April 26, 2016
By Mark Terry, BioSpace.com Breaking News Staff
More attention is being paid to San Francisco’s Medivation as rumors heat up that it might be acquired.
Late in March, the company hired JPMorgan Chase & Co. (JPM), according to unidentified sources, to fend off potential acquisitions. Otherwise the company has no plans to be sold.
The stock has seemed undervalued lately. In the last quarter of 2015, Medivation’s sales increased 30 percent. Its prostate drug, Xtandi, has done very well. With its marketing partner, Astellas Pharma , Xtandi sales grew by 73 percent in the U.S. and 116 percent globally. Despite that, shares dropped 5 percent in 2015.
Some of the company’s soft share price is probably related to the ongoing U.S. presidential race. A number of candidates have come down hard on high-priced drugs. In mid-March, 12 members of Congress, including presidential candidate Sen. Bernie Sanders (I-Vermont), requested that the National Institute of Health (NIH) and the U.S. Department of Health and Human Services (HHS) bring down drug prices, specifically noting Xtandi.
In the U.S., Xtandi costs $129,000 for a course of treatment, which is three times higher than the drug’s price in Japan and Sweden. Not surprisingly, other companies specifically targeted by Sanders and the other politicians included Turing Pharmaceuticals and Valeant Pharmaceuticals International .
In a recent report, Leerink’s Geoffrey Porges argued that Medivation’s attractiveness to larger companies and the stock’s recently appreciated stock value was “evidence of investors’ view that more value lies in the sale of the company versus its independence.”
Porges rated the stock as “market perform” with a $39 price target. Medivation is currently trading for $51.66.
Other analysts have somewhat mixed evaluations. According to Street Updates, five analysts recently gave the company a “strong buy rating” and seven analysts gave it a “buy rating.” On the other hand, another 10 analysts gave it a “hold rating.”
Porges indicated he expects Medivation to fend off any acquisition bids this year, but will probably agree to a sale sometime next year. His valuation range would be $35 to $70 per share, with Xtandi and its recent acquisition of talazoparib for solid tumors driving its value. “The biggest variation comes from the assumed avenue outlook for Xtandi (including potential upside in prostate cancer M0 and breast cancer), but tax and cost of capital assumptions are almost as important.”
Potential buyers include AstraZeneca , AbbVie , and Sanofi . Roche is also a potential suitor.
In February, Brian Feroldi, writing for The Motley Fool, said, “If the company is able to come anywhere close to hitting its expected five-year profit growth rate of 66 percent per year, then today’s share price will likely look like a bargain in retrospect.”
Last week, the company announced data from a Phase II study of enzalutamide. Presented at the American Association for Cancer Research (AACR) Annual Meeting in New Orleans, the company indicated that early data from a 12-patient subset of patients treated with the drug for non-metastatic castration sensitive prostate cancer showed positive potential immune-activating responses.
“Existing literature already suggests that inhibition of androgen receptor signaling can potentiate the function of the thymus and improve the profile of the immune system,” said David Hung, Medivation’s founder, president and chief executive officer, in a statement. “These new data suggest that in prostate cancer patients, enzalutamide may also enhance immune cell killing of prostate cancer cells throughout the body. We are very encouraged by these new data and believe that the potential immune-activating properties of enzalutamide warrant further investigation, particularly in combination with other immunotherapy agents.”
