Prostate Cancer Treatment Seen Drawing Medivation Bids: Real ...

Medivation Inc. (MDVN), which has already
quadrupled in a year, is still tempting acquirers with a
prostate cancer treatment that?s poised to make it one of the
world?s fastest-growing drug developers.

Shares of the San Francisco-based biotechnology firm surged
309 percent in the past 12 months for the biggest gain in the
Russell 1000 Index (RIY) as investors bet its cancer drug,
enzalutamide, will be approved by the U.S. Food and Drug
Administration this year. Analysts project the treatment, once
on sale, will spur an almost sixfold increase in revenue for
Medivation by the end of 2014, outpacing 97 percent of similar-
sized biotechnology and pharmaceutical companies worldwide,
according to data compiled by Bloomberg.

Astellas Pharma Inc. (4503), Medivation?s partner on the drug, may
want to buy out the $3.3 billion company to avoid splitting the
profit, ThinkEquity LLC said. AbbVie, the pharmaceutical unit
being spun off from Abbott Laboratories (ABT), and AstraZeneca Plc (AZN) may
also bid for Medivation to restock drug pipelines, according to
Wedbush Inc. A suitor could offer at least $140 a share, Aegis
Capital Corp. said, or 53 percent more than last week?s close,
and still pay a smaller premium than the average among
biotechnology deals in the last year, the data show.

?It?s going to be probably the biggest prostate cancer
drug ever,? David Nierengarten, a San Francisco-based analyst
at Wedbush, said in a telephone interview. ?That?s something
that?s worth quite a bit. They?re almost approved, so Medivation
is certainly a candidate for an acquisition. You?re talking
about a lot of potential revenue here.?

Awaiting Approval

?It?s our objective to maximize value for our stockholders
and we believe the best way to do that is by leveraging our
assets? and remaining a standalone company, Anne Bowdidge, a
spokeswoman for Medivation, said in an e-mailed statement in
response to being asked whether the company has been approached
by acquirers or is open to selling. ?That said, it?s also our
obligation to remain open to all available options.?

Medivation and Astellas, Japan?s second-largest drugmaker
by market capitalization, are awaiting a decision from the FDA
on whether they can start selling enzalutamide to prostate
cancer patients who have grown sicker even after chemotherapy.
The medicine could win approval as early as September, according
to Kimberly Lee, a San Francisco-based analyst for ThinkEquity.

The treatment, which works to blunt the effects of male
hormones that spur tumor growth, proved so effective that the
companies halted a clinical trial last year and gave the drug to
all of the participants. Men with prostate cancer that was
spreading even after chemotherapy lived 4.8 months longer if
they were given enzalutamide rather than a placebo, and
experienced few serious side effects.

?Best Drug?

If approved, the medicine would compete with Johnson
Johnson (JNJ)?s Zytiga, which was cleared by U.S. regulators in 2011.
One difference between the drugs is that enzalutamide doesn?t
have to be used in combination with the steroid prednisone.

Medivation?s ?cancer drug to me looks to be the best drug
so far for prostate cancer, which is a big category, a big
market,? Howard Liang, a Boston-based analyst for Leerink Swann
LLC, said in a phone interview. ?It?s not common for a mid-cap
company to be associated with a product that?s best in class for
a big category.?

The company?s size and potential sales may make it
attractive to larger drugmakers, Liang said. He estimates the
drug will achieve $4 billion in annual sales by 2025.

Broader Uses

Analysts expect the medicine to be so successful that
Medivation?s revenue will climb to $357 million in 2014 from $60
million last year, according to data and estimates compiled by
Bloomberg. That?s almost five times the average pace among
pharmaceutical and biotechnology companies worldwide with at
least $1 billion in market value, the data show.

Medivation is aiming to eventually have the drug approved
for treatment in earlier stages of the disease and for breast
cancer, which would lead to even higher sales, said Raghuram Selvaraju, an analyst for Aegis Capital in New York.

Enzalutamide blocks testosterone from binding to its
receptor in tumor cells, and because the male hormone has been
implicated in breast cancer, the drug may be effective in those
patients as well, he said.

