NOTE 2 — COLLABORATION AGREEMENTS

(a) 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 U.S. Food and Drug Administration, or the FDA. In addition, if approved by the FDA, following such approval and the launch of MDV3100 in the United States, the Company 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.

Under the Astellas Collaboration Agreement, Astellas paid the Company a non-refundable, up-front cash payment of $110.0 million in the fourth quarter of 2009. The Company is also eligible to receive up to $335.0 million in development milestone payments, plus up to an additional $320.0 million in commercial milestone payments. As of September 30, 2011, the Company had received an aggregate of $13.0 million in development milestone payments under the Astellas Collaboration Agreement. Should the FDA accept for filing a new drug application seeking approval of MDV3100 in post-chemotherapy patients based on the positive interim analysis results from the AFFIRM trial, the Company would be entitled to a $10.0 million milestone payment under the Astellas Collaboration Agreement. The Company is required to share 10% of the up-front and development milestone payments received under the Astellas Collaboration Agreement with The Regents of the University of California, or UCLA, pursuant to the terms of its MDV3100 license agreement. The Company and Astellas will share equally the costs and expenses of developing and commercializing MDV3100 for the United States market, except that (a) 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, and (b) both the Company and Astellas will be responsible for all commercialization costs incurred in fielding and supporting its respective MDV3100 sales forces, and each of Astellas and the Company will be entitled to receive a fee for each detail made by its respective sales forces. 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.

(b) 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 FDA. The Company and Pfizer discontinued development of dimebon for Huntington disease in April 2011 following the negative results in the HORIZON trial. 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.

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 $500.0 million upon the attainment of development and regulatory milestones plus additional milestone payments upon the achievement of certain net sales levels for the product. 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 nine 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.

(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 Astellas Collaboration Agreement and the Pfizer Collaboration Agreement will end in the fourth quarters of 2014 and 2013, 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 received $123.0 million and $225.0 million of up-front and development milestone payments under the Astellas Collaboration Agreement and the Pfizer Collaboration Agreement, respectively. At September 30, 2011, deferred revenue balances with respect to the Astellas Collaboration Agreement and the Pfizer Collaboration Agreement were $77.2 million and $81.0 million, respectively.

Revenue recognized with respect to the Astellas Collaboration Agreement and the Pfizer Collaboration Agreement for the three and nine months ended September 30, 2011 and 2010 was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
	(in thousands)				(in thousands)
Collaboration revenue from Astellas	$	5,936	$	5,346	$	18,436	$	15,864
Collaboration revenue from Pfizer		9,004		9,004		27,012		30,012

Total	$	14,940	$	14,350	$	45,448	$	45,876

(d) Cost-Sharing Payments

Under both the Astellas Collaboration Agreement and the Pfizer 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, 2011 and 2010, the Company recorded development cost-sharing payments from its collaborative partners, and corresponding reductions in research and development expense, as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2011		2010		2011		2010
	(in thousands)				(in thousands)
Development cost-sharing payments from Astellas	$	11,480	$	9,743	$	32,593	$	22,634
Development cost-sharing payments from Pfizer		2,484		8,709		10,387		19,551

Total	$	13,964	$	18,452	$	42,980	$	42,185

For the three and nine months ended September 30, 2011 and 2010, the Company recorded commercialization cost-sharing payments from (to) its collaborative partners, and corresponding reductions (increases) in selling, general and administrative expense, as follows:


	Three Months Ended September 30,						Nine Months Ended September 30,
	2011			2010			2011		2010
	(in thousands)						(in thousands)
Commercialization cost-sharing payments from Astellas	$	176		$	125		$	634	$	375
Commercialization cost-sharing payments from (to) Pfizer		(3	)		(712	)		33		(1,049	)

Total	$	173		$	(587	)	$	667	$	(674	)