NOTE 4. BUSINESS ACQUISITIONS

(a) Acquisition of MDV3800 from BioMarin

In the fourth quarter of 2015, the Company completed an acquisition of all rights to MDV3800, a PARP inhibitor, from BioMarin pursuant to an Asset Purchase Agreement. The acquired MDV3800 assets include all patents, data, know-how, third-party agreements, regulatory materials and pre-commercial inventories. The Company also assumed certain costs for ongoing clinical trials of MDV3800, and commitments under certain agreements previously entered into or assumed by BioMarin and assigned to the Company. The parties entered into a Transition Services Agreement at the closing of the transaction to facilitate the transition of the research and development activities relating to MDV3800 from BioMarin to the Company, including responsibility for the ongoing clinical studies.

The Company has concluded that the acquisition of MDV3800 from BioMarin is an acquisition of a business and will account for it in accordance with ASC 805-10, “Business Combinations.” The acquisition was completed on October 6, 2015, and results of operations related to MDV3800 since that date have been included in the consolidated statement of operations and were not significant.

In connection with the acquisition, the Company paid BioMarin an upfront cash payment of $410.0 million during the fourth quarter of 2015. In addition, BioMarin is entitled to contingent payments totaling up to $160.0 million upon the achievement of defined regulatory and sales-based milestones, and mid-single digit royalties on net sales of products that contain MDV3800 during the royalty term specified in the Asset Purchase Agreement. The acquisition-date fair value of the contingent consideration payments totaled $171.9 million and was estimated by applying a probability-based income model using a discounted cash flow analysis for contingent regulatory and royalty payments and a Monte Carlo simulation model for the contingent sales milestone payments. The estimation was based on significant inputs that are not observable in the market, referred to as Level 3 inputs, as described in more detail in Note 14, “Fair Value Disclosures.”

The following table presents the final allocation of the purchase consideration for the MDV3800 acquisition, including the contingent consideration payable, based on fair value:

Purchase consideration:
Cash	$	410,000
Acquisition-date fair value of contingent consideration		171,942
Total purchase consideration	$	581,942
Allocation of the purchase consideration:
Assets:
Identifiable intangible assets- IPR&D	$	573,299
Net identifiable assets acquired		573,299
Goodwill		8,643
Net assets acquired	$	581,942

Identifiable intangible assets totaled $573.3 million and consist entirely of IPR&D for MDV3800. As of the valuation date, the Company determined that MDV3800 was the only R&D project with substance, such that the project had undergone conceptual stages, and research, development, and preproduction had been started for the project. As such, no other intangible assets were identified in the transaction other than MDV3800 as separate and apart from goodwill. The Company utilized the multi-period excess earnings model of the “income method” to determine the fair value of the IPR&D as of the acquisition date. The excess of the consideration over the fair values assigned to the net assets acquired was $8.6 million, which represents the amount of goodwill resulting from the acquisition. The Company believes that the goodwill primarily represents benefits to it, such as the potential to diversify its product portfolio in the area of oncology, that do not qualify for separate recognition as acquired intangible assets. The amount of goodwill that is expected to be deductible for income tax purposes is $8.6 million. The Company recorded the goodwill on its consolidated balance sheet as of the acquisition date.

Pro forma Financial Information

The following unaudited pro forma financial information presents the combined results of operations of Medivation and MDV3800 as if the acquisition of MDV3800 had been completed on January 1, 2014, with adjustments to give effect to pro forma events that are directly attributable to the acquisition. The unaudited pro forma results do not reflect any operating efficiencies or potential cost savings which may result from the consolidation of the operations of Medivation and MDV3800. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the acquisition had occurred at the beginning of the period presented, nor are they indicative of future results of operations:

	Year Ended December 31,
	2015		2014
Total revenues	$	943,258	$	710,487
Net income	$	201,161	$	230,271

(b) Acquisition of MDV9300 from CureTech

In the fourth quarter of 2014, the Company entered into a License Agreement with Israel-based CureTech, pursuant to which it licensed exclusive worldwide rights to CureTech’s late-stage clinical molecule MDV9300, an antibody with immune-mediated anti-tumor effects. Under the License Agreement, the Company is responsible for all development, regulatory, manufacturing, and commercialization activities for MDV9300 for all indications, including oncology. The Company has concluded that the in-license transaction is an acquisition of a business and will account for it in accordance with ASC 805-10, “Business Combinations.”

In connection with the acquisition, the Company made upfront cash payments to CureTech totaling $5.0 million during the fourth quarter of 2014. In addition, CureTech is entitled to contingent payments totaling up to $85.0 million upon attainment of certain development and regulatory milestones, up to $245.0 million upon the achievement of certain annual worldwide net sales thresholds, and tiered royalties ranging from 5% to 11% on annual worldwide net sales. CureTech is also entitled to a $5.0 million milestone payment upon completion of the Manufacturing Technology Transfer as described in Note 15, “Commitments and Contingencies.” The acquisition-date fair value of the contingent consideration payments totaled $106.0 million and was estimated by applying a probability-based income approach using an appropriate discount rate. The estimation was based on significant inputs that are not observable in the market, referred to as Level 3 inputs, as described in more detail in Note 14, “Fair Value Disclosures.”

The following table presents the final allocation of the purchase consideration for the MDV9300 acquisition, including the contingent consideration payable, based on fair value:

Purchase consideration:
Cash	$	5,000
Acquisition-date fair value of contingent consideration		106,000
Total purchase consideration	$	111,000
Allocation of the purchase consideration:
Assets:
Identifiable intangible assets- IPR&D	$	101,000
Net identifiable assets acquired		101,000
Goodwill		10,000
Net assets acquired	$	111,000

Identifiable intangible assets totaled $101.0 million and consist entirely of IPR&D for MDV9300. As of the valuation date, the Company determined that MDV9300 was the only R&D project with substance, such that the project had undergone conceptual stages, and research, development, and preproduction had been started for the project. As such, no other intangible assets were identified in the transaction other than MDV9300 as separate and apart from goodwill. The Company utilized the multi-period excess earnings model of the “income method” to determine the fair value of the IPR&D as of the acquisition date. The excess of the consideration over the fair values assigned to the net assets acquired was $10.0 million, which represents the amount of goodwill resulting from the acquisition. The Company believes that the goodwill primarily represents benefits to it, such as the potential to diversify its product portfolio in the area of oncology, that do not qualify for separate recognition as acquired intangible assets. The amount of goodwill that is expected to be deductible for income tax purposes is $10.0 million. The Company recorded the goodwill on its consolidated balance sheet as of the acquisition date.

Pro forma Financial Information

The following unaudited pro forma financial information presents the combined results of operations of Medivation and MDV9300 as if the acquisition of MDV9300 had been completed on January 1, 2013, with adjustments to give effect to pro forma events that are directly attributable to the acquisition. The unaudited pro forma results do not reflect any operating efficiencies or potential cost savings which may result from the consolidation of the operations of Medivation and MDV9300. Accordingly, these unaudited pro forma results are presented for informational purposes only and are not necessarily indicative of what the actual results of operations of the combined company would have been if the acquisition had occurred at the beginning of the period presented, nor are they indicative of future results of operations:

	Year Ended December 31,
	2014		2013
Total revenues	$	710,487	$	272,942
Net income (loss)	$	274,626	$	(45,685	)