Pfizer seals $14-B takeover of Medivation

Pfizer Inc. beating out numerous other bidders, said it agreed to buy US cancer drug company Medivation Inc. for $14 billion in cash, adding its blockbuster prostate cancer drug Xtandi to the company’s growing oncology roster.

Medivation shares jumped nearly 20 percent to close at $80.42, just shy of the offer price of $81.50 per share. Shares of Pfizer, the largest US drugmaker, were down 0.4 percent at $34.84.

The offer is a 55- percent premium to Sanofi SA’s initial bid to buy Medivation for $52.50 per share in April, which pushed the San Francisco-based company to put itself up for sale. It represents a 118-percent increase since Reuters reported on March 30 that Medivation had hired JP Morgan to handle interest from companies in a potential acquisition.

The planned purchase of Medivation, with its $2.2 billiona-year Xtandi, is the latest in a number of deals by large drugmakers willing to pay top dollar for cancer drugs that are more effective than standard, older treatments. Perhaps the most notable example is AbbVie Inc.’s $21-billion purchase last year of Pharmacyclics. The deal gave AbbVie shared ownership with Johnson & Johnson in the blockbuster leukemia drug Imbruvica.

Analysts predicted the deal would not raise antitrust concerns because Pfizer does not currently sell a prostate cancer drug aside from generics.

Pfizer said its earnings would increase immediately after buying Medivation. The deal comes four months after Pfizer and Ireland-based Allergan Plc scrapped their $160 billion merger. Pfizer has since bought Anacor Pharmaceuticals Inc. in a $5.2-billion deal to add an eczema gel to its portfolio.

The Medivation deal illustrates a shift in Pfizer’s M&A strategy from lowering taxes - the rationale behind the failed Allergan tax inversion deal - to strengthening its lineup of branded drugs, especially lucrative cancer treatments.

Pfizer, in a conference call with analysts, said it still plans to decide by year-end whether to split into separate companies selling either low-growth generics or patent-protected brand medicines.

“The Medivation deal increases the likelihood of a split,” said SunTrust Robinson Humphrey analyst John Boris. But, he said, Pfizer would likely first try to buy other drugmakers or their best assets in order to further strengthen its branded-drug portfolio.

A year ago, Pfizer paid $15 billion for Hospira, which sells generic hospital products and is developing biosimilars meant to compete with big-selling injectable biotech drugs. That deal was seen by Wall Street as a way of bolstering its generic drugs ahead of potentially divesting the business.

Pfizer’s biggest growth driver is a new breast cancer drug called Ibrance. The company is also trying to catch up with Merck & Co. and Bristol-Myers Squibb Co. in developing immuno-oncology drugs that work by taking the brakes off the immune system to fight cancers.

Pfizer chief executive Ian Read told analysts the Medivation deal was mainly driven by the desire to obtain Xtandi, although he expressed high hopes for talazoparib and pidilizumab, experimental Medivation drugs for breast cancer and lymphoma, respectively.