Pfizer buys Medivation for $81.50 a share

Print 24 August 2016
Ben Adams / Fierce Biotech

Move over Sanofi, your original $9.3 billion bid and even your second, sweetened offer has been blown out of the water by the $14 billion being put on the table by Pfizer--and Medivation’s CEO David Hung has decided that's his best bet, and has taken the deal. 

The Pfizer ($PFE) bid, which was accepted officially by Medivation ($MDVN) this morning, is worth an eye-watering $81.50 a share and would be a major premium on the $67 it was worth as of Friday evening (and up around $10 since May, when its suitors started to come out of the woodwork).

Analysts had thought $75 a share deal would likely be the eventual winning bid, showing just how much this M&A speculation--which has been ongoing for much of 2016--has whipped up increased interest.

This means Pfizer has beat out rivals Sanofi ($SNY), Celgene ($CELG), Merck ($MRK) and Gilead ($GILD)--although only Sanofi has officially confirmed its interest.

“The proposed acquisition of Medivation is expected to immediately accelerate revenue growth and drive overall earnings growth potential for Pfizer,” said Ian Read, chairman and CEO of Pfizer.

“The addition of Medivation will strengthen Pfizer’s Innovative Health business and accelerate its pathway to a leadership position in oncology, one of our key focus areas, which we believe will drive greater growth and scale of that business over the long-term. This transaction is another example of how we are effectively deploying our capital to generate attractive returns and create shareholder value.”

The deal will be paid by an all-cash transaction, Pfizer said in a statement.

Both Sanofi and Pfizer and a few others were over the summer said to be allowed access to Medivation’s books as Hung sought to see his suitors outbid each other.

Sanofi is likely the more in need of California-based Medivation’s access to its marketed prostate cancer med Xtandi (also marketed with Astellas), which makes blockbuster sales in the U.S., as well as its oncology pipeline, which includes what Hung touts as a best-in-class, Phase III PARP inhibitor.

Sanofi has been struggling with its research units and in April, announced another re-tooling of its R&D after poaching AZ's former MedImmune research head to "rejuvenate" its own unit. The French firm has said it would like to partner or even buy some smaller biotechs, but its focus is predominately on early-stage drugs. 

But Pfizer needs a lift too, as it’s been a case of always the bridesmaid and never the bride for the U.S. giant, which has had to drop two $100-billion-plus deals: first for AstraZeneca ($AZN) in 2014 and then this year for Allergan ($AGN).

Having now sealed the Medivation deal, with the words “tax inversion” luckily nowhere in sight, this could help shore up its middling cancer pipeline. It does have a checkpoint inhibitor in the form of a $850 million deal with Merck KGaA, but this still at midstage and far behind rivals Roche ($RHHBY), Merck and Bristol-Myers Squibb ($BMY).

Some analysts aren’t convinced, however, with Bernstein declaring that this is “barely a needle-mover” for Pfizer, and points out that at the start of the year, Medivation’s shares were trading in the $30s, with an $81.50 a share bid representing around a 170% premium. A “hefty bid,” is their analysis.

It also only has one marketed drug, and its later stage PARP med was only acquired by the biotech last year, from BioMarin ($BMRN), and this oncology class has not been gaining the attention that checkpoint inhibitors and the potential from CAR-T and CRISPR have been. 

Back in April, Jefferies analyst Biren Amin has said that a fair value for acquirers would be in the range of $51 to $54 a share. This would in fact have represented a fairly substantial premium to Medivation's pre-merger-speculation price of $37.

In a more bullish scenario, for example, where its pipeline drugs meet or beat expectations, Amin estimated that valuation could be $71 to $75 a share, although this would all depend on the buyer. Deal speculation reached a fever pitch, however, and its shares were bumped from the mid $30s to the mid $60s between the start of the year and today.

It was also helped along by some stellar data coming out of Tesaro ($TSRO) last month and its experimental PARP inhibitor, which boosted the whole class and strengthened Medivation’s resolve to gain a higher bid, and ignore the hostile attempts from Sanofi.

Its pipeline includes not just the PARP talazoparib, which last year was projected to make $200 million in peak sales, but also the blood cancer drug pidilizumab, which is in a Phase II trial. A candidate for bladder cancer and a multiple myeloma therapy are also in its early-stage pipeline. Talazoparib is now being touted as a blockbuster-in-waiting, although estimates do vary widely depending on who you talk to, but Tesaro's data has definitely shifted the sentiment, and upper figures for the drug, across the board. 

There have however been some hiccoughs in the biotech’s pipeline, with a midstage trial for pidilizumab being partially suspended by the FDA when Medivation discovered it may not work as originally expected.

Jefferies was a little more upbeat today than Bernstein, saying in a note to clients that Medivation could be around 7% accretive to EPS for PFE in the mid-term against the $14bn cash offer for the company.

It admits, however, that many investors “will view as expensive.” The firm added: “We believe that Medivation is a logical fit for Pfizer in terms of its strategy in oncology as well as an earnings bridge through 2018/19. Recent conversations with investors lead us to expect increased speculation that Sanofi may now turn towards Biomarin as a target.”

Medivation was up 20% to $80.50 by mid-morning, while Pfizer nudged up slightly to 0.5% after opening slightly down on the news. Vanquished suitor Sanofi, meanwhile, was down by 0.6%. 

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