Medivation deal could spark biotech M&A

Pfizer won the race to buy Medivation, following Sanofi's failed attempt at a hostile takeover, and commentators are assessing the future for both companies amid speculation that the deal will spark a fresh round of biotech M&A.

Shares in biotechs BioMarin and Incyte Corporation jumped following the largest US biotech merger this year, as investors betted that these will be likely targets in the next round of M&A in the sector.

Speculation is mounting over Sanofi's next move, along with the other companies that were outbid by Pfizer – thought to include Merck & Co, Celgene and Gilead.

Sanofi was roundly criticised for its tactics in its bid for Medivation, which has developed big-selling prostate cancer drug Xtandi (enzalutamide).

Bