Astellas to successfully promote MDV3100 outside of the United States. We have limited ability to direct Pfizer or Astellas in their potential commercialization of dimebon or MDV3100,
respectively, in any country, including the United States. If Pfizer or Astellas fail to adequately market and promote dimebon or MDV3100, respectively, whether inside or outside of the United States, we may be unable to obtain any remedy against
Pfizer or Astellas. If this were to happen, any sales of dimebon or MDV3100, respectively, may be harmed, which would negatively impact our business, results of operations, cash flows and liquidity.

We are dependent on Pfizer and Astellas to manufacture clinical and commercial requirements of dimebon and MDV3100, respectively,
which could result in the delay of clinical trials or regulatory approval or lost sales. Under both of our agreements with each of Pfizer and Astellas, after a transition period, Pfizer and Astellas have the primary right and responsibility to
supply dimebon and MDV3100, respectively, for clinical trials and all commercial requirements. We transitioned substantially all of the manufacturing obligations for dimebon to Pfizer in 2009, and are in the process of transitioning the
manufacturing obligations for MDV3100 to Astellas. Consequently, we are, and expect to remain, dependent on Pfizer and Astellas to manufacture dimebon and MDV3100, respectively. In the event that Pfizer terminates the dimebon collaboration, at our
request it will supply us with dimebon for clinical and commercial use for a reasonable period of time not to exceed eighteen months following its notice of termination, on terms to be negotiated by the parties in good faith. Pfizer or Astellas may
encounter difficulties in production scale-up, including problems involving production yields, quality control and quality assurance, and shortage of qualified personnel. Pfizer or Astellas may not perform as agreed or may default in their
obligations to supply clinical trial supplies and/or commercial product. Pfizer or Astellas may fail to deliver the required quantities of our products or product candidates on a timely basis. Any such failure by Pfizer or Astellas could delay our
future clinical trials and our applications for regulatory approval, or, if approved for commercial sale, could impair our ability to meet the market demand for dimebon or MDV3100, respectively, and therefore result in decreased sales. If Pfizer or
Astellas does not adequately perform, we may be forced to incur additional expenses, delays, or both, to arrange for other third parties to manufacture products on our behalf, as we do not have any internal manufacturing capabilities.

*If Pfizers or Astellas business strategies change, any such changes may adversely affect our collaborative relationships
with each party. Either Pfizer or Astellas may change its business strategy. Decisions by either Pfizer or Astellas to either reduce or eliminate its participation in the Alzheimers disease field or prostate cancer field, respectively, to
emphasize other competitive agents currently in its portfolio at the expense of dimebon or MDV3100, respectively, or to add additional competitive agents to its portfolio, could reduce its financial incentives to continue to develop, seek regulatory
approval for, or commercialize dimebon or MDV3100, respectively. For example, in October 2009 Pfizer completed its acquisition of Wyeth, which is co-developing an Alzheimers disease product candidate that, like dimebon, is currently in Phase 3
development. A change in Pfizers business strategy as a result of the Wyeth acquisition or for other reasons, including the negative results of the CONNECTION study or potential negative results in the ongoing CONCERT or HORIZON studies, may
adversely affect activities under our collaboration agreement with Pfizer, which could cause significant delays and funding shortfalls impacting the activities under the collaboration and seriously harming our business, or could result in changes to
the terms of our collaboration or its outright termination. In addition, Astellas has partnered with us based in part on Astellas desire to use MDV3100 as a component of building a global oncology franchise, which Astellas presently does not
have. If Astellas strategic objective of building a global oncology franchise were to change, such change could negatively impact any commercial prospects of MDV3100.

Our industry is highly regulated by the FDA, and comparable foreign regulatory agencies. We must comply with extensive, strictly enforced regulatory requirements in order to develop and obtain
marketing approval for any of our product candidates. Before we, Pfizer, Astellas or our potential future partners can obtain regulatory approval for the sale of our product candidates, our product candidates must be subjected to extensive
preclinical and clinical testing to demonstrate their safety and efficacy for humans. The preclinical and clinical trials of any product candidates that we develop must comply with regulation by numerous federal, state and local government
authorities in the United States, principally the FDA, and by similar agencies in other countries. We are required to obtain and maintain an effective investigational new drug application to commence human clinical trials in the United States
and



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must obtain and maintain additional regulatory approvals before proceeding to successive phases of our clinical trials. 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 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 or halted due to any of the following:



