Medivation opens books to Pfizer, Amgen as bidders circle: Reuters

Medivation CEO David Hung

Medivation is officially putting itself on the block, and Pfizer and Amgen appear to be first in line for a deal.

Sources tell Reuters that the reluctant San Francisco biotech, suddenly awash in takeover interest, agreed to open its books to potential buyers Pfizer and Amgen. The two companies are among several said to be eyeing a bid for Medivation, which sells the blockbuster prostate cancer drug Xtandi in partnership with Japan’s Astellas.

Notably absent from the due diligence invitation is Sanofi, which is the only drugmaker with a public offer on the table. Medivation has rejected Sanofi’s overtures twice, despite hints that the French drugmaker might sweeten its $9.3 billion bid if its target agreed to negotiate--or try to take over Medivation’s board if it didn’t.

Medivation says Sanofi’s $52.50 per share offer “substantially undervalues the company,” and analysts say there’s plenty of room for a higher price, given Xtandi’s substantial cash flow and Medivation’s pipeline. The company expects up to $1.525 billion in net U.S. sales from Xtandi this year.

Medivation CEO David Hung said last week that Xtandi has a “massive” market opportunity in prostate cancer alone, and Medivation is planning to expand into other cancers, too, including breast cancer. One of its late-stage prospects, talazoparib, could even beat Xtandi’s sales down the road, Hung told investors on the company’s Q1 earnings call.

In addition to Pfizer and Amgen, AstraZeneca and Novartis are said to be interested in pursuing a Medivation bid. Bloomberg reported last week that the two companies were running numbers with advisers to determine whether to move forward with an offer.

Practically every Big Biopharma company is on the prowl for deals, and Medivation’s combination of current blockbuster sales and promising pipeline drugs is hard to come by. The competition among potential bidders could ratchet up Medivation’s price considerably.

But Sanofi’s public missive to Medivation--and Medivation’s response during the Q1 call--illustrates one of the disconnects in biopharma dealmaking right now. Sanofi sees Medivation as unrealistic, its leadership unwilling to accept the decline in biotech stock values over the last six months or so. Hung, on the other hand, called Sanofi “extremely opportunistic” for making an offer now, “during a period of significant market dislocation for biotech.”

Medivation hints that it’s looking for a hefty premium. During its earnings call, the company cited the only other recent oncology deal that brought along big revenue from a marketed drug:  AbbVie’s ($ABBV) $21 billion acquisition of Pharmacyclics. Analysts called that price “staggering.” The adjective applied to Medivation’s buyout--when, not if, it happens--remains to be seen.

- read the Reuters news

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