Pfizer unveiled its biggest takeover of a cancer company in its 167-year history on Monday — the $14bn acquisition of Californian biotech Medivation — following a hotly-contested auction of the sought-after drugmaker.
The deal comes as the world’s second largest drugmaker by value tries to turn itself into a leading player in oncology, able to capitalise on rapid scientific advances that have led to the discovery of a string of revolutionary cancer medicines that command high prices.
Ian Read, chief executive, said he wanted to build a “leadership position in oncology with flagship products” during a call to discuss the deal with analysts.
Pfizer said it would pay roughly $81.50 in cash for each share in Medivation, which was founded in 2004, giving the company an enterprise value of more than $14bn.
The price represents a premium of 120 per cent over Medivation’s stock price at the end of March, when the company said it had hired bankers to defend itself against a hostile bidder, which turned out to be Sanofi, the French drugmaker. In February, Medivation shares were changing hands for as little as $27.32 each.
Medivation shares jumped by a fifth to $80.42 by lunchtime in New York. Pfizer slipped 0.25 per cent to $34.90.
Sanofi, which had given up on a hostile takeover of Medivation to enter friendly talks with the company, on Monday said it had “appreciated the opportunity to have engaged constructively,” but that it was “first and foremost a disciplined acquirer”.
Merck, Gilead and Celgene also held talks with Medivation, according to people familiar with the negotiations.
“While Pfizer is described as having ‘beaten’ other companies in this competitive bid, is this something to be proud of,” asked Tim Anderson, an analyst at Bernstein.
“At first pass, paying $80-plus per share for a stock that was trading in the $30s just a few months ago feels pricey,” he added.
Mr Read said: “The process was efficient and competitive and we think we tied a fair price to the asset.”
Mr Read had been preparing investors for a large deal to grow the part of Pfizer that develops innovative medicines since April, when his attempt to buy Dublin-based Allergan for $160bn was thwarted by the Obama administration, which wanted to stop the company relocating to low-tax Ireland.
San Francisco-based Medivation makes the world’s best-selling prostate cancer drug, Xtandi, which is forecast to generate $5.7bn in annual revenues by 2020. It is also developing an experimental drug called Talazoparib, designed to stop tumour cells from multiplying by damaging their DNA, and Pidilizumab, a medicine that could help patients suffering from lymphoma.
Pfizer is best known for selling drugs prescribed by family doctors, such as Lipitor, the cholesterol-lowering statin, and Viagra, the male impotence pill, but in recent years it has started building a large oncology franchise, which has been buoyed by the success of Ibrance, a blockbuster cancer drug.
Last year it lost out in the race to buy Pharmacyclics, the maker of a best-selling drug for a type of blood cancer, which was eventually taken over by AbbVie for $21bn.
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