Sanofi could go hostile with Medivation bid

Sanofi's headquarters in Paris

At the beginning of the month the big question was: Who wants to buy the cancer biotech Medivation ($MDVN)? Now we have an answer in the form of Sanofi ($SNY)--but things haven't gone well as the drugmaker was firmly rebuffed after making its feelings known.

This is according to reports from financial newswire Bloomberg, quoting anonymous people "familiar with the matter."

Bloomberg's sources add that Sanofi is "working with advisers on a potential offer and hasn't ruled out making a hostile bid." The California biotech is said to have already brought in JPMorgan to help with any takeover approaches.

The French drugmaker is one of a handful of pharma companies touted this month as being interested in the biotech, with Roche ($RHHBY), AstraZeneca ($AZN), Amgen ($AMGN) and Gilead ($GILD) also believed to be interested.

The sources told Bloomberg that other suitors are still considering making an offer as Medivation is seeking a higher price than initial proposals have indicated.

Medivation--which markets Astellas' prostate cancer drug Xtandi in the U.S.--is under increasingly heavy political pressure for the $129,000 it charges for the medicine, which was first developed at UCLA through taxpayer-supported research grants.

A number of Democratic representatives, led by presidential candidate Sen. Bernie Sanders, have sent a letter to lawmakers urging the NIH to consider using its power to override Xtandi's patent and thus allow the drug to be swapped for cheaper new generics--despite its patent being valid for around a decade.

Most analysts don't believe this power will be used in this case, but the whole saga has put Medivation in the doldrums, with its shares down considerably over the past 12 months.

But the M&A speculation saw its shares jump as much as 11% yesterday as Sanofi looks to build on its own cancer drug pipeline. Sanofi, however, dropped 0.6% in after-hours trading last night.

The French pharma is currently struggling with its research units and just this month announced another re-tooling of its R&D strategy after poaching AZ's former MedImmune research head Dr. Yong-Jun Liu to help "rejuvenate" its unit.

The drugmaker has said it would like to partner or even buy some smaller biotechs, but its focus is predominately on early-stage drugs. Gaining access to Xtandi's blockbuster sales in the U.S. could however help buffer the company in the near term, making a deal more attractive.

Sanofi has in fact been trimming its oncology pipeline in recent years, and a year ago it walked away from an armed-antibody cancer treatment licensed from ImmunoGen ($IMGN) as it reshapes its approach to the field (although it still has a strong research pact with the biotech).

The Paris-based Big Pharma has been rethinking its approach to oncology after a series of trial setbacks, cutting about 100 researchers last year and merging its cancer group into its global R&D team. For Sanofi, price will likely be key to any deal.

So what could it get Medivation for? Jefferies analyst Biren Amin said at the start of April that a fair value for acquirers would be in the range of $51 to $54 a share, although this could be bumped up to $71 to $75 a share, depending on the buyer and how well its assets can do.

Its pipeline consists of the late-stage breast cancer drug talazoparib, which is projected to make $200 million in peak sales, and the blood cancer drug pidilizumab, which is in a Phase II trial, although both of these have not had smooth trials. A candidate for bladder cancer and a multiple myeloma therapy are also in its early-stage pipeline.

Sanofi and Medivation declined to comment on the rumors.

- check out Bloomberg's take

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