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Pfizer to acquire Medivation for $14 billion

Pfizer is paying a hefty premium for the much sought-after prostate cancer drug maker, Medivation. (Video: Reuters; Photo: Getty Images)

Pharmaceutical giant Pfizer announced Monday that it has agreed to acquire Medivation in a $14 billion deal that would add a blockbuster drug to its cancer pipeline.

Medivation, a San Francisco biopharmaceutical company, has been highly sought after in recent months. Its flagship product, Xtandi, is a prostate cancer treatment that generated $2.2 billion in sales over the past four quarters and has been projected to be one of the top-10 cancer drugs in 2021. Xtandi, which is being co-developed and marketed by Medivation and Astellas Pharma, has also generated criticism for its high price.

In a conference call, Pfizer executives said that the acquisition would help Pfizer accelerate its revenue growth and bring important assets to its cancer portfolio.

"With this acquisition, we are expanding and stamping our footprint on one of the highest growth therapeutic areas in the biopharmaceutical industry, and we are strategically building a leadership position in oncology with flagship products," said Ian Read, chairman and chief executive of Pfizer.

Medivation also has a promising experimental breast cancer drug called talazoparib and an immuno-oncology drug called pidilizumab in late-stage development.

Ben Gomes-Casseres, a professor at Brandeis International Business School who studies the strategy of business combinations said that the deal was in sharp contrast to the proposed Pfizer merger with Allergan. That deal collapsed in April, after Treasury department rule changes stripped the deal of many of its tax benefits.

"It is a rifle-shot approach to finding assets that can help them grow -- as compared to a big merger that may have many components and it’s not clear where the growth will come from," Gomes-Casseres said. "I think big pharma has been finding out that they’re better off doing more smaller or medium-sized deals than the huge mergers of 5 to 10 years ago."

Albert Bourla, group president of Pfizer Innovative Health, outlined on the call how Xtandi would fit into Pfizer's oncology portfolio, pointing out that the acquisition will add to its breast cancer treatment, Ibrance, to give Pfizer two drugs projected to be top-10 cancer products in 2021.

"We see a lot of  parallels between prostate and breast cancer," Bourla said. "Both diseases are comprised of advanced stage patients currently treated by our medicines, Xtandi and Ibrance, with both having the potential to expand into large, earlier stage disease populations."

In a research note issued shortly before the deal was official, Credit Suisse analysts wrote that Pfizer's large cancer sales force and experience in urology could help fuel sales growth for Xtandi. They also noted that the experimental breast cancer drug it is acquiring could allow the company to explore drug combinations in various cancers.

A subsidiary of Pfizer will make the offer to buy Medivation for $81.50 a share, and the deal is expected to close in the third or fourth quarter of this year. The price is a significant premium over the unsolicited bid that Medivation received in April from the French drug company Sanofi. Medivation's board of directors rejected that offer, of $52.50 a share. In recent months, multiple companies have been reportedly eyeing the biotech company as a takeover target. Last month Medivation announced it had entered confidentiality agreements with multiple companies that had expressed interest in exploring an acquisition.

In a press release, David Hung, founder and chief executive of Medivation called Pfizer the "ideal partner to extend the reach of our blockbuster Xtandi franchise and take our promising, late-stage assets — talazoparib and pidiluzimab — to their next stages of development so that they can be made available to patients as quickly as possible.”

Medivation's stock was up nearly 20 percent in mid-day trading. Pfizer's stock was slightly down.

Correction: The original version of this story misstated Xtandi's sales. It has been corrected.

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