Pfizer to Treat the Market Ahead of Medivation Acquisition

Pfizer one the world’s largest pharmaceutical companies, is in advanced talks to acquire U.S. cancer drug company Medivation for close to $14 billion in a bid to boost its oncology portfolio. In a deal that could be completed as early as today, Pfizer will pay a little more than $80 per share for Medivation. This will be a substantial premium to the $52.50 per share offer the company received from France’s Sanofi earlier in April this year.

Medivation Impressive Prospects

Medivation has always been one of the most desired biotech companies in the world. It sells a leading and approved prostate cancer drug, Xtandi, which already generates revenues in excess of $2 billion annually, with analysts estimating that this would more than double by 2020. Pfizer already sells Ibrance, a leading breast cancer treatment, and adding Xtandi to its portfolio, would boost its promising immuno-oncology product portfolio.

Medivation also has promising drugs under development, mainly breast cancer treatment drug Talazoparib, which was the subject of a contingent value right bid in the form of $3 per share. Cancer is one of the biggest pharmaceutical industries in the world, estimated at about $80 billion annually and growing by over 10% per year. And the acquisition of Medivation will position Pfizer firmly on the driver’s seat as the world continues to seek ways to combat one of the deadliest worldwide diseases.

Financially, Medivation is performing well. In its second-quarter earnings which it released earlier this month, Medivation reported continued growth of double-digits year-over-year for Xtandi, underscoring the company’s expectations of more than 50% revenue growth for the year.

Market Caution

Ahead of the Medivation deal, the market is still cautious on the Pfizer stock with prices largely flat at around $35 per share for the whole of last week. With sources indicating that the deal will be completed in cash, there will be definitely some impact on Pfizer’s balance sheet or forex reserves and the market will not want to overlook this. But the biggest market worry is a potential deal collapse. Early this year, Pfizer and Irish pharmaceutical company Allergan planned an extremely high-profile merger that was valued at $160 billion and would have been the biggest deal in the industry’s history. The inversion deal, which would have saved the companies $2 billion in taxes, collapsed and the market is keen not to be excited before an official confirmation is issued. Nonetheless, if confirmed, the Medivation deal is an astute acquisition that will likely drive the Pfizer stock to new highs in the long run.

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