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Why Speculation Has Medivation Inc.'s Shares Soaring 20% Today

By Todd Campbell - Mar 31, 2016 at 11:52AM

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Rumors are flying that an acquirer could make a bid for this cancer drug company.

SOURCE: MEDIVATION, INC.

What: On the heels of payer pushback over the pricing of Medivation's (MDVN) only commercial drug, speculation that a suitor such as Gilead Sciences (GILD -0.40%) or Roche Holdings (RHHBY 1.39%) could come knocking has sent its shares soaring -- up 20.3%% at 11:46 a.m. today. 

So what: Medivation's shares nosedived earlier this week after members of Congress petitioned the National Institutes of Health (NIH) to invalidate patent exclusivity for its top-selling prostate cancer drug, Xtandi.

Xtandi is widely used in pre- and post-chemotherapy prostate cancer patients; net sales in the U.S. are running at a $1.2 billion annualized pace. However, Xtandi is extremely expensive, and with prostate cancer the second-most-common cancer among men, policymakers and others are angry that its $129,000 price tag could be keeping this game-changing drug out of the hands of Americans who could benefit from it.

Their ire is compounded by the fact that Xtandi was cooked up in the labs at UCLA using taxpayer dollars provided by NIH grants.

This price scrutiny, however, isn't derailing optimism that Medivation's recent stock slide may make it more attractive to potential acquirers. Rumors that the company hired M&A savvy bankers Wednesday have sparked the speculation that's sending shares higher today.

Now what: With an ever-growing number of drugs coming to market bearing six-figure price tags, politicians have put the biopharma industry under the microscope to curry favor with voters who are tired of seeing sky-high drug prices cause retirement accounts to dwindle.

However, the NIH has historically shunned petitions to invalidate patents, choosing instead to lay the responsibility of regulating (or not regulating) drug prices at the feet of Congress. I suspect that the NIH will continue to take that approach given the potential chaos that doing otherwise might cause within the research community.

If so, then the question becomes, what company -- if any -- might step in and buy Medivation?

It's never a good idea to invest based on rumors and innuendo, but a number of companies, including the previously mentioned Gileadand Roche, could find this company intriguing.

Gilead's cancer drug program has been on the ropes since it was forced to halt six trials earlier this month for its only cancer treatment, Zydelig, and Roche's Genentech is one of the globe's biggest makers of oncology medicines. Whether either is interested is anyone's guess, but in the wake of today's spike, investors might want to focus on other stocks rather than chase this one any higher today. 

 

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Stocks Mentioned

Medivation, Inc. Stock Quote
Medivation, Inc.
MDVN
Gilead Sciences, Inc. Stock Quote
Gilead Sciences, Inc.
GILD
$62.83 (-0.40%) $0.25
Roche Holding AG Stock Quote
Roche Holding AG
RHHBY
$42.22 (1.39%) $0.58

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