Please ensure Javascript is enabled for purposes of website accessibility

Sanofi's Bid for Medivation Is Too Low

By Todd Campbell - Apr 28, 2016 at 2:29PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A top-selling cancer drug already on the market and more in the wings make this biotech a very attractive M&A target.

Image source: Flickr user

After waiting for weeks for a reply to its M&A offer, drug giant Sanofi (SNY -0.78%) has gone public with a $9.3 billion bid to acquire mid-cap cancer drugmaker Medivation (MDVN). Sanofi's purchase price is substantially higher than the "volume weighted average share price" at which Medivation was trading prior to M&A rumors emerging, but it's not nearly a big enough offer to get this deal done.

What's up for grabs
Medivation and partner Astellas (ALPMY 0.58%) market the top-selling prostate cancer drug Xtandi. Xtandi won FDA approval for use in the post-chemotherapy metastatic prostate cancer setting in 2012, and it quickly displaced Johnson & Johnson's Zytiga in that setting. In 2014, the FDA expanded Xtandi's label to include pre-chemotherapy patients, and the drug has since been winning away share from J&J in that indication, too. As a result, Medivation and Astellas' are racking up sales from Xtandi at more than a $2 billion annualized clip.

Xtandi's success, though, may only be the beginning. Studies are under way to expand Xtandi's use even earlier in prostate cancer treatment, which may lead to the drug being used in significantly more patients. Additionally, Xtandi is being evaluated in late-stage trials as a therapy for breast cancer.

Specifically, positive mid-stage results in triple negative breast cancer patients with a specific genetic makeup are expected to lead to a confirmatory phase 3 trial beginning later this year. Results from another Xtandi breast cancer trial should read out in the coming year, and if results are positive, then a phase 3 trial could be coming in that indication, too.

In addition to Xtandi, Medivation is also working on two other intriguing compounds.

Last year, the company acquired a phase 3 PARP inhibitor, talazoparib. Talazoparib is being evaluated as a treatment to prevent breast cancer cells from repairing themselves once they've been damaged by other anti-cancer treatments. Data for Talazoparib should be available within the coming year.

Medivation also owns pidilizumab, a drug under development for use in blood cancers such as diffuse large B cell lymphoma. Pidilizumab was previously thought to be a PD-L1 inhibitor, but its precise mechanism of action is now unknown. If pidiluzumab's trials are successful, it could offer a unique new approach within this indication.

Why Sanofi wants it
Sanofi got a new CEO early last year, and last fall, the company told investors it was committed to rebuilding a leadership position in cancer treatment.

Image source: Sanofi. 

To deliver on that commitment, Sanofi reached out to Medivation's CEO David Hung in March to discuss a deal, but Hung flat-out refused to negotiate, according to Sanofi. In response, Sanofi prepped and delivered a $9.3 billion all-cash bid to Medivation's board in April.

Medivation has yet to respond to that bid, but if Medivation does eventually come to the negotiating table, Sanofi will likely have to considerably increase its offer to get this deal done. Fortunately for Medivation investors, it may be willing to do that. After all, Xtandi and the other drugs in Medivation's mid- to late-stage pipeline would allow Sanofi's expansion into oncology to hit the ground running.

Tying it together
As much as Sanofi may want to buy Medivation, Sanofi is far from the only company looking to expand into cancer treatment. The market for cancer medicine is massive, and it's growing as aging baby boomers live longer. That fact has everyone from Gilead Sciences to Novartis angling for market share.

Given Medivation already markets a global top-seller, it's already profitable, and it has plenty of cash, so its management can afford to be patient. For that reason, I imagine the board will be busy entertaining a number of suitors over the coming weeks. 

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Medivation, Inc. Stock Quote
Medivation, Inc.
Sanofi Stock Quote
$55.85 (-0.78%) $0.44
Astellas Pharma Inc. Stock Quote
Astellas Pharma Inc.
$15.67 (0.58%) $0.09
Johnson & Johnson Stock Quote
Johnson & Johnson
$179.62 (-0.98%) $-1.78
Novartis AG Stock Quote
Novartis AG
$91.25 (-0.74%) $0.68
Gilead Sciences, Inc. Stock Quote
Gilead Sciences, Inc.
$65.01 (1.03%) $0.66

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 05/25/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.