Medivation Shares Spike as Company Opens Door to Full-Fledged Auction
Shares of Medivation (MDVN) spiked in after hours trading following the announcement that the company entered into confidentiality agreements with Sanofi (SNY) - Get Report and others.
The San Francisco biopharmaceutical company's shares were up 1.76% to $62.85 per share following the news that it will share otherwise classified information with the companies, which came July 5 after markets close.
This news follows a more than two-month-long process during which Sanofi made several attempts at a hostile takeover, the latest of which - an offer to buy Medivation for $58 per share in cash, was rebuffed by the company's board.
According to analyst Kennen Mackay of Credit Suisse, it looks like Medivation may actually be considering a sale of the company now, rather than continuing to rebuff takeover attempts.
"Given that Medivation's board appears to have shifted from resisting a hostile takeover toward potential sale of the corporation, we see the role of the board shifting from defense, to auctioneers," MacKay wrote in a note.
Predicted bidders include Celgene (CELG) - Get Report and Pfizer (PFE) - Get Report , both of which Reuters reported entered into confidentiality agreements with Medivation, as well as Amgen (AMGN) - Get Report , Eli Lilly (LLY) - Get Report and Roche (RHHBY) . None of these companies could confirm involvement in the process.
According to MacKay, though, the sale of Medivation could turn into an auction process.
"We anticipate the board's fiduciary duties now shift to gaining the best price for shareholders through sale of the company, including the potential institution of an auction process," MacKay wrote in a note.
As a part of the confidentiality agreements, Sanofi has agreed to drop its consent solicitation, an attempt to nominate an entirely new board to Medivation. Shareholders were expected to vote on that proposal at an August 2 meeting.
Medivation, which sells a popular prostate cancer drug called Xtandi, has a call with investors scheduled for 4:30 p.m. Wednesday, during which the company is expected to give updates on its drug talazoparib.
According to Mackay, who surveyed shareholders on their expectations for Medivation's takeout price, many expect the company to sell for a higher bid.
"Our recent sentiment survey suggests 21% of investors anticipate Medivation getting bought for $64-$67, with 28% anticipating a sale in the $61-$63 range," MacKay wrote in a note.
MacKay has an outperform rating on Medivation, with a price target of $63 per share.
Medivation declined further comment on the agreement, while Sanofi could not be reached for immediate comment.
Sanofi, which has a market cap of $106.58 billion, closed at $41.36 per share Tuesday.