Pfizer’s shares fell $0.14 in the wake of the deal, closing at $34.84.
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The deal came last month after Medivation rejected a $9.3bn takeover bid from the French drug maker Sanofi, saying that offer, worth $52.50 per share, undervalued the company.
Pfizer’s $14bn move to bring Medivation under its wing adds yet another string to the pharma giant’s bow, with major drug Xtandi coming into Pfizer’s ownership through the deal. Medivation’s prostate cancer drug enzalutamide (Xtandi) already generates almost $2 billion in annual sales and has the potential to more than double that, analysts report. In fact, shares jumped 13% last week alone, leaving Marathon 15% higher since the start of August – even including Monday’s decline. The deal gave AbbVie shared ownership with Johnson & Johnson in the blockbuster leukemia drug Imbruvica.
Medivation has been a leading cancer drug manufacturing company.
The deal comes four months after new rules adopted by the US Department of the Treasury foiled Pfizer’s plans to acquire Allergan in a $160bn (£121bn) tax inversion deal. Moreover, Pfizer’s main growth engine these days is a new treatment against breast cancer called “Ibrance”.
The deal is likely to close by the end of the year when Pfizer will finally have access to all the cancer drugs of Medivation. We believe other companies that could have been interested in Medivation such as AstraZeneca (AZN), Roche and Gilead may also be interested in the above assets.
Medivation’s drugs that are being developed could also complement Pfizer’s efforts to create combination cancer drugs with immunotherapies, which set up the immune system fight cancer.
Xtandi generated USA net sales of US$330.3 million in the second quarter.
Astellas Pharma U.S. and Medivation signed a deal in 2009 to jointly develop and commercialize Xtandi. Additionally, a non-metastatic castration-resistant prostate cancer trial for Xtandi should wrap up soon, and that could also increase Xtandi’s addressable patient population someday.
“The product is just at the beginning of its growth cycle”, Read said on the conference call.
And the premium that Pfizer was willing to pay for Medivation may continue, according to Jefferies’ Brian Abrahams. But Piper Jaffray analyst Richard Purkiss said the price is not excessive given Xtandi’s potential for earlier treatment in coming years. The high price is partly due to Xtandi already competing strongly in the market.
Pfizer’s investors and followers of the space will have differing opinions if Pfizer’s 2016 acquisitions mark a busy year for the company. Top-line results from a phase 2 study of estrogen receptor- and progesterone receptor-positive breast cancer patients are expected later this year, and a phase 3 study of Xtandi in diagnostic-positive-triple-negative breast cancer is on deck to begin enrollment in Q4.
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J.P. Morgan Securities and Evercore were Medivation’s financial advisers, while Cooley LLP and Wachtell, Lipton, Rosen & Katz served as its legal advisers.
