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Pfizer (PFE) Bought Medivation (MDVN), but is it a Good Deal?
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Today, Pfizer (PFE - Free Report) has announced that it will be acquiring Medivation Inc. in an all cash offer for $81.50 per share. This comes out to a transaction value of approximately $14 billion. Shares were trading for about $67 per share before the deal was announced, and since then, MDVN stock has shot up by about 20%.
Pfizer doesn’t expect the transaction to impact its fiscal 2016 guidance. Pfizer CEO Ian Read is especially bullish on the purchase, saying that “The proposed acquisition of Medivation is expected to immediately accelerate revenue growth and drive overall earnings growth potential for Pfizer”. Pfizer expects to achieve high long term growth from its oncology pipeline, and by adding Medivation, PFE hopes to boost this portfolio of drugs which treats tumors.
Medivation wouldn’t be fetching a high price tag if it weren’t for its drug called XTANDI®(enzalutamide). XTANDI is an androgen receptor inhibitor that blocks steps in the androgen receptor signaling pathway inside tumor cells. The hormone therapy has an avid following in the US, and over the past four quarters, the drug has generated $2.2 billion in worldwide sales.
The drug was approved by the FDA in 2012, and it was made for the purpose of treating advanced metastatic prostate cancer. XTANDI has treated 64,000 men in America, and the product stands to see immense sales growth if it gains FDA approval for treating other types of cancer. Medivation and Astellas Pharma Inc. (ALPMY - Free Report) entered an agreement in 2009 to jointly develop and commercialize XTANDI, and the companies are conducting two phase 3 studies in non-metastatic prostate cancer as well as a phase 3 study in hormone-sensitive prostate cancer. Additionally, there are phase 2 studies being conducted for treating advanced breast cancer and hepatocellular carcinoma.
Pfizer believes that the addition of XTANDI will give it a well-rounded oncology portfolio. Pfizer’s drug IBRANCE treats metastatic breast cancer, so Medivation’s product should fit in well and help Pfizer to have products that effectively treat two of the top cancers in annual incidence (in the US) after lung cancer. The cancers impact millions of people, and there are 300,000 and 180,000 new cases expected this year for breast cancer and prostate cancer respectively. According to Market Realist, XTANDI has a 51% share in the novel hormone therapy market, and it is on track to becoming the fourth-largest oncology drug by 2021.
There is more to Medivation than XTANDI though. The company also has a promising drug candidate known as Talazoparib. The product is in phase 3 studies for treating BRCA-mutated breast cancer, and it has the potential to be a highly potent PARP inhibitor that could be effective for treating several other types of tumors as well.
Bottom Line
It should be noted that Sanofi (SNY - Free Report) offered to buy Medivation for $52.50 per share in April. Pfizer’s offer is about 55% higher than the bid Sanofi put up, so it is clear that the company has strong faith in the value of XTANDI to be used for treating multiple types of cancer. So far, the trials for treating other types of cancer (such as breast cancer, pre and post-metastatic castration-resistant prostate cancer, and hepatocellular carcinoma) have progressed into mid and later stage trials, so there is strong potential for XTANDI to become an effective form of treatment for various types of tumors.
The high price tag is a gamble, but if XTANDI gets FDA approval for treating other forms of cancer, it will gain increased traction in the oncology market. This will mean a lot for Pfizer, and it could result in the company becoming one of the premier leaders in oncology. Right now, PFE stock is a Zacks Rank #3 (Hold).
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Pfizer (PFE) Bought Medivation (MDVN), but is it a Good Deal?
Today, Pfizer (PFE - Free Report) has announced that it will be acquiring Medivation Inc. in an all cash offer for $81.50 per share. This comes out to a transaction value of approximately $14 billion. Shares were trading for about $67 per share before the deal was announced, and since then, MDVN stock has shot up by about 20%.
Pfizer doesn’t expect the transaction to impact its fiscal 2016 guidance. Pfizer CEO Ian Read is especially bullish on the purchase, saying that “The proposed acquisition of Medivation is expected to immediately accelerate revenue growth and drive overall earnings growth potential for Pfizer”. Pfizer expects to achieve high long term growth from its oncology pipeline, and by adding Medivation, PFE hopes to boost this portfolio of drugs which treats tumors.
Medivation wouldn’t be fetching a high price tag if it weren’t for its drug called XTANDI®(enzalutamide). XTANDI is an androgen receptor inhibitor that blocks steps in the androgen receptor signaling pathway inside tumor cells. The hormone therapy has an avid following in the US, and over the past four quarters, the drug has generated $2.2 billion in worldwide sales.
The drug was approved by the FDA in 2012, and it was made for the purpose of treating advanced metastatic prostate cancer. XTANDI has treated 64,000 men in America, and the product stands to see immense sales growth if it gains FDA approval for treating other types of cancer. Medivation and Astellas Pharma Inc. (ALPMY - Free Report) entered an agreement in 2009 to jointly develop and commercialize XTANDI, and the companies are conducting two phase 3 studies in non-metastatic prostate cancer as well as a phase 3 study in hormone-sensitive prostate cancer. Additionally, there are phase 2 studies being conducted for treating advanced breast cancer and hepatocellular carcinoma.
Pfizer believes that the addition of XTANDI will give it a well-rounded oncology portfolio. Pfizer’s drug IBRANCE treats metastatic breast cancer, so Medivation’s product should fit in well and help Pfizer to have products that effectively treat two of the top cancers in annual incidence (in the US) after lung cancer. The cancers impact millions of people, and there are 300,000 and 180,000 new cases expected this year for breast cancer and prostate cancer respectively. According to Market Realist, XTANDI has a 51% share in the novel hormone therapy market, and it is on track to becoming the fourth-largest oncology drug by 2021.
There is more to Medivation than XTANDI though. The company also has a promising drug candidate known as Talazoparib. The product is in phase 3 studies for treating BRCA-mutated breast cancer, and it has the potential to be a highly potent PARP inhibitor that could be effective for treating several other types of tumors as well.
Bottom Line
It should be noted that Sanofi (SNY - Free Report) offered to buy Medivation for $52.50 per share in April. Pfizer’s offer is about 55% higher than the bid Sanofi put up, so it is clear that the company has strong faith in the value of XTANDI to be used for treating multiple types of cancer. So far, the trials for treating other types of cancer (such as breast cancer, pre and post-metastatic castration-resistant prostate cancer, and hepatocellular carcinoma) have progressed into mid and later stage trials, so there is strong potential for XTANDI to become an effective form of treatment for various types of tumors.
The high price tag is a gamble, but if XTANDI gets FDA approval for treating other forms of cancer, it will gain increased traction in the oncology market. This will mean a lot for Pfizer, and it could result in the company becoming one of the premier leaders in oncology. Right now, PFE stock is a Zacks Rank #3 (Hold).
The Zacks Rank is a truly marvelous trading tool. Our ranking system has beaten the S&P 500, yielding an average return of 25% per year for the last 29 years! Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>