BY Richard Summerfield
In its largest deal since its $152bn merger with Allergan was terminated in April, pharmaceutical powerhouse Pfizer Inc has announced that it will acquire US drug manufacturer Medivation Inc – producer of the best selling cancer drug Xtandi – in a deal worth $14bn.
The transaction, according to a statement released by the firms, will see Pfizer pay around $81.50 a share in cash for the company which had been the subject of furious takeover speculation of late. Indeed, a number of other pharmaceutical companies made offers for Medivation in an auction after it rebuffed an offer of $9.3bn by French drug maker Sanofi. Rival US firms Merck & Co and Celgene are also believed to have pursued deals for Medivation since Sanofi’s offer proved unsuccessful; however, it was Pfizer that was able to clinch the deal.
Speculation around a potential deal for the company helped to double Medivation’s share price over the last few months. In February, its stock was trading at less than $30 per share. Although Medivation’s stock price has climbed recently, the agreed deal price will still see Pfizer pay a 21 percent premium on Medivation’s share price on Friday, the last trading day before the deal was announced.
Oncology related drugs have proved to be a popular deal driver in recent years and the success of Xtandi has also helped to send Medivation’s stock price soaring. Xtandi is the leading novel hormone therapy available in the US today and generated approximately $2.2bn in worldwide net sales over the past four quarters. Furthermore the drug is expected to generate $5.7bn in sales by 2020.
“The proposed acquisition of Medivation is expected to immediately accelerate revenue growth and drive overall earnings growth potential for Pfizer,” said Ian Read, chairman and chief executive of Pfizer. “The addition of Medivation will strengthen Pfizer’s Innovative Health business and accelerate its pathway to a leadership position in oncology, one of our key focus areas, which we believe will drive greater growth and scale of that business over the long-term. This transaction is another example of how we are effectively deploying our capital to generate attractive returns and create shareholder value.”
Though Xtandi is Medivation’s only marketed product, the company has a strong pipeline of other cancer drugs in late-stage clinical development. Potential breast cancer treatment talazoparib and a potential lymphoma drug will sit alongside Xtandi and a number of other oncology related products offered by the newly merged Pfizer who were slow out of the gates when it comes to cancer treatments. The company has been playing catch up in the oncology field and the deal for Medivation will go a long way toward closing the gap.