Pfiz­er bags Medi­va­tion buy­out with blowout $14B cash of­fer

David Hung, Medi­va­tion CEO

Pfiz­er $PFE has struck a deal to buy Medi­va­tion $MD­VN at a price CEO David Hung has been look­ing for. The two com­pa­nies an­nounced Mon­day morn­ing that the phar­ma gi­ant will pay $81.50 a share — about $14 bil­lion — for Medi­va­tion, all of it in cold, hard cash. That’s far more than the $9.3 bil­lion of­fer Sanofi used to get the auc­tion start­ed.

Medi­va­tion closed Fri­day with a mar­ket cap of $11.1 bil­lion, giv­ing the com­pa­ny a big pre­mi­um to boast about to share­hold­ers. Sanofi $SNY last bid $58 a share in cash and an ex­tra $3 CVR for Medi­va­tion, which has con­sis­tent­ly re­ject­ed the phar­ma com­pa­ny’s of­fers as gross­ly in­ad­e­quate. A swirl of ru­mors has al­so put Mer­ck $MRK, Cel­gene $CELG, Gilead $GILD and oth­ers at the bar­gain­ing ta­ble as well.

Pfiz­er will now beef up its on­col­o­gy port­fo­lio with Medi­va­tion’s share of Xtan­di, part­nered with Astel­las. An­a­lysts have pro­ject­ed that the block­buster sales per­for­mance of Xtan­di—which goes head-to-head against Zyti­ga—will shoot up to close to $5 bil­lion by 2020.

The buy­out al­so adds an ex­per­i­men­tal late-stage PARP in­hibitor called ta­la­zoparib to Pfiz­er’s pipeline. Tak­ing a frag­ment of da­ta, Hung re­cent­ly claimed that ta­la­zoparib was clear­ly the best of all the con­tenders in the pipeline, far sur­pass­ing Tesaro’s ni­ra­parib, Clo­vis’s ru­ca­parib, As­traZeneca’s Lyn­parza (ola­parib) and Ab­b­Vie’s veli­parib. Tesaro, though, has field­ed strong re­sults from its study, help­ing beef up peak sales pro­jec­tions for the class.

Medi­va­tion bought their drug last year from Bio­Marin for $410 mil­lion cash, adding $160 mil­lion on the back end of the deal. And it’s proven to be the wild card in this high-stakes game of biotech M&A.

Pfiz­er’s pre­mi­um sur­prised some bat­tle hard­ened vet­er­ans on Wall Street.

“We have a very dif­fi­cult time get­ting to the ~$80/share price that Pfiz­er (PFE Not Cov­ered) is re­port­ed to be pay­ing based on rea­son­able mod­el­ing as­sump­tions for the com­pa­ny,” not­ed RBC’s Simos Sime­oni­dis just ahead of the of­fi­cial con­fir­ma­tion. “We re­mind in­vestors that Xtan­di is shared with Astel­las. Al­so, me­dia re­ports point to an all-cash trans­ac­tion, which is both sur­pris­ing, giv­en the risk in­volved in sec­ond as­set ta­la­zoparib and a cred­it to MD­VN’s man­age­ment, which may man­age to sell this as­set, with­out any or much of a CVR (if that in­deed ends up be­ing the case), with ta­la­zoparib Phase III da­ta around the cor­ner.”

Ian Read, Pfiz­er CEO

“The pro­posed ac­qui­si­tion of Medi­va­tion is ex­pect­ed to im­me­di­ate­ly ac­cel­er­ate rev­enue growth and dri­ve over­all earn­ings growth po­ten­tial for Pfiz­er,” said Pfiz­er CEO Ian Read. “The ad­di­tion of Medi­va­tion will strength­en Pfiz­er’s In­no­v­a­tive Health busi­ness and ac­cel­er­ate its path­way to a lead­er­ship po­si­tion in on­col­o­gy, one of our key fo­cus ar­eas, which we be­lieve will dri­ve greater growth and scale of that busi­ness over the long-term. This trans­ac­tion is an­oth­er ex­am­ple of how we are ef­fec­tive­ly de­ploy­ing our cap­i­tal to gen­er­ate at­trac­tive re­turns and cre­ate share­hold­er val­ue.”

The biggest suc­cess Pfiz­er had ex­pe­ri­enced re­cent­ly has been the ac­cel­er­at­ed ap­proval for Ibrance (pal­bo­ci­clib), a pi­o­neer­ing CDK 4/6 drug that now faces sev­er­al late-stage ri­vals. Pfiz­er paid Mer­ck KGaA $850 mil­lion to part­ner on their PD-L1 check­point drug, and this new deal clear­ly un­der­scores its cen­tral fo­cus on the can­cer are­na.

Pfiz­er has plen­ty of cash avail­able for the buy­out. It made un­suc­cess­ful megabids for As­traZeneca and Al­ler­gan. And Pfiz­er CEO Ian Read has clear­ly been will­ing to dig deep to build the com­pa­ny through ac­qui­si­tions.

Iron­i­cal­ly, Pfiz­er out­li­censed its PARP, PF-01367338, now known as ru­ca­parib, to Clo­vis back in 2011, when it was re­struc­tur­ing its pipeline and slash­ing its R&D bud­get. Now it finds it­self buy­ing a ri­val for a block­buster sum. Pfiz­er gained an eq­ui­ty stake in Clo­vis along with $255 mil­lion in mile­stones in the deal, an amount that is like­ly far ex­ceed­ed by what it’s will­ing to pay Medi­va­tion stock­hold­ers for ta­la­zoparib. In ad­di­tion, Pfiz­er in­di­rect­ly helped fund Xtan­di’s de­vel­op­ment, pay­ing $225 mil­lion to Medi­va­tion to part­ner on dime­bon, which flopped for Alzheimer’s.

The Pfiz­er deal marks an em­bar­rass­ing de­noue­ment for new Sanofi CEO Olivi­er Brandi­court, who had sought to make his mark on the com­pa­ny with a bar­gain deal. Sanofi, and oth­ers in the hunt, will now have to turn their at­ten­tion to oth­er tar­gets of op­por­tu­ni­ty. And they aren’t like­ly to start on the low end.

A deal like this could sig­nal a will­ing­ness by Big Phar­ma to pay top dol­lar for mar­ket­ed and late-stage prod­ucts with re­al po­ten­tial. Over­all, M&A has been drag­ging this year in bio­phar­ma. A few more ac­qui­si­tions like this would bring the num­bers up con­sid­er­ably. Bio­gen, Gilead and oth­ers have in­di­cat­ed a will­ing­ness to snap up new deals to beef up their pipelines as an­a­lysts clam­or for more projects to get ex­cit­ed about.

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As Nas­daq en­rolls the fi­nal batch of 2019 IPOs, how have the num­bers com­pared to past years?

IGM Biosciences’ upsized IPO haul, coming after SpringWorks’ sizable public debut, has revved up some momentum for the last rush of biotech IPOs in 2019.

With 39 new listings on the books and roughly two more months to go before winding down, Nasdaq’s head of healthcare listings Jordan Saxe sees the exchange marking 50 to 60 biopharma IPOs for the year.

“December 15 is usually the last possible day that companies will price,” he said, as companies get ready for business talks at the annual JP Morgan Healthcare Conference in January.

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