Step right up and place your bets on who might buy Medivation

Medivation CEO David Hung

AstraZeneca ($AZN), Roche ($RHHBY) and Sanofi ($SNY) are just three Big Pharma names being touted as possible suitors for the struggling biotech Medivation ($MDVN)--but analysts warn it won't come cheap, or easy.

The San Francisco, CA-based biotech--which markets Astellas' prostate cancer drug Xtandi in the U.S.--is currently under increasingly heavy political pressure for the $129,000 it charges for the medicine, which was first developed at the UCLA through taxpayer-supported research grants.

A number of Democratic reps, led by presidential candidate Sen. Bernie Sanders, have this week sent a letter to lawmakers urging the NIH to consider using its power to override Xtandi's patent and thus allow the drug to be swapped for cheaper new generics--despite its patent being valid for around a decade.

Most analysts don't believe this power will ever actually be used in this case, but the whole saga has put Medivation in the doldrums, with its shares down 31% from highs last spring--even after a 23% merger speculation bump yesterday.

It's currently cheap and seemingly an easy buy, but the stocks won't stay low for long if suitor talk begins to pick up, and these types of deals can take years to pull off--and who knows what its stock will be in a year's time, or more.

Its pipeline consists of the late-stage breast cancer drug talazoparib, which is projected to make $200 million in peak sales, and the blood cancer drug pidilizumab, which is in a Phase II trial.

Things don't look great here however as studies on the treatment were partially suspended by the FDA when Medivation discovered it may not work as originally expected. It would also have to be something very special to gain meaningful access to a highly saturated market.

AZ, Sanofi and Roche are the names being whispered as possible suitors, but each already has their own biotech arm: MedImmune, Genzyme and Genentech respectively--although AZ could do with some near-market drugs to shore up its increasingly creaky late-stage pipeline. It has however only just recovered from nearly being bought by Pfizer ($PFE) itself, but a series of recent late-stage disappointments may make Medivation a likely target if it can give an instant financial boost.

Sanofi is also struggling with its research units and just this week announced another re-tooling of its R&D after poaching AZ's former MedImmune research head to "rejuvenate" its own unit. The French firm has said it would like to partner or even buy some smaller biotechs, but its focus is predominately on early-stage drugs. A bladder cancer drug and a multiple myeloma therapy are on the early list for Medivation, but it would probably cost the firm a lot to gain access to these unknown entities.

What about Roche? It may seem a natural fit given that Medivation deals with oncology, but the sale projections for its two pipeline drugs are low and it's hard to see how Medivation could add any real value to Roche--and would certainly not be a patch on the successful partnership the Swiss firm has had with Genentech over the years.

Of course there are biosimilar threats coming, and a Medivation buy could help to shore up the billions of dollars it would need when Avastin and Rituxan succumb to copycats--but it would all depend on what the biotech could cost the firm.

Oh, and then there's one more name--Gilead ($GILD), although it's so cash rich from its hep C successes that any buyout seems to have people whisper then start shouting its name. True, its cancer pipeline has been hit hard in recent months, but there is still a question mark hanging over the firm's oncology future. If it still wants to develop into that space after this year's disappointments, Medivation could prove a good fit--but it's not been in a rush to splash the cash since its bumper 2014 year and there's little to suggest it will loosen the purse strings now.

Jefferies analyst Biren Amin has said that, right now, a fair value for acquirers would be in the range of $51 to $54 a share. This would represent a fairly substantial premium to Medivation's pre-merger-speculation price of $37 and comes as the firm has current market capitalization of $6.1 billion, and makes blockbuster sales from Xtandi each year.

In a more bullish scenario,for example, where its pipeline drugs meet or beat expectations, Amin estimated that valuation could be $71 to $75 a share, although this would all depend on the buyer. One thing is for sure: Medivation is not yet interested in selling, and has remained bullish on its pipeline.

The California biotech has in fact already brought in JPMorgan to help with any takeover approaches, according to Reuters, with sources close to the firm telling the news wire that a number of approaches have taken place since the start of the year, without disclosing the names of the interested parties.

You know who could be really interested: Martin Shkreli and Kanye West (*April Fools'*).

- see Bloomberg's take
- check out Reuters piece

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