[Ip-health] NY Times: Sanofi Offers to Buy Drug Maker Medivation for $9.3 Billion

Zack Struver zack.struver at keionline.org
Fri Apr 29 10:36:44 PDT 2016


​Sanofi Offers to Buy Drug Maker Medivation for $9.3 Billion​


​The French drug company Sanofi said on Thursday that it had made a
nonbinding offer to acquire the prostate cancer drug maker Medivation for
about $9.3 billion in cash.

Sanofi, based in Paris, publicly announced the offer on Thursday after it
said that Medivation, a San Francisco biotechnology company, had not
responded to a letter Sanofi sent nearly two weeks ago offering to acquire
the company. Sanofi, which has been suffering from declines in sales of its
main diabetes drugs, has said it is interested in making medium-size
acquisitions. Analysts describe the company’s existing portfolio as weak.

Under the terms of its offer, Sanofi said on Thursday that it was willing
to pay $52.50 a share for Medivation, the maker of the prostate cancer
therapy Xtandi. That would represent a premium of more than 50 percent over
Medivation’s two-month volume-weighted average share price before takeover
rumors, Sanofi said.

Shares of Medivation closed on Wednesday at $52.05.

“Last November, Sanofi outlined our midterm strategy, which includes
rebuilding our position in oncology, one of the largest and fastest-growing
therapeutic areas in the biopharmaceutical sector,” Olivier Brandicourt,
the Sanofi chief executive, said in a news release.

“With Medivation’s best-in-class offerings in prostate cancer, we believe a
combination would benefit patients and, at the same time, generate value
for shareholders of both companies,” he added.

In a separate letter to Medivation on Thursday, Sanofi said that it first
discussed a possible takeover in a phone call with David T. Hung,
Medivation’s chief executive, on March 25 and in a subsequent conversation
on April 3.

Medivation expressed no interest in discussing a transaction at the time,
and Sanofi sent a letter on April 15 offering to pay $52.50 a share for the
company, Sanofi said.

Medivation has not responded other than to acknowledge the letter’s
receipt, Sanofi said.

“We do not understand the delay in responding to our letter,” Mr.
Brandicourt said on Thursday. “The price we put forth represents a very
substantial premium, and it would be all cash without any financing
condition. In these circumstances we believe it is appropriate to make this
letter public, which we are doing today.”

Medivation said on Thursday that its board began an evaluation of the
Sanofi proposal with its independent financial and legal advisers when it
was contacted by Sanofi on April 15.

The company said that it expected the board to complete the review at a
meeting on Thursday and it would “provide an update promptly thereafter.”

“There are no assurances that a transaction will be reached or on what
terms,” Medivation said in a news release. “Medivation stockholders are
advised to take no action at this time.”

Mr. Brandicourt, who took over as chief executive last year after
Christopher A. Viehbacher was abruptly ousted, has said that Sanofi is
interested in medium-size acquisitions, and that cancer treatment is an
area of interest.

Sanofi already sells two drugs to treat prostate cancer: Taxotere, also
known as docetaxel, which now faces competition from generics, and the
newer Jevtana. But both are considered chemotherapy, with the attendant
side effects, and many men with the disease prefer other drugs.

Over all, Sanofi’s portfolio of marketed cancer drugs is “weak and
populated by undifferentiated also-rans,” Timothy Anderson, an analyst at
Sanford C. Bernstein, wrote in a note on Thursday.

Xtandi is among the fairly new, so-called targeted drugs that are not
considered chemotherapy and that have been shown in clinical trials to
extend the lives of men with advanced prostate cancer. The drug, marketed
by the Japanese company Astellas Pharma, had global sales last year of $1.9
billion, with Medivation’s share at $943 million.

Sales could grow if the company succeeds in winning approval for the drug’s
use in earlier stages of prostate cancer. But it faces competition from
Zytiga, made by Johnson & Johnson, and possibly from agents under

Xtandi has already provided a windfall for the University of California,
Los Angeles as the development of the drug was based on discoveries by
campus researchers. In March, U.C.L.A. sold its rights to future royalties
from the drug to the investment firm Royalty Pharma, for $1.14 billion in
cash and potential additional payments based on Xtandi sales. U.C.L.A. will
retain $520 million of that. The rest will go to the researchers and to the
Howard Hughes Medical Institute, which financially supported the research.

Xtandi, however, has also become one of the latest symbols of the
controversy over high drug prices. Two activist groups have asked the
federal government to essentially pre-empt Medivation’s exclusive patent
rights and allow other companies to manufacture the product to lower
prices. Some members of Congress, including Senator Bernie Sanders of
Vermont, are also pressing the Obama administration to consider this.

The federal government has so-called march-in rights because taxpayers
helped pay for the drug’s development, in this case through research
funding from the National Institutes of Health and the Department of
Defense. Under federal law, the government can exercise its rights to
patents if the benefits of a federally funded invention are not made
“available to the public on reasonable terms.”

The activist groups, Knowledge Ecology International and the Union for
Affordable Cancer Treatment say that Xtandi meets this criterion because of
its high price. The drug has a wholesale list price in the United States of
about $88 a capsule, or $129,000 for a year of treatment, the groups say,
two to four times the price in other high-income countries.

In the past, however, the National Institutes of Health has declined to
exercise such march-in rights merely because a drug is expensive, saying
that they were not an appropriate means of controlling prices.​

Zack Struver, Communications and Research Associate
Knowledge Ecology International
zack.struver at keionline.org
Twitter: @zstruver <https://twitter.com/zstruver>
Office: +1 (202) 332-2670 Cell: +1 (914) 582-1428

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