All bets are on for biotech deals after $14B Medivation bonanza

As the dust settles on the eye-watering $14 billion buyout from Pfizer for the one-marketed-drug biotech Medivation, other mid-cap companies are now sitting pretty and increasingly hopeful they will see suitors lining up to also bet big on biotech.

Everyone knew that Medivation ($MDVN) would be bought in the end, but the big question was how long could David Hung, the Californian firm’s CEO, push back the perceived lowball offers from Sanofi and get the $10-billion-plus he was clearly seeking?

The answer yesterday was 5 months--the time it took from Sanofi’s ($SNY) first $9.3 billion offer in March to yesterday’s accepted $14 billion all-cash deal from Pfizer ($PFE), with seemingly half of all Big Pharma companies tripping over each other to get at the U.S. blockbuster sales of prostate cancer med Xtandi and a pipeline of oncology treatments.

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This was good news for Medivation’s shareholders (shares for the company were $37 pre-deal speculation, but ended up over $80 yesterday), for Hung and as it turns out, much of the biotech industry given that this has reinvigorated M&A speculation across the board.

Biotech companies were some of the biggest movers overall yesterday, with BioMarin ($BMRN) and Incyte ($INCY) two of the more notable (after Medivation, of course).  

Incyte, up 7.7% at end of play yesterday, is also a mid-cap oncology biotech like Medivation, with Cowen analyst Eric Schmidt saying: “It would make sense that the Medivation price tag would boost Incyte,” as it holds out for its own cash-rich Big Pharma suitor who also wants to top up their cancer pipeline.

BioMarin was also boosted by the news, given that Jefferies analyst Jeffrey Holford has linked the company to suitor Sanofi as a Plan B after losing out to Pfizer.

Holford said: “We know that Sanofi had been aggressively pursuing Medivation and whilst some may be relieved to see it not pay for this particular deal, investors will now begin to look for alternative targets for them. Many investors that speak to us believe that this could include BioMarin.”

BioMarin was in fact the company that exactly one year ago this week sold the rights to its late-stage PARP inhibitor talazoparib. Initial estimates saw this making $200 million at peak but this has now been ramped up after external successes for other PARP drugs, something that has been seen as a read-through by some for the drug.

Medivation paid $410 million upfront for rights to the treatment, but will still pay out up to an additional $160 million should it gain approval, as well as on sales-based milestones and mid-single digit royalties for talazoparib, potentially increasing the attractiveness off BioMarin--which has not been blessed in recent times with luck in the lab.

Plan B for some also includes Sanofi going all in on Regeneron ($REGN) as Plan B part.2, with the biotech seeing its shares ticking up by 3.5% at the end of play yesterday.

Up until yesterday, deal activity in life sciences was down 64% from this time last year, according to data from Thomson Reuters. Do Kim, an analyst for BMO Capital Markets, wrote in a note to clients that the Pfizer deal could, however, be just the tonic biotech and Big Pharma needs to get deals rolling again.

“Given the scarcity of mid-cap biotech, we believe the remaining companies could see increasing interest, as large pharma continues to look toward biotech as a source of growth.”

On top of Incyte and BioMarin, Kim sees Vertex ($VRTX), Alexion ($ALXN) and Intercept ($ICPT) as all sparking renewed takeover interest on the back of Medivation’s payday.

Related Articles:
Pfizer buys Medivation for $81.50 a share
BioMarin climbs on rumors it may be Sanofi's Medivation backup