The higher-than-anticipated all cash deal that Medivation (MDVN) has agreed to be taken out for looks to have been the conclusion a very competitive process, plus a successful job by the target's CEO David Hung in achieving notable value for one of the cancer drug maker's still-in-development therapies.
Ending a several-month long race among Big Pharma rivals for Medivation, Pfizer (PFE) - Get Pfizer Inc. Report on Monday went public with a $81.50 per share cash deal for the San Francisco-based target. The deal represents a 21% premium to the $67.16 at which shares of Medivation closed on Friday.
"It's obviously a premium price," David Nierengarten of Wedbush Securities said by phone Monday. "[Pfizer] is definitely assigning a decent amount of value to Talazoparib."
While best known for its one marketed therapy, prostate cancer drug Xtandi, Medivation is also working to develop PARP inhibitor Talazoparib. PARP inhibitors, which are still being tested in clinical trials and are not FDA approved, are a type of medication that have generated increasing excitement over their potential to treat cancer.
Recent promising data out of Tesaro (TSRO) - Get TESARO, Inc. Report , a smaller developer of cancer drugs, has seemingly given Pfizer greater confidence about the future potential for Talazoparib, noted Niergarten.
Tesaro, which on June 19 revealed plans to file an NDA (New Drug Application) for its ovarian cancer drug in the fourth quarter of the year, is the first to report a succussful Phase 3 study of a PARP inhibitor.
Medivation shares jumped nearly 20% to $80.42 a piece on Monday. Tesaro added about 4% to $99.09.
Even so, Pfizer CEO Ian Read in describing the process leading up to the deal as "efficient and competitive," emphasized on a Monday investor call that the value of Xtandi and the franchise's future growth potential served as the primary driver of valuation. Read added that Pidizumad, another Medivation pipeline product, was not a meaningful part of the valuation.
"We think we paid a fair price for the asset," Read said to investors, noting that the New York pharma giant will remain open to future M&A.
Others besides Sanofi that were said to be in the race for Medivation included Celgene (CELG) - Get Celgene Corporation Report , Gilead Sciences (GILD) - Get Gilead Sciences, Inc. (GILD) Report , Merck (MRK) - Get Merck & Co., Inc. (MRK) Report and AstraZeneca (AZN) - Get Astrazeneca PLC Sponsored ADR Report .
Also notable is the structure of the Aug. 22 deal, which doesn't include any "contingent value rights," or rights to additional cash based on a product's success in meeting certain performance targets.
The latest rejected offer from Paris-headquartered Sanofi was valued at $58 per share, plus a CVR of up to $3 a share. The Deal previously reported that the inclusion of such a financial arrangement was unlikely to be enough to entice the target's shareholders.
"I think in order to get a deal done it needed to be all cash," Niergarten said.
On the other hand, Simos Simeonidis of RBC Capital Markets wrote in an Aug. 22 research note that an all-cash transaction is surprising given the risk involved in Talazoparib, whose Phase 3 data results are around the corner, but also a "credit to MDVN's managment" due to the lack of a CVR.
While the deal includes a break-up fee of $510 million, Simeonidis added that his firm views it as "very unlikely (but not impossible) that another company will come up with a higher bid."
Simeonidis assigned the probability of a higher offer at 15% to 20%. There's a possibility that Sanofi might "want to avoid the 'embarrassment' of losing an auction," though the company could alternatively stress to the public its "discipline" in not chasing the deal, the analyst wrote.
Medivation has tapped Daniel Neff, Greg Ostling and Ian Nussbaum at Wachtel for legal advice, alongside a Cooley LLP team, including Jamie Leigh, Kenn Guernsey, Ben Beerle, Anne Lieberman, Ben Maida, Barbara Kosacz, Marty Schenker, Jacqueline Grise, Tanisha James, Barbara Mirza, Thomas Welk, Natasha Leskovsek, Cydney Posner, Brett White, Devon Hanley Cook, Lisette Sell, Alyssa Ohanianand Susan Cooper Philpot.
Medivation's financial advisers included Robert Huffines and Michael Gaito at JPMorgan, as well as Evercore's Francois Maisonrouge, Bill Anderson, Ed Baxter, Nishant Saxena, Andrew Meyer, Amy Lissauer, Rachel Newman, Justin Ng, Francis Stapleton, Conor Flemming, Kevin Sun, Bradley Tradonsky and Evan Silverat.
Medivation's general counsel is Andrew K. W. Powell with an in-house team also including Carolyn Tang and Samuel Kais.
JPMorgan and Evercore had also been advising Medivation on the hostile bid from Sanofi, which engaged Morgan Stanley as financial adviser and Michael Aiello of Weil, Gotshal & Manges LLP as legal counsel.
Robbie Huffines and Michael Gaito of JPMorgan advised.
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