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



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



| |  |  | negative or inconclusive results from a preclinical test or clinical trial, such as the negative results from the CONNECTION trial reported in March
2010, 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;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the FDA might not approve the clinical processes or facilities that we utilize, or the processes or facilities of our consultants, including without
limitation the vendors who will be manufacturing drug substance and drug product for us or any potential collaborators;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | any regulatory approval we, Pfizer, Astellas or any potential future collaborators ultimately obtain may be limited or subject to restrictions or
post-approval commitments that render the product not commercially viable; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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 our product candidates.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

If our product candidates cannot be manufactured in a cost-effective manner and in compliance with current good manufacturing practices and other applicable regulatory standards, they will not be
commercially successful. All pharmaceutical and medical device products in the United States, Europe and other countries must be manufactured in strict compliance with current good manufacturing practices, or cGMP, and other applicable
regulatory standards. Establishing a cGMP-compliant process to manufacture pharmaceutical products involves significant time, cost and uncertainty. Furthermore, in order to be commercially viable, any such process would have to yield product on a
cost-effective basis, using raw materials that are commercially available on acceptable terms. We face the risk that our contract manufacturers may have interruptions in raw material supplies, be unable to comply with strictly enforced regulatory
requirements, or for other reasons beyond their or our control, be unable to complete their manufacturing responsibilities on time, on budget, or at all. Under our collaboration agreements with Pfizer and Astellas, Pfizer and Astellas are
responsible for all manufacture of dimebon and MDV3100, respectively, for commercial purposes, but we cannot guarantee that either Pfizer or Astellas will be able to manufacture dimebon or MDV3100, respectively, in a timely manner or at all.
Furthermore, neither dimebon nor MDV3100 has been manufactured at commercial-scale under cGMP-compliant conditions. In the event that Pfizer elects to terminate our dimebon collaboration agreement, following a period of transition assistance from
Pfizer, we will be responsible for manufacturing dimebon or finding a different third party to manufacture dimebon and neither we nor any other third party have experience manufacturing dimebon at commercial scale under cGMP-compliant conditions. We
thus cannot guarantee that commercial-scale cGMP manufacture of dimebon and/or MDV3100 will be possible, on a cost-effective basis or at all, which would materially and adversely affect the value of these programs.

*Any of our product development candidates that receive marketing approval will face significant competition from other approved
products, including generic products and products with more convenient dosing regimens, and other products in development. The biopharmaceutical industry is intensely competitive in general. Furthermore, our business strategy is to target large
unmet medical needs, and those markets are even more highly competitive. For example, there are four branded drugs and one generic drug currently marketed to treat Alzheimers disease. These drugs are all dosed once or twice per day, while
dimebon dosing is three times daily in all of our completed and ongoing Alzheimers disease and Huntington disease clinical trials. This difference in dosing regimen may make dimebon less competitive than alternative drugs if dimebon receives
marketing approval based on a thrice per day dosing regimen. In addition, one of the four branded Alzheimers disease drugs has already lost patent protection, and the other three branded drugs are expected to lose patent protection between the
end of 2010 and 2015. Such loss of patent protection typically results



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in the entry of generic competition for, and significant reductions in the commercial pricing of, those approved drugs. A generic version of one Alzheimers disease drug received FDA
marketing approval in 2008. This development would put significant competitive pressure on the prices we or our potential partners could charge for dimebon should it ever be approved. Companies marketing currently approved Alzheimers disease
therapeutics include some of the worlds largest and most experienced pharmaceutical companies, such as Novartis AG and Eisai. Pfizer also already markets a currently approved Alzheimers disease drug. In addition, in October 2009 Pfizer
merged with Wyeth, which is co-developing with Johnson & Johnson an Alzheimers disease product candidate that, like dimebon, is currently in Phase 3 development. There are also dozens of additional small molecule and recombinant
protein candidates in development targeting the clinical indications we are pursuing, particularly Alzheimers disease and castration-resistant prostate cancer, including compounds already in Phase 3 clinical trials. Two such compounds, a
chemotherapy drug from sanofi-aventis and a prostate cancer vaccine from Dendreon, were approved by the FDA in 2010 to treat castration-resistant prostate cancer. One or more other such compounds may be approved in each of our target indications
before any of our product candidates could potentially be approved, including abiraterone acetate, an investigational hormonal drug from a unit of Johnson & Johnson which, like MDV3100, operates by inhibiting the androgen signaling pathway
and in October 2010 was shown to prolong overall survival in castration-resistant prostate cancer patients. Most, if not all, of these competing drug development programs are being conducted by pharmaceutical and biotechnology companies with
considerably greater financial resources, human resources and experience than ours. Any of our product candidates that receives regulatory approval will face significant competition from both approved drugs and from any of the drugs currently under
development that may subsequently be approved. Bases upon which our product candidates would have to compete successfully include efficacy, safety, price and cost-effectiveness. Even if dimebon were ever to receive marketing approval, the negative
results from the CONNECTION trial could be included in the product label, which could negatively affect dimebons ability to compete. In addition, our product candidates would have to compete against these other drugs with several different
categories of decision makers, including physicians, patients, government and private third-party payors, technology assessment groups and patient advocacy organizations. Even if one of our product candidates is approved, we cannot guarantee that
we, Pfizer, Astellas or any of our potential future partners will be able to compete successfully on any of these bases. Any future product candidates that we may subsequently acquire will face similar competitive pressures. If we or our partners
cannot compete successfully on any of the bases described above, our business will not succeed.

