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Pfizer to acquire Medivation for $14 billion as oncology deals continue to rise

Monday, August 29, 2016

Last Monday, Pfizer and Medivation announced their merger, with Pfizer buying Medivation for $14 billion in cash. Pfizer won out over numerous other bidders, including Celgene, Gilead Sciences, Merck and Sanofi.

While Pfizer shares were down 0.4% at $34.84, Medivation shares rose almost 20%, closing at $80.42. Pfizer’s winning bid price equals 180% more than Medivation’s stock price when the deal discussions were first made public.

A California-based cancer drug company, Medivation is best known for its drug Xtandi, which is approved for prostate cancer and currently being tested in breast cancer. Xtandi earned $595 million in the second quarter and is expected to add $1.52 billion in sales for the company this year. Pfizer CEO Ian Read cited the drug as the main selling point in the deal.

While critics point out that domestic growth for Xtandi is slowing considerably, Read noted that prostate cancer is an area of high unmet need. The drug could benefit from even greater sales if it manages to be approved for earlier use and earn a high prescription rate with urologists, with whom Pfizer has a strong relationship.

Medivation’s labs also house other potential cancer fighting drugs, most notably the PARP inhibitor talazoparib, which has shown good results in late-stage cancer, and whose potential rival drug, niraparib, extended the life of ovarian cancer patients in a recent study by Tesaro.

Medivation believes the PARP inhibitor to be a potential market leader. In the merger and acquisition conference call, Read noted that talazoparib is being studied in breast cancer and could complement Pfizer’s current efforts in the field.

Another highly anticipated experimental drug from the company is pidilizumab, which targets lymphoma.

According to EvaluatePharma, cancer is one of the pharmaceutical industry’s biggest markets, with worldwide sales totaling $80 billion per year and more than 10% annual growth expected.

While fielding multiple offers, Medivation CEO David Hung held out for the highest bid. During the discussions, analysts recognized Medivation as one of the few oncology companies for sale with an approved blockbuster medication and a pipeline that renders them able to supply sales from the start.

With this deal, Pfizer shows itself to be actively bolstering its stable of branded drugs, especially top-selling cancer medications. This aligns with the fact that Pfizer’s biggest growth driver is currently the metastatic breast cancer drug Ibrance. Entering the market in February 2015, Ibrance earned $723 million last year. In the first quarter of 2016, it surpassed analysts’ estimates to bring in another $429 million. While the drug is currently approved for use in two indications, Pfizer aims to significantly expand this, and is testing the drug in 38 other cancers, from head and neck cancer to advanced pancreatic cancer.

In the conference call, Pfizer CEO Read predicted that the deal “will help position us as a top-tier oncology company in the highest-growth therapeutic area within biopharma.”

The industry has seen several other oncology-related mergers and acquisitions this year. In February, McKesson, an international healthcare services and information technology company, acquired Vantage Oncology and Biologics in two transactions totaling $1.2 billion. In January, Merck acquired IOmet, a U.K.-based cancer drug company specializing in the fields of cancer immunotherapy and cancer metabolism.

Other companies are also investing in the oncology market for long-term R&D. One of them is Celgene, which focused on CAR-T approaches with partners Juno Therapeutics and bluebird bio, and immune-oncology deals with Jounce Therapeutics and AstraZeneca. The goal of these recent deals is to identify and develop new immune therapies by conducting investigations based on immune cell metabolic pathways.

GSK, Roche and Novo Ventures recently invested in Tioma Therapeutics, a startup that aims to treat solid and hematologic cancers. Its lead drug candidate is an anti-CD47 immune checkpoint inhibitor, soon to be tested in advanced proof-of-concept clinical trials.

Earlier this month, Amgen established a partnership with Advaxis, investing up to $540 million to fund its preclinical cancer immunotherapy candidate known as ADXS-NEO. Testing should start next year. Merck is also partnering with Advaxis on a drug candidate for prostate cancer, currently in phase I/II testing.

Bristol-Myers Squibb and Janssen are teaming up to combine their drugs in a phase II trial for non-small cell lung cancer. Bristol-Myers Squibb is also partnering with AbbVie to test one of its own checkpoint inhibitors alongside AbbVie’s cancer candidate Rova-T, in a trial targeting small cell lung cancer.

Industry analysts expect more deal-making in the cancer drug company sector in the near future. As there are several disappointed sponsors whose bid for Medivation failed, it’s likely that Pfizer’s acquisition is only one of many more oncology purchases to come.

“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,” said Read.

 

This article was reprinted from Volume 20, Issue 34, of CWWeekly, a leading clinical research industry newsletter providing expanded analysis on breaking news, study leads, trial results and more. Subscribe »

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