Pfizer to Acquire Medivation in Deal Worth $14 Billion -- Update
August 22 2016 - 7:50AM
Dow Jones News
By Jonathan D. Rockoff
Pfizer Inc. said Monday it has agreed to buy biotech Medivation
Inc. for $81.50 a share, valuing the total company at about $14
billion, in a move that adds one of the crown jewels of the
multibillion-dollar market for cancer drugs to Pfizer's
portfolio.
News of the impending deal was reported Sunday.
It ends months of bidding for San Francisco's Medivation, one of
the most desired independent biotechs because it sells a leading
prostate-cancer drug.
The deal is a 21% premium to Medivation's closing share price
Friday. Medivation shares traded up 20% to $80.59 as Pfizer shares
fell 0.1% to $34.95 in premarket trading.
Medivation's drug, Xtandi, already generates about $2 billion in
yearly sales and has potential to more than double, according to
analysts.
Pfizer said the deal will add 5 cents to earnings in the first
full year after closing and isn't expected to impact 2016 financial
guidance.
Pfizer has been seeking to expand its lineup of such oncology
treatments. Xtandi would give the New York drug company a beachhead
in prostate cancer complementing its breast-cancer treatment
Ibrance, which is on track to be a blockbuster.
Medivation's drugs in development could also complement Pfizer's
efforts to develop combinations of cancer agents with so-called
immunotherapies, which deploy the immune system in the fight
against cancer.
The acquisition would also further Pfizer CEO Ian Read's efforts
to bolster what he refers to as the innovative side of the
company's business.
Mr. Read has said Pfizer would decide by year's end whether to
split into two, with one company selling fast-growing brand-name
drugs like Ibrance and another selling drugs that have lost patent
protection.
The deal is expected to close in the third or fourth quarter of
the year and is subject to customary closing conditions and U.S.
antitrust clearance.
Wall Street expected Pfizer would break up when it agreed to
take over Allergan PLC in a $150 billion deal, but the two
companies parted ways in April, after the Obama administration
targeted the proposed combination with new rules.
After the 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.
Cancer is one of the pharmaceutical industry's biggest markets
with world-wide sales amounting to roughly $80 billion a year and
growing more than 10% annually, according to EvaluatePharma.
Despite charging high prices often surpassing $100,000 a year
per patient, companies haven't faced the challenges securing
reimbursement that have limited sales of new drugs for other
diseases.
Medivation is one of the few independent biotechs left with a
cancer treatment that is already approved and selling well. CEO
David Hung says he decided to found the company after watching a
28-year-old breast-cancer patient die during his oncology
fellowship.
Xtandi has held its own against a rival prostate-cancer
treatment from Johnson & Johnson called Zytiga. Xtandi, which
Astellas Pharma Inc. also sells, could be one of the top-selling
cancer drugs by 2020, according to EvaluateSHYPharma.
But J&J is developing a new prostate-cancer drug that could
pose a threat to Xtandi, according to analysts.
Medivation was put in play after French drug company Sanofi SA
made an unsolicited proposal of $52.50 a share in cash, which the
biotech rejected in April, saying the offer substantially
undervalued the company.
A bidding war resulted. If Pfizer's offer wins, Medivation would
fetch more than double the $6 billion it was valued earlier in the
year.
Austen Hufford contributed to this article
Write to Jonathan D. Rockoff at Jonathan.Rockoff@wsj.com
(END) Dow Jones Newswires
August 22, 2016 07:35 ET (11:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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