*Any of our product
candidates that is eventually approved for sale may not be commercially successful if not widely-covered and appropriately reimbursed by third-party payors. Third-party payors, including public insurers such as Medicare and Medicaid and private
insurers, pay for a large share of health care products and services consumed in the United States. In Europe, Canada and other major international markets, third-party payors also pay for a significant portion of health care products and services
and many of those countries have nationalized health care systems in which the government pays for all such products and services and must approve product pricing. Even if approved by the FDA and foreign regulatory agencies, our product candidates
are unlikely to achieve commercial success unless they are covered widely by third-party payors and reimbursed at a rate that generates an acceptable commercial return for us and any collaborative partner. It is increasingly difficult to obtain
coverage and acceptable reimbursement levels from third-party payors and we may be unable to achieve these objectives. Achieving coverage and acceptable reimbursement levels typically involves negotiating with individual payors and is a
time-consuming and costly process. Moreover, comprehensive health care reform legislation was recently enacted in the United States that substantially changes the way health care is financed by both governmental and private insurers, and
significantly impacts the pharmaceutical industry. The new legislation contains a number of provisions that are expected to impact our business and operations, including those relating to the increased use of comparative effectiveness research on
health care products, changes to enrollment in federal healthcare programs, reimbursement changes and fraud and abuse provisions, all of which will impact existing government health care programs and will result in the development of new programs.
Many of the details regarding the implementation of this legislation have yet to be determined and implementation may ultimately adversely affect our business. Further, we expect that there will continue to be a number of federal and state proposals
to implement government controls over drug product pricing. We are currently unable to predict what additional legislation or regulations, if any, relating to the pharmaceutical industry or third-party payor coverage and reimbursement may be enacted
in the future, or what effect the recently enacted federal health care reform legislation or any such additional legislation or regulation will or would have on our business. In addition, we would face competition in such negotiations from other
approved drugs against which we compete, which may include other approved drugs marketed by Pfizer or Astellas, 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. The competition for coverage and reimbursement level with individual payors will be particularly intense for dimebon, if approved to treat Alzheimers disease, because all four
currently marketed Alzheimers disease drugs are expected to lose patent protection prior to, or shortly following, dimebons potential commercial launch, and thus are likely to be available at generic price levels that are more attractive
to individual payors. One such drug already has lost patent protection and a generic version is on the market, and the largest-selling such drug is expected to lose patent protection later in 2010. Our commercial prospects would be further weakened
if payors approved coverage for our product candidates only as second- or later-line treatments, or if they placed any of our product candidates in tiers requiring unacceptably high patient co-payments. Failure to achieve acceptable coverage and
reimbursement levels could materially harm our or our partners ability to successfully market our product candidates.



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We may be subject
to product liability or other litigation, which could result in an inefficient allocation of our critical resources, delay the implementation of our business strategy and, if successful, 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 of pharmaceutical products. If any of our product candidates 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 our ongoing clinical trials, but do not have insurance for any of our other development activities. 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 any of our product candidates, our litigation costs and
liability could exceed our total assets and our ability to pay. 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. Any litigation to which we are
subject, including the purported securities class action lawsuits described in the section entitled Legal Proceedings under Part II, Item 1 of this Quarterly Report on Form 10-Q, 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 Intellectual Property