?That?s why potential acquirers should be interested and
that?s why Medivation management?s phones should be ringing off
the hook,? Selvaraju said in a phone interview.

Stock Surge

The company?s stock has already quadrupled in the last 12
months amid investor optimism over enzalutamide, making it the
top performer in the Russell 1000 over that span. Even after the
gain, the company is attractive, according to ThinkEquity?s Lee.

?Medivation definitely looks cheap,? given the growth
potential for enzalutamide beyond late-stage prostate cancer,
Lee said in a phone interview. ?The market opportunity could
potentially be very large.?

Astellas may want to buy out Medivation to keep all of the
drug?s earnings for itself, she said.

The companies have agreed to split the development and
marketing costs as well as profits earned in the U.S. They also
have a standstill agreement whereby Astellas can?t make a
hostile bid for Medivation, which Lee said wouldn?t prevent them
from negotiating a friendly transaction.

Jenny Kite, a spokeswoman for Astellas, declined to comment
on whether the company is interested in acquiring Medivation.

AbbVie, the name of Abbott?s pharmaceutical business after
the company splits in two this year, may also be interested in
Medivation, according to Wedbush?s Nierengarten.

?Hungry Pharma?

The company already sells Lupron, an injection that?s used
to treat symptoms associated with prostate cancer, as well as
rheumatoid-arthritis treatment Humira, which Aegis Capital?s
Selvaraju said is facing stiffer competition.

AstraZeneca, the U.K.?s second-biggest drugmaker, may also
want to pursue a takeover of Medivation as it tries to replenish
its pipeline, Selvaraju and Nierengarten said. The London-based
maker of Seroquel and Nexium is set to lose patent protection by
2014 on drugs representing more than 40 percent of last year?s
sales, data compiled by Bloomberg show.

?You could see AstraZeneca,? Nierengarten said. ?You
could see the pharmaceutical spinout of Abbott because they
still sell Lupron. There are plenty of hungry pharma companies
out there that I?m sure would be interested.?

Scott Stoffel, a spokesman for Abbott Park, Illinois-based
Abbott, and Tom Hushen, a spokesman for AstraZeneca, declined to
comment on speculation when asked whether the companies have
considered a takeover of Medivation.

Poison Pill

A drawback to acquiring Medivation is the obligation to
share enzalutamide profits with Astellas, said Biren Amin, a New
York-based analyst for Jefferies Group Inc. Medivation also has
a so-called poison pill designed to thwart hostile takeovers.

Even so, the revenue potential from the drug may still be
enough to entice buyers, he said.

?Larger cap pharma companies are looking for attractive
growth opportunities and attractive assets that potentially
drive growth,? Amin said in a phone interview. A buyer ?could
consider enzalutamide as fitting that type of a profile.?

Medivation may command at least $140 a share in a takeover,
Selvaraju said, or 53 percent more than last week?s close of
$91.21. That?s still lower than the average 65 percent premium
buyers agreed to pay in biotech deals globally worth more than
$500 million in the last 12 months, the data show.

Wedbush?s Nierengarten said a takeover offer would have to
exceed his $100 share-price estimate, while ThinkEquity?s Lee
estimated a bid would be higher than her $110 target.

Medivation Management

Medivation?s managers have a history of building up and
selling businesses, so they would probably welcome a deal at the
right price, Aegis Capital?s Selvaraju said.

Chief Executive Officer David Hung and Patrick Machado, the
chief financial officer, ran ProDuct Health Inc. until they sold
the medical device maker to Cytyc Corp. in 2001.

?The company?s management team is heavily focused on
creating value for shareholders,? Selvaraju said. ?It?s not
like they?re not experienced at doing MA stuff. They?ve
demonstrated the willingness to sell out and get out of there
before.?

To contact the reporter on this story:
Tara Lachapelle in New York at
tlachapelle@bloomberg.net.

To contact the editor responsible for this story:
Sarah Rabil at srabil@bloomberg.net.

Article source: http://www.bloomberg.com/news/2012-07-15/prostate-cancer-treatment-seen-drawing-medivation-bids-real-m-a.html

Source: http://cancerkick.com/2012/07/15/prostate-cancer-treatment-seen-drawing-medivation-bids-real-ma/

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