Pfizer to Buy Medivation, Inc Pharmaceutical Company is not Far Way…
Pfizer Inc. is nearing agreement to buy biotech Medivation Inc. in a move that would add one of the crown jewels of the multibillion-dollar market for cancer drugs to Pfizer’s portfolio, according to people familiar with the matter.The $14 billion all-cash deal could be announced as early as Monday, one of the people said. It would end months of bidding for San Francisco’s Medivation, one of the most desired independent biotechs because it sells a leading prostate-cancer drug.
Medivation’s drug, Xtandi, already generates about $2 billion in yearly sales and has potential to more than double, according to analysts. Pfizer has been seeking to expand its lineup of such oncology treatments. Xtandi would give the New York drug company a beachhead in prostate cancer complementing its breast-cancer treatment Ibrance, which is on track to be a blockbuster. Medivation’s drugs in development could also complement Pfizer’s efforts to develop combinations of cancer agents with so-called immunotherapies, which deploy the immune system in the fight against cancer.
The acquisition would also further Pfizer CEO Ian Read’s efforts to bolster what he refers to as the innovative side of the company’s business. Mr. Read has said Pfizer would decide by year’s end whether to split into two, with one company selling fast-growing brand-name drugs like Ibrance and another selling drugs that have lost patent protection. Wall Street expected Pfizer would break up when it agreed to take over Allergan PLC in a $150 billion deal, but the two companies parted ways in April, after the Obama administration targeted the proposed combination with new rules.
After the breakup, some analysts said Pfizer needed to do more deals to add patent-protected drugs if that side of the company was to develop the critical mass of revenue it would need to function on its own. The news of Pfizer’s potential deal for Medivation was reported earlier by the Financial Times. Cancer is one of the pharmaceutical industry’s biggest markets with world-wide sales amounting to roughly $80 billion a year and growing more than 10% annually, according to EvaluatePharma.
Despite charging high prices often surpassing $100,000 a year per patient, companies haven’t faced the challenges securing reimbursement that have limited sales of new drugs for other diseases. Medivation is one of the few independent biotechs left with a cancer treatment that is already approved and selling well. CEO David Hungsays he decided to found the company after watching a 28-year-old breast-cancer patient die during his oncology fellowship.
Xtandi has held its own against a rival prostate-cancer treatment from Johnson & Johnson called Zytiga. Xtandi, which Astellas Pharma Inc. also sells, could be one of the top-selling cancer drugs by 2020, according to EvaluatePharma. But J&J is developing a new prostate-cancer drug that could pose a threat to Xtandi, according to analysts. Medivation was put in play after French drug company Sanofi SAmade an unsolicited proposal of $52.50 a share in cash, which the biotech rejected in April, saying the offer substantially undervalued the company.
A bidding war resulted. If Pfizer’s offer wins, Medivation would fetch more than double the $6 billion it was valued earlier in the year.
Three Best reasons to buy Medivation, Inc.
Investors should take note, because Medivation could add a much-needed new revenue source to a flatlining big pharma’s sales. The biotech has a prostate cancer drug on the market, Xtandi, whose blockbuster sales could deliver a quick top-line increase to any buyer. But which companies are really in the hunt? That depends on whom you listen to, but Medivation recently said it had entered into confidentiality agreements with several potential bidders. The list of possible contenders for the $11.1 billion company includes: Pfizer(NYSE:PFE), AstraZeneca (NYSE:AZN), Novartis (NYSE:NVS), Amgen (NASDAQ:AMGN), Gilead Sciences (NASDAQ:GILD), Celgene (NASDAQ:CELG), and Roche Holding Ltd.(NASDAQOTH:RHHBY).
But Medivation won’t be bought for a dime — or even $11 billion. The company has already swiftly rejected at least two bids from formerly hostile bidder Sanofi (NYSE:SNY); the last one the French drugmaker sweetened to $11 billion, or $58 a share. Medivation CEO Dr. David Hung called the offer “opportunistic,” and the company’s board decided it substantially undervalued the company.
Here’s what makes Medivation such a mouth-watering takeover target for big pharma and big biotech
One drug to rule them all
Medivation’s drug Xtandi brought in $638 million in the U.S. in the past six months, as reported last quarter. That’s a 22% jump from the six months previous, putting Xtandi ahead of its former rival, Johnson & Johnson drug Zytiga. Xtandi now owns 51% of this market — and for the best of all reasons: More prostate cancer patients are using the drug, and they are taking it for longer — nine months on average now. Medivation is also studying Xtandi for other indications, including breast cancer, where a mid-stage trial is expected to show results in the fourth quarter this year. Xtandi’s peak annual sales in the U.S. are estimated to climb as high as $5.5 billion, but that is a best-case scenario that assumes expanded approval in several indications. Still, this superstar drug has a lot of appeal to prospective bidders. And Medivation has other gems hidden deeper in its pipeline.
Hopes for Medivation’s PARP inhibitor are sky-high
Medivation has been loudly touting another drug in its pipeline: talazoparib, a potential partner with Xtandi for combination treatment. The company claims talazoparib has the potential to be “best-in-class” among so-called PARP inhibitors — a new type of medicine designed to stop tumor cells from multiplying by damaging their DNA. Medivation expects late-stage data on talazoparib next year in breast cancer. The drug also has potential as a treatment in cervical, lung, and ovarian cancers. Assuming talazoparib makes it through the FDA gauntlet successfully, it could be used alongside Xtandi in a cancer-fighting cocktail. If that happens, it could help boost Xtandi’s sales while adding sales of its own.
Profitable oncology biotechs are rarer than hen’s teeth
Many factors make acquisitions attractive for traditional big pharmas. But in recent years, deals have tended to focus on targets that provide a blockbuster drug that can pump up the acquirer’s sales. A second major focus has been on companies with a strong pipeline to beef up the acquirer’s future prospects. Medivation fits into both categories perfectly. And it’s profitable, giving it significant scarcity value as one of the very few profitable oncology companies on the market. So how high could Medivation’s stock go, assuming a deal pans out? In the best-case scenario, where its drugs are assumed to meet or beat expectations, Jefferies analyst Biren Amin estimated its valuation as high as $71 to $75 a share. Amin attached those values to specific possible buyers, saying it should be worth $71 a share to Sanofi and $75 to Amgen. That’s one analyst’s opinion, however, and reality may not look so rosy.
The Original Article was written by JONATHAN D. ROCKOFF