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 obtain and maintain intellectual property protectionprimarily patent protectionof our technologies and product candidates, as well as successfully defending these patents
against third-party challenges. We and our collaborators will only be able to protect our technologies and product candidates from unauthorized use by third parties to the extent that valid and enforceable patents or trade secrets cover them.
Furthermore, the degree of future protection of our proprietary rights is uncertain because legal means 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:



| |  |  | 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;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



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



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



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



| |  |  | 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
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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

Our existing and any future patent rights may not adequately protect any of our product candidates, which could prevent us from ever
generating any revenues or profits. We cannot guarantee that any of our pending or future patent applications will mature into issued patents, or that any of our current or future issued patents will adequately protect our product candidates
from competitors. For example, there is a large body of prior art, including multiple issued patents and published patent applications, disclosing molecules in the same chemical class as our licensed MDV300 series compounds. Since our licensed
MDV300 series compounds include approximately 170 specific molecules, we expect that some members of this series may not be patentable in light of this prior art, or may infringe the claims of patents presently issued or issued in the future.
Furthermore, we also cannot guarantee that any of our present or future issued patents will not be challenged by third parties, or that they will withstand any such challenge. If we are not able to obtain adequate protection for, or defend, the
intellectual property position of our technologies and product candidates, then we may not be able to attract collaborators to acquire or partner our development programs. Further, even if we can obtain protection for



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and defend the intellectual property position of our technologies and 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 our 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. In recent years, there has been significant litigation in the United
States and elsewhere involving pharmaceutical patents and other intellectual property rights. In particular, generic pharmaceutical manufacturers have been very aggressive in challenging the validity of patents held by proprietary pharmaceutical
companies, especially if these patents are commercially significant. If any of our present or future product candidates succeed, we may face similar challenges to our existing or future patents. For example, in the prosecution of our issued United
States patents claiming the use of dimebon and certain related compounds to treat neurodegenerative diseases, including Alzheimers disease, the prior owners missed a filing deadline with the U.S. Patent & Trademark Office, or PTO,
which resulted in the patent application being deemed abandoned. The prior owners petitioned the PTO to revive the patent application alleging that missing the deadline was unintentional and the PTO approved the petition and issued the patent.
However, as with any other decision the PTO makes, this decision could be challenged in subsequent litigation in an attempt to invalidate this issued United States patent and any other United States patent that may issue based on the same patent
application. If a generic pharmaceutical company or other third party were able to successfully invalidate any of our present or future patents, any of our 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 to do one or more of the
following:



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



| |  |  | obtain from the owner of the 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 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 and re-examination proceedings. 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 in order 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 may need to obtain 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 third parties to develop our existing and
future product candidates. For example, in our industry there are a large number of issued patents and published patent applications with claims to treating diseases generically through use of any product that produces one or more biological
activitiessuch as inhibiting a specific biological target. We are aware of several such issued patents relating to Alzheimers disease and expect to continue to encounter such patents relating to other diseases targeted by our present and
future product candidates. We have not conducted experiments to analyze whether, and we have no evidence that, any of our product candidates produce the specific biological activities covered in any of the issued patents or published patent
applications of which we are presently aware. We have not sought to acquire licenses to any such patents. In addition, the commercial scale manufacturing processes that we are developing for our product candidates may require licenses to third-party
technology. 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.



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We may become
involved in disputes with Pfizer, Astellas or 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 collaborative agreements, including our collaboration agreements with
Pfizer and Astellas, 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 our 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.

Risks Related to Ownership of Our Common Stock

*We have been named as a defendant in three purported securities class action lawsuits. These lawsuits could result in substantial
damages and may divert managements time and attention from our business and operations. On March 9, 2010, the first of three purported securities class action lawsuits was commenced in the United States District Court for the Northern
District of California, naming as defendants us and certain of our officers. The lawsuits are largely identical and allege violations of the Securities Exchanges Act of 1934 in connection with allegedly false and misleading statements made by us
related to dimebon. The plaintiffs allege among other things that the defendants disseminated false and misleading statements about the effectiveness of dimebon for the treatment of Alzheimers disease, making it impossible for stockholders to
gain a realistic understanding of the drugs progress toward FDA approval. The plaintiffs purport to seek damages, an award of its costs and injunctive relief on behalf of a class of stockholders who purchased or otherwise acquired our common
stock between July 17, 2008 and March 2, 2010. On September 17, 2010, the court entered an order consolidating the actions and setting a discovery and briefing schedule for issues related to appointment of a lead plaintiff. Once a
lead plaintiff is appointed, the plaintiffs will have 30 days to file their consolidated, amended complaint.

