Most-wanted buyout target Medivation and hostile bidder Sanofi line up for board fight

Sanofi

Locked in a standoff with hostile bidder Sanofi, Medivation took a step on Wednesday toward High Noon. The biotech company set a shareholder record date for a board election, clearing the way for Sanofi to advance its slate of replacement directors and make its case for a deal.

Medivation ($MDVN) may be the most-wanted company in biopharma right now, with Big Pharma and Big Biotech companies both on the hunt. Potential bidders Pfizer ($PFE) and Amgen ($AMGN) reportedly got a look at Medivation’s books last month, and AstraZeneca ($AZN), Novartis ($NVS), Gilead Sciences ($GILD), Celgene ($CELG) and others are said to be circling, too.

No wonder: Medivation has a blockbuster cancer drug, Xtandi, on the market, and pipeline meds that could deliver solid sales down the line. Analysts say it’s one of the very few buyout targets with both. With a range of big drugmakers intent on dealmaking--and flush with cash--that puts Medivation in a powerful position to dictate terms.

But Sanofi ($SNY) appears to be the most determined bidder so far. After its first, private offer was shot down, the French drugmaker went public with a $52.50-per-share bid, valuing the deal at about $9.3 billion. When that offer was no more successful, Sanofi threatened to take over Medivation’s board if the company didn’t sit down to talk.

That’s just what Sanofi is trying to do now. The company set out a slate of 8 new directors for a written consent solicitation, an uncommonly used mechanism that allows for shareholder votes without a formal meeting. At Sanofi’s request, Medivation set Wednesday, June 1, as the record date, meaning as of yesterday shareholders can vote on Sanofi’s proposal.

Next, Sanofi will file required documents with the Securities and Exchange Commission, and, if approved, can start campaigning for votes. Medivation has already filed preliminary SEC documents setting out its case against Sanofi’s offer and its director candidates.

In those documents, Medivation argues that Sanofi is trying to strong-arm its way into buying Medivation at a price that’s far too low. Pipeline drugs talazoparib and pidilizumab are “enormous opportunities,” with billions in potential sales, and of course, Xtandi is a “fast-growing, multibillion-dollar oncology product.” Sanofi’s bid may be a premium to Medivation’s current stock price--but that price doesn’t give the company’s pipeline enough credit, the company contends.

Medivation CEO David Hung said as much last month in response to Sanofi’s suit. Xtandi has a “massive” market opportunity in prostate cancer alone, and it’s under study for other cancers, too, including breast cancer. Talazoparib could even beat Xtandi’s sales down the road, Hung told investors on the company’s Q1 earnings call.

Sanofi CEO Olivier Brandicourt has said he’s not averse to raising the bid for Medivation, provided the company sits down to negotiate. Given news that it’s talking to other potential buyers, why not? “There have been published reports that you have signed confidentiality agreements with other parties. If that is accurate, we cannot see how you have not done so with us,” Brandicourt wrote in a letter to Medivation’s board.

Market watchers agree that buyers have plenty of room to pay more for Medivation, given Xtandi’s sales and the company’s pipeline prospects. But given the rush of interest, a deal may not come together very soon. RBC Capital Markets analyst Simos Simeonedis figures the contest will extend into 2017, with an auction eventually yielding a per-share price of $65 to $75, a recent investor report noted.

- see the release from Medivation
- see Sanofi’s announcement
- get more from Medivation's SEC filing

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