Pfizer initiates buyout talks with cancer drug maker Medivation

US drug giant Pfizer Inc has initiated talks with cancer drug maker Medivation Inc over a possible buyout, a move that could rival a $9.3 billion offer from Sanofi SA, Reuters today reported, citing people familiar with the matter.

Pfizer's approach comes less than a week after Sanofi tabled a $52.50 per share cash offer after Medivation refused to engage in discussions. (See: Sanofi tables $9.3-bn bid for US biotech firm Medivation) Medivation, whose shares closed yesterday at $57.52, has rejected Sanofi's offer as too low.

''We believe the continued successful execution of our well-defined strategic plan will deliver greater value to Medivation's stockholders than Sanofi's substantially inadequate proposal," Medivation CEO, David Hung, said in a press release.

Medivation has not yet decided whether it should engage with Pfizer in negotiations and is in discussions with its financial and legal advisers, while Sanofi currently has no plans to raise its offer and is waiting for Medivation to launch an auction to sell itself before it makes any new bid, the report said.

For Pfizer, a potential deal with Medivation would come a month after it paid $400 million break-up fee after abandoning its $160 billion proposed acquisition of Ireland-based botox maker Allergan Plc, amidst an ongoing drive by the Obama administration to stop tax-dodging corporate mergers.

San Francisco-based Medivation has one marketed prostate cancer therapy, Xtandi, and two additional oncology assets in clinical development.

Xtandi is also under evaluation for use in breast cancer patients. Xtandi was approved by the US Food and Drug Administration (FDA) for post-chemotherapy metastatic prostate cancer setting in 2012 and in 2014, the FDA expanded Xtandi's label to include its use in pre-chemotherapy patients as well.

Since its launch, Xtandi's has become the most prescribed prostate cancer drug in these indications, generating annual sales of more than $2 billion and is expected to generate almost $5.7 billion in sales over the next four years.

Medivation expects results of phase 2 trials for Xtandi in the coming 12 months, and if approved for breast cancer, it could treat more than 220,000 patients who are diagnosed with breast cancer every year in the US alone.

Medivation stock price was $37 and market cap of around $6 billion as of 31 March when takeover interest was first reported.  Its share price has since surged by over 55 per cent.

Bloomberg reported on Friday that AstraZeneca plc is also considering a counter bid, but Medivation does not plan to accept any offer below $65 a share.

While Sanofi's offer reflects a 50-per cent premium to what Medivation's stock had been trading prior to buyout speculation, analysts believe that it is too low for Medivation's board to even enter into talks.

Barclays expects a winning bid to be $15-20 above Sanofi's $52.50 offer, while Goldman Sachs analysts said they expect an offer of at least $70 a share.

In March, Jefferies analyst Biren Amin said Medivation's stock price can go upto $71-75 a share, if its pipeline drugs meet or beat expectations.