Our management
believes that we have meritorious defenses and intends to defend these lawsuits vigorously. However, these lawsuits are subject to inherent uncertainties, and the actual cost will depend upon many unknown factors. The outcome of the litigation is
necessarily uncertain, we could be forced to expend significant resources in the defense of these suits and we may not prevail. Monitoring and defending against legal actions is time-consuming for our management and detracts from our ability to
fully focus our internal resources on our business activities. In addition, we may incur substantial legal fees and costs in connection with the litigation and, although we believe the company is entitled to coverage under the relevant insurance
policies, subject to a $350,000 retention, coverage could be denied or prove to be insufficient. We are not currently able to estimate the possible cost to us from this matter, as this lawsuit is currently at an early stage and we cannot be certain
how long it may take to resolve this matter or the possible amount of any damages that we may be required to pay. We have not established any reserves for any potential liability relating to this lawsuit. It is possible that we could, in the future,
incur judgments or enter into settlements of claims for monetary damages. A decision adverse to our interests on these actions could result in the payment of substantial damages, or possibly fines, and could have a material adverse effect on our
cash flow, results of operations and financial position. In addition, the uncertainty of the currently pending litigation could lead to more volatility in our stock price.

*Our stock price may be volatile, and our stockholders investment in our stock could decline in value. The market prices for our securities and those of other life sciences companies
have been highly volatile and may continue to be highly volatile in the future. The following factors, in addition to other risk factors described in this Quarterly Report on Form 10-Q, may have a significant impact on the market price of our common
stock:



| |  |  | the receipt or failure to receive the additional funding necessary to conduct our business;
| | - |  | -------------------------------------------------------------------------------------------



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



| |  |  | selling by existing stockholders and short-sellers;
| | - |  | ---------------------------------------------------



| |  |  | announcements of technological innovations or new commercial products by our competitors or us;
| | - |  | -----------------------------------------------------------------------------------------------



| |  |  | developments concerning proprietary rights, including patents;
| | - |  | --------------------------------------------------------------



| |  |  | developments concerning our collaboration with Pfizer, our collaboration with Astellas, or any future collaborations, including any potential decision
by Pfizer to terminate our dimebon collaboration due to the negative results of the CONNECTION trial reported in March 2010 or other factors;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | publicity regarding us, our product candidates or those of our competitors, including research reports published by securities analysts;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | regulatory developments in the United States and foreign countries;
| | - |  | -------------------------------------------------------------------



| |  |  | litigation, including the purported securities class action lawsuits commenced against us and certain of our officers;
| | - |  | ----------------------------------------------------------------------------------------------------------------------



| |  |  | economic and other external factors or other disaster or crisis; and
| | - |  | --------------------------------------------------------------------



| |  |  | period-to-period fluctuations in financial results.
| | - |  | ---------------------------------------------------

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.

Our principal stockholders exert
substantial influence over us and may exercise their control in a manner adverse to your interests. Certain stockholders and their affiliates own a substantial amount of our outstanding common stock. These stockholders may have the power to
direct our affairs and be able to determine the outcome of certain matters submitted to stockholders for approval. Because a limited number of persons controls us, transactions could be difficult or impossible to complete without the support of
those persons. Subject to applicable law, it is possible that these persons will exercise control over us in a manner adverse to your interests.

Provisions of our 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. In addition, 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 the company and an interested stockholder of the company. 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.



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|ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
|------- | ------------------------------------------------------------

None.



|ITEM 3. | DEFAULTS UPON SENIOR SECURITIES.
|------- | --------------------------------

None.



|ITEM 4. | (REMOVED AND RESERVED).
|------- | -----------------------



|ITEM 5. | OTHER INFORMATION.
|------- | ------------------

None.



