Sanofi Heats Up Medivation Bid With Letter Threatening a Hostile Takoever
May 5, 2016
By Mark Terry, BioSpace.com Breaking News Staff
Paris-based Sanofi ’s attempt to acquire San Francisco-based Medivation heated up today when Sanofi sent a letter to Medivation’s board of director.
In late March and early April, Olivier Brandicourt, Sanofi’s chief executive officer, discussed a potential acquisition with Medivation’s founder, president, and chief executive officer, David Hung. Both Hung and the Medivation board indicated they had “no interest in discussing a transaction.”
In response, on April 15, Sanofi sent a written proposal, which Medivation ignored. So on April 28, Sanofi went public with its offer in hopes of pressuring the board and shareholders into at least discussing the deal.
In the proposal, Sanofi offered $52.50 per share, which was a 50 percent premium to Medivation’s average share price the two months prior to the offer. It was a nonbinding, all-cash offer.
Medivation traded for $66.02 on May 29, 2015, then began a fairly steady drop to $27.32 on Feb. 8, 2016. It was on its way up when Sanofi started its original discussions, trading for $42.57 on Mar. 24. It is currently trading for $59.94 per share.
In the most recent letter, Sanofi indicates it had discussed the acquisition with top shareholders and believes there is “overwhelming support by your shareholders for a transaction.” Sanofi, perhaps a bit disingenuously, also says that it believes without the rumors of the Sanofi acquisition, shares would be trading in the $30s, so the company’s offer is more than fair. In that Medivation’s shares were trading in the $40s at Sanofi’s first overture, this seems to be a little exaggerated, although the stock’s continued rise probably is related to the Sanofi offer and other rumors of interest.
The Sanofi letter, in a reasonable tone, also carries a threat of a hostile takeover. “You should know that an acquisition of Medivation is a priority for Sanofi and we are committed to effecting it. If you are not prepared to engage with us, we have no choice but to go directly to your shareholders. As you know, your shareholders have the ability to act at any time by written consent to remove and replace the Board. If the Medivation Board of Directors continues to refuse to engage with us, then we intend to commence a process to remove and replace members of the Board.”
Clearly Medivation was expecting this. On Friday, April 29, Medivation amended its bylaws to give the board of directors more leverage in negotiations. The first provision indicates that written consent actions from stockholders can be independently reviewed and will not go into effect until the independent inspectors were done reviewing them. The second provision requires that any claims against the company by stockholders have to be done in the Court of Chancery of the State of Delaware.
The second amendment indicates Medivation was preparing for a hostile takeover attempt. Of the first provision, Yang Huang and Yigal Nochomovitz of Citigroup recently wrote, the “goal is to draw out timelines. In the event activist shareholders attempt to influence the makeup of the Board via written consent (i.e. add themselves to the Board or remove an existing Board member), the process can be drawn out by bringing in independent inspectors to review the validity of the consent, and no consent becomes effective until the review is complete.”
Inside sources have indicated that Pfizer has also contacted Medivation about an acquisition. Pfizer has a partnership with Medivation over a Huntington’s disease drug, which was terminated in 2012.
The interest in Medivation revolves around its prostate drug, Xtandi. With its marketing partner, Astellas Pharma , sales of Xtandi grew 73 percent in the U.S. in 2015 and 116 percent globally. It also has at least two additional oncology drugs in its pipeline, pidilizumab to treat B-cell lymphoma and other blood cancers, and talazoparib for breast cancer. Talazoparib is considered a possible blockbuster—over $1 billion in annual sales. Also, recent recommendations by the European Medicines Agency’s Committee for Medicinal Products for Human Use (CHMP) will allow Xtandi to be marketed and labeled as being better than rival drugs.
In the fourth quarter of 2015, Xtandi’s U.S. sales were $230.2 million. It is also being evaluated for more indications related to prostate cancer, as well as for breast cancer.
Although Medivation has yet to formally respond to this letter, other analysts are wondering if a third company might show up and make an offer. David Nierengarten of Leerink Partners, said, “I think even though Pfizer probably is putting a bit more emphasis on oncology lately, it’s probably a better fit for Sanofi, but the best fit is with [Japanese pharmaceutical company] Astellas.”
Astellas is the company Medivation has the marketing relationship with for Xtandi.
They’re also keeping an eye on Medivation’s stock price. Nierengarten points out that if Medivation stock hits $65 or above, the likelihood of an acquisition goes down. As The Street wrote today, “According to Nierengarten, Medivation’s current share price may be too high for traditional biotech investors, who typically hope to see a 10 percent return over six to 12 months. However, someone who is a merger arbitrage investors may be interested in buying following news of this second bid.”