May 4, 2016
By Mark Terry, BioSpace.com Breaking News Staff
Just a week after San Francisco-based Medivation rejected Paris-based Sanofi ’s unsolicited acquisition bid, insiders told Reuters that Pfizer had contacted the company about an acquisition.
On March 25 and April 3, Olivier Brandicourt, chief executive officer of Sanofi, contacted Medivation’s chief executive officer, David Hung, about a potential acquisition. Hung and the Medivation board told Brandicourt the company had “no interest in discussing a transaction.”
On April 15, Sanofi then outlined an official proposal in writing. Medivation did not respond.
In that proposal, Sanofi offered $52.50 per share, a 50 percent premium to Medivation’s average share price the two months prior to the offer. It was a nonbinding, all-cash offer.
Sanofi then went public in an attempt to pressure the Medivation board and shareholders into considering the deal. Medivation argues that the Sanofi offer undervalues the company.
Medivation’s prostate drug, Xtandi, with its marketing partner, Astellas Pharma , grew sales by 73 percent in the U.S. in 2015 and 116 percent globally. Medivation 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. 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 indicating it works better than rival drugs.
The Reuters sources say that Medivation hasn’t decided whether to discuss the merger with Pfizer, but is in talks with its financial and legal advisers. Reportedly Sanofi does not plan to increase its bid.
Pfizer, of course, recently abandoned its merger with Dublin-based Allergan after the U.S. Treasury Department expanded its rules regarding tax inversions. Earlier this week, rumors spread that Pfizer was considering selling the pumps and devices business that it picked up as part of its 2015 acquisition of Lake Forest, Ill.,-based Hospira.
Although it seems fairly clear Medivation isn’t interested in Sanofi’s original bid, what’s not as clear is if the company is holding back as a negotiating tool or legitimately wishes to stay independent.
“Over the past several years, we have established a world class oncology franchise and a unique, diversified and highly-promising late-stage development pipeline,” Hung said in a statement last week. “Further, we have a track record of delivering extraordinary value to our shareholders. Sanofi’s opportunistically-timed proposal, which comes during a period of significant market dislocation, and prior to several important near-term events for the company, is designed to seize for Sanofi value that rightly belongs to our stockholders. We believe the continued successful execution of our well-defined strategic plan will deliver greater value to Medivation stockholders than Sanofi’s substantially inadequate proposal.”
Those statements would seem to also apply to a Pfizer bid, unless Pfizer’s proposal was “substantially” adequate, whatever that might be. Medivation’s Xtandi is doing very well and its pipeline is promising, especially talazoparib, but the company had an experimental drug for Alzheimer’s disease that failed in 2010, as well as failing trials for Huntington’s disease—with which it had a partnership with Pfizer, which was terminated in 2012.
Medivation has been on a fairly steady climb since Feb. 8, 2016, when shares traded for a low of $27.32. However, on May 29, 2015, shares traded for $66.02 before it started its slow crawl to its low.
And on Friday, April 29, Medivation amended its bylaws that would 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.
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.”
The second provision appears more of a standard legal maneuver, but Huang and Nochomovitz write, “but more importantly signals the inevitability of a hostile takeover battle and downstream legal costs.”
In effect, these provisions seem to strongly signal that Medivation isn’t interested in an acquisition at all and is lining up its resources to fend off any hostile takeover attempts.
