Why Sanofi is So Infatuated With the Bay Area’s Medivation

Why Sanofi is So Infatuated With the Bay Area’s Medivation June 2, 2016
By Mark Terry, BioSpace.com Breaking News Staff

Paris - As Sanofi ’s hostile takeover bid for the Bay Area’s Medivation grinds along, analysts take a hard look at Medivation’s appeal, which is significant, if rather narrow.

At the end of March, Olivier Brandicourt, Sanofi’s chief executive officer, rang up Medivation’s founder, president, and chief executive officer, David Hung, to discuss a potential acquisition. Hung and the Medivation board indicated they had “no interest in discussing a transaction.”

Not willing to take no for an answer, Sanofi went public with its offer in hopes of pressuring the board and shareholders into at least discussing the deal. Sanofi offered $52.50 per share, a 50 percent premium to Medivation’s average share price the two months prior to the offer. Medivation still declined, claiming it undervalued the company, and also took some measures that would make a hostile takeover more difficult.

Sanofi, in May, counterpunched with another letter that pretty much says if Medivation won’t sell, it’ll go for a hostile takeover. “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.”

Which it announced it had plans to do a week later. It also filed pre-merger paperwork with the Federal Trade Commission (FTC).

So what’s so great about Medivation that Sanofi wants it so badly?

That’s fairly straightforward: Xtandi.

Xtandi was approved in 2012 for late-stage prostate cancer. Sales exceeded $1 billion in the U.S. in 2015. “There just aren’t that many mid-cap oncology companies with meaningful ownership of a blockbuster drug,” said Eric Schmidt, an analyst with Cowen & Co. to Bloomberg. “I don’t think it’ll come down to strategic fit, just which company is willing to pay the most.”

At the moment there appears to only be hints of other bidders, although inside sources indicated that Pfizer contacted Medivation about a potential acquisition. There has also been speculation that Astellas Pharma , which is Medivation’s commercial partner for Xtandi, might be interested in a deal with Medivation.

Xtandi, which has an annual price of more than $100,000 prior to discounts and rebates, is also being evaluated in a form of difficult-to-treat breast cancer and in earlier stage of prostate cancer.

The company isn’t exactly a unicorn—a single-product company. But its pipeline isn’t large, either. It has only two compounds in its pipeline. One is pidiluzumab, which is in mid-stage trials for blood cancers. The other, talazoparib, is in a later-stage trial for advanced breast cancer patients who have BRCA mutations. Study data is expected in the first half of 2017. It is also being evaluated in small cell lung cancer, prostate cancer and ovarian cancer.

Medivation argues that talazoparib has a potential $30 billion market. Some analysts are skeptical, noting that the drug’s mechanism is poorly understood. It inhibits a protein called PARP, but so far it hasn’t been determined if PARP inhibitors work in cancers that don’t have specific mutations. And AstraZeneca already has a similar drug, Lynparza (olaparib) on the market, and Tesaro and Clovis Oncology are working on their own versions.

Which may or may not be a plus for Sanofi or any other companies interested in Medivation. Simos Simeonidis, an analyst with RBC Capital Markets, told Bloomberg, that Medivation “didn’t make huge factories or hire thousands of people for early R&D. Someone could acquire Medivation for this great drug and strip out everything else, which isn’t a lot.”

For its part, Sanofi seems mostly interested in Xtandi. “We think Xtandi is a very important drug in prostate cancer and it also has very attractive life-cycle management opportunities,” said Sanofi spokesman Jack Cox to Bloomberg. “What we know about it is some publicly available information. Part of our interest in having them open up the information is so we can learn more.”

And it may be a matter of when and how much, not if.

“Sale of the company seems to be inevitable and only subject to delivery of a price that satisfies the company’s investors,” said Geoffrey Porgers, a Leerink Partners analyst, in a note to clients. “We now believe that the company, and its stock and its management, have gone beyond the point of no return.”

Medivation is currently trading for $60.92.

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