Medivation Says No! to Sanofi’s $9.3 Billion Hostile Bid
By Mark Terry, BioSpace.com Breaking News Staff
On March 25 and April 3, Olivier Brandicourt, chief executive officer of Sanofi (SNY), discussed on the phone with David Hung, Medivation’s chief executive officer, a potential acquisition. Hung and the Medivation board told Brandicourt the company had “no interest in discussing a transaction.”
On April 15, Sanofi then outlined an official proposal in writing. Medivation did not respond.
In that proposal, Sanofi offered $52.50 per share, a 50 percent premium to Medivation’s average share price the two months prior to the offer. It was a nonbinding, all-cash offer.
Deciding that Medivation was ignoring the offer, Sanofi went public with it in an attempt to pressure the board and shareholders into considering the deal, which is where today’s announcement comes in.
“Over the past several years, we have established a world class oncology franchise and a unique, diversified and highly-promising late-stage development pipeline,” Hung said in a statement. Hung is also the company’s founder and president. “Further, we have a track record of delivering extraordinary value to our shareholders. Sanofi’s opportunistically-timed proposal, which comes during a period of significant market dislocation, and prior to several important near-term events for the company, is designed to seize for Sanofi value that rightly belongs to our stockholders. We believe the continued successful execution of our well-defined strategic plan will deliver greater value to Medivation stockholders than Sanofi’s substantially inadequate proposal.”
Medivation further outlines the areas where it feels the Sanofi offer comes up short. First, it feels the company is being undervalued. That’s a real possibility, given that Medivation’s prostate drug, Xtandi, with its marketing partner, Astellas Pharma (ALPMY) grew sales by 73 percent in the U.S. last year and 116 percent globally. It has at least two drugs in its oncology pipeline, pidilizumab to treat B-cell lymphoma and other blood cancers, and talazoparib for breast cancer. Recently the European Medicines Agency’s Committee for Medicinal Products for Human Use (CHMP) recommended that additional clinical data regarding Xtandi should be included in the European label—the upshot being that Xtandi will be marketed and labeled as showing it works better than rival drugs.
The stock on Medivation can be a little harder to evaluate. Currently it’s trading for $56, higher than Sanofi’s bid. Only two months ago, on Feb. 8, shares traded for $27.32, less than half its current price. The company only turned a profit two years ago.
As Bloomberg writes, the company’s had its problems. It had an experimental drug for Alzheimer’s disease that failed in 2010, which resulted in a 67 percent drop in stock value and the layoff of 20 percent of its staff. The same drug also failed to be useful in treating Huntington’s disease, for which it had a partnership with Pfizer (PFE), which was terminated in 2012.
The company bought rights to several experimental compounds from the University of California in Los Angeles in 2005. One of those was Xtandi.
In 2011, the drug was so effective in a prostate cancer trial that it was stopped early and given to everybody in the trial. That, not surprisingly, caused the stock to double. As Geoffrey Porgers, an analyst at Leerink Partners, said at the time, investors now had to “realize this is a real company.”
Xtandi is projected to make $1.4 billion in 2020.
Porges told Bloomberg, “Investors and management will look for more, and other buyers will probably be willing to pay it. They’ve been spectacularly successful, but they’ve also been lucky as well. Investors realize that lightning isn’t likely to strike in the same place again.”
The company’s most recent statement would suggest it’s not interested in any merger, although that could simply be a negotiating posture, particularly with the stock currently running as high as it is.
The company’s sole asset isn’t Xtandi, even though Xtandi’s financial promise would be of interest to most companies in the oncology market. Talazoparib is another potential blockbuster, with top-line data from the Phase III EMBRACA trial in germline BRCA mutated advanced breast cancer expected in the first half of next year. Several additional trials are expected this year, including for prostate cancer, ovarian cancer and small cell lung cancer.
In defense of the board’s decision, Kim Blickenstaff, chairman of the board, said in a statement, “Medivation has a long history of producing superior growth and generating significant value for its shareholders. Since the launch of Xtandi, Medivation has achieved revenues of nearly $1 billion in just over three years. There are several exciting pipeline opportunities that will drive significant growth. The Board is determined to continue to aggressively focus on working for, and delivering value to, Medivation’s stockholders.”