Medivation stock surged almost 20% on the announcement of the deal.
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Pfizer Inc said on Monday it would buy USA cancer drug company Medivation Inc in a deal valued at about $14 billion to boost its oncology portfolio.
Pfizer CEO Ian Read called the acquisition a “rare opportunity” to add an established treatment and a pipeline of drugs under development. The merger with Medivation will be Pfizer’s largest deal since Allergan.
Major drug makers are vying for a foothold in oncology because the sector promises to be single biggest contributors to sales growth. Offers from the likes of Paris-based Sanofi SA probably pushed amounts higher in the auction and led to the win by Pfizer, which brings aboard androgen receptor inhibitor Xtandi (enzalutamide) for metastatic, castration-resistant prostate cancer that has spread or recurred, even with medical or surgical therapy to block testosterone.
A new deal for Pfizer Inc.is set to boost its oncology treatments. Incyte and Seattle Genetics, which have respective market capitalizations of $15.4 billion and $6.7 billion, focus on innovative cancer treatments and, like Medivation, are already producing revenue. Earlier this year, it rejected a $9.3 billion offer from the French drugmaker Sanofi.
Pfizer is a Zacks Rank #3 (Hold) stock while Medivation is a Zacks Rank #5 (Strong Sell) stock. Earlier this year, the federal government turned down a petition from public-interest group Knowledge Economy International that sought to get the National Institutes of Health to lowers Xtandi’s price. Ibrance and Xtandi are anchor brands in breast and prostate cancer respectively, giving Pfizer leadership in two hormone-driven cancers.
Pfizer will pay US$81.50 a share in cash, the companies said in a statement yesterday.
The deal could be a much needed shot in the arm for deal making in the biotech sector, which has been tepid ever since the Nasdaq Biotech Index plunged more than 30 percent late past year, largely due to heightened political pressure on drug prices.
Pfizer said the deal was approved by boards of both companies and should be completed in the third or fourth quarter.
Last year, Pfizer announced it was joining forces with Allergan PLC in a $150 billion takeover deal, but backed out in April after new U.S. Treasury rules were issued under the Obama administration. It was structured as a tax inversion, which means Pfizer’s headquarters would move, on paper only, from NY to reduce the drugmaker’s US tax bill.
There has been a push from Wall Street for the drugmaker to break itself up into smaller companies so that it can grow faster. However, Medivation rebuffed all of Sanofi’s efforts as undervaluing the company and began taking bids from other potential suitors.
About 1.51 million shares of Waltham, MA-based Tesaro traded hands today, well above the stock’s average trading volume of roughly 825,853 shares per day.
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Shares of Medivation Inc. soared almost 20 percent, or $13.33, to $80.49 early Monday, while Pfizer climbed 22 cents to $35.20.
