Pfizer is buying the cancer drug company Medivation in a deal valued at about $14 billion.
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At last check Monday, MDVN was up 19.8% to $80.4 per share while PFE was down 0.5% to $34.8. Shares of Pfizer, the largest USA drugmaker, were little changed.
The American giant, which has lost out on takeover deals for UK-listed AstraZeneca and Ireland’s Botox maker Allergan, said the combination would provide an immediate boost to earnings.
The deal marks a shift in Pfizer’s strategy from lowering taxes to strengthening its pipeline of branded drugs.
“After the [Allergan] breakup, some analysts said Pfizer needed to do more deals to add patent-protected drugs if that side of the company was to develop the critical mass of revenue it would need to function on its own”, The Wall Street Journal said.
Pfizer CEO Ian Read called the bidding process “efficient and competitive”, adding that his firm “paid a fair price” at $81.50 per share in cash for Medivation.
“The Medivation deal increases the likelihood of a split”, said SunTrust Robinson Humphrey analyst John Boris.
In other news, SVP Andrew Kenneth William Powell sold 2,578 shares of the firm’s stock in a transaction on Monday, June 6th. This is going to be the biggest deal of Pfizer since they purchased Hospira Inc. for $17 billion in 2015. Researchers also are studying Xtandi as a possible treatment for earlier-stage prostate cancers. Medivation’s primary drug is Xtandi, a prostate cancer treatment that generated $2.2 billion in worldwide net sales during the past four quarters. The hormone therapy has an avid following in the United States, and over the past four quarters, the drug has generated $2.2 billion in worldwide sales. That is true despite the fact that Medivation shares the economic rights to Xtandi with Japanese drugmaker Astellas Pharma.ALPMY 1.38 % . The failure will put pressure on Chief Executive Officer Olivier Brandicourt to keep looking for growth as some of the Paris-based company’s biggest products age. Subsequently, Canaccord analyst John Newman raised his price target for MDVN, from $70 to $82, while reiterating a Buy rating. Pfizer shares traded down slightly Monday afternoon.
The Boards of Directors of both companies have unanimously approved the merger, which is expected to be immediately accretive to Pfizer’s adjusted diluted EPS upon closing, approximately $0.05 accretive in the first full year after close with additional accretion and growth anticipated thereafter.
Pfizer’s financial advisors for the transaction were Guggenheim Securities and Centerview Partners, with Ropes & Gray LLP acting as its legal advisor.
Medivation, meanwhile, turned to Cooley and Wachtell Lipton Rosen & Katz.
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Medivation shares jumped almost 20 per cent to close at US$80.42, just shy of the offer price of US$81.50 per share.
