Updated from Sunday, Aug. 21.
Acquiring Medivation will strengthen Pfizer's oncology franchise, which has lost ground in recent years to some Big Pharma competitors. But Medivation was a highly sought-after takeover target, so Pfizer is being forced to outbid other suitors, raising concerns that it may be paying too much.
The all-cash transaction values Medivation at $81.50 a share, or a 21% premium to the company's Friday closing price of $67.16.
Medivation shares rose 19.5% in premarket trading to $80.22.
Pfizer said the Medivation acquisition will be accretive to its adjusted earnings, adding 5 cents a share in the first full year after the deal closes. Pfizer doesn't expect the transaction to impact its current 2016 financial guidance.
In April, Sanofi (SNY) - Get Report offered $9.3 billion to acquire Medivation, then upped the offer to $10 billion in July. Celgene (CELG) - Get Report , Gilead Sciences (GILD) - Get Report , Merck (MRK) - Get Report and AstraZeneca (AZN) - Get Report were all said to have expressed interest in Medivation, as well.
With the acquisition of Medivation, Pfizer will add the marketed prostate cancer drug Xtandi to its oncology portfolio. Xtandi sales in the U.S. totaled $1.15 billion in 2015, and Medivation has forecast the drug's U.S. sales to reach $1.4 billion to $1.5 billion in 2016. Xtandi is co-marketed by Japan's Astellas, which also sells the drug overseas. Astellas' economic interest in Xtandi would not be affected by the Pfizer deal.
While Xtandi is a blockbuster cancer drug, U.S. sales growth has slowed in recent quarters, hurt by slowing demand and insurance reimbursement issues.
Pfizer would also gain an experimental cancer drug, talazoparib, which belongs to a promising class of anti-cancer medicines known as PARP inhibitors. AstraZeneca, AbbVie (ABBV) - Get Report and a small biotech firm, Tesaro (TSRO) - Get Report , are all pursuing development of their own PARP inhibitors as potential treatments for breast and ovarian cancer and other solid tumors.
While Pfizer recently secured approval for a breast cancer drug known as Ibrance, the company's oncology business has lagged behind Big Pharma rivals Merck and
, both of which have taken leadership roles in cancer immunotherapy. Pfizer is playing catch up, paying $850 million to Germany's
to license a checkpoint inhibitor, and now buying Medivation.
Whether Pfizer is paying too much for Medivation isn't a debate the biotech company's shareholders will care much about. CEO Hung capitalized on Sanofi's initial interest in the company to lure other suitors and ultimately drive the takeout price higher by billions of dollars.
Adam Feuerstein writes regularly for TheStreet. In keeping with company editorial policy, he doesn't own or short individual stocks, although he owns stock in TheStreet. He also doesn't invest in hedge funds or other private investment partnerships. Feuerstein appreciates your feedback; click here to send him an email.