|ITEM 6. | EXHIBITS.
|------- | ---------



|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT
NO. |  | DESCRIPTION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|            | 
|3.1(a)      |  | Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1(a) to the Quarterly Report on Form 10-QSB of Medivation, Inc. for the quarter ended
June 30, 2005).                                                                                                                                                                                                                                                                                                            
|            | 
|3.1(b)      |  | Certificate of Amendment of Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1(b) to the Quarterly Report on Form 10-QSB of Medivation, Inc.
for the quarter ended June 30, 2005).                                                                                                                                                                                                                                                                                
|            | 
|3.1(c)      |  | Certificate of Amendment to the Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1(c) to the Quarterly Report on Form 10-QSB of Medivation,
Inc. for the quarter ended June 30, 2005).                                                                                                                                                                                                                                                                            
|            | 
|3.1(d)      |  | Certificate of Designations of the Series C Junior Participating Preferred Stock of Medivation, Inc. (incorporated by reference to Exhibit 3.1(d) to the Annual Report on Form 10-KSB
of Medivation, Inc. for the year ended December 31, 2007).                                                                                                                                                                                                                                                           
|            | 
|3.2         |  | Amended and Restated Bylaws of Medivation, Inc. (incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K of Medivation, Inc. for the year ended December 31,
2008).                                                                                                                                                                                                                                                                                                                     
|            | 
|4.1         |  | Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form SB-2 of Medivation, Inc. (formerly Orion Acquisition Corp. II) (No.
333-03252)).                                                                                                                                                                                                                                                                                                                  
|            | 
|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 (incorporated by
reference to Exhibit 4.1 to the Current Report on Form 8-K filed on December 4, 2006).
|            | 
|31.1        |  | Certification of President and Chief Executive Officer pursuant to Rules 13a-14(a) or 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended.                                                                                                                                                                                                                                                                                                                                         
|            | 
|31.2        |  | Certification of Chief Business Officer and Chief Financial Officer pursuant to Rules 13a-14(a) or 15d-14(a) promulgated under the Securities Exchange Act of 1934, as
amended.                                                                                                                                                                                                                                                                                                                            
|            | 
|32.1        |  | Certification of the Chief Executive Officer and Chief Financial Officer, as required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the
United States Code (18 U.S.C. §1350).                                                                                                                                                                                                                                                                                          



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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: November 5, 2010 |  | MEDIVATION, INC.
|                       |  |                 
|                       |  | By:              |  | /s/    C. Patrick
Machado                                                                                   
|                       |  | Name:            |  | C. Patrick Machado                                                                                          
|                       |  | Title:           |  | Chief Business Officer and Chief Financial Officer
(Duly Authorized Officer and Principal Financial Officer)



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EXHIBIT INDEX



|            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|EXHIBIT
NO. |  | DESCRIPTION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|            | 
|3.1(a)      |  | Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1(a) to the Quarterly Report on Form 10-QSB of Medivation, Inc. for the quarter ended
June 30, 2005).                                                                                                                                                                                                                                                                                                            
|            | 
|3.1(b)      |  | Certificate of Amendment of Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1(b) to the Quarterly Report on Form 10-QSB of Medivation, Inc.
for the quarter ended June 30, 2005).                                                                                                                                                                                                                                                                                
|            | 
|3.1(c)      |  | Certificate of Amendment to the Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1(c) to the Quarterly Report on Form 10-QSB of Medivation,
Inc. for the quarter ended June 30, 2005).                                                                                                                                                                                                                                                                            
|            | 
|3.1(d)      |  | Certificate of Designations of the Series C Junior Participating Preferred Stock of Medivation, Inc. (incorporated by reference to Exhibit 3.1(d) to the Annual Report on Form 10-KSB
of Medivation, Inc. for the year ended December 31, 2007).                                                                                                                                                                                                                                                           
|            | 
|3.2         |  | Amended and Restated Bylaws of Medivation, Inc. (incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K of Medivation, Inc. for the year ended December 31,
2008).                                                                                                                                                                                                                                                                                                                     
|            | 
|4.1         |  | Common Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registration Statement on Form SB-2 of Medivation, Inc. (formerly Orion Acquisition Corp. II) (No.
333-03252)).                                                                                                                                                                                                                                                                                                                  
|            | 
|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 (incorporated by
reference to Exhibit 4.1 to the Current Report on Form 8-K filed on December 4, 2006).
|            | 
|31.1        |  | Certification of President and Chief Executive Officer pursuant to Rules 13a-14(a) or 15d-14(a) promulgated under the Securities Exchange Act of 1934, as amended                                                                                                                                                                                                                                                                                                                                          
|            | 
|31.2        |  | Certification of Chief Business Officer and Chief Financial Officer pursuant to Rules 13a-14(a) or 15d-14(a) promulgated under the Securities Exchange Act of 1934, as
amended                                                                                                                                                                                                                                                                                                                             
|            | 
|32.1        |  | Certification of the Chief Executive Officer and Chief Financial Officer, as required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the
United States Code (18 U.S.C. §1350).                                                                                                                                                                                                                                                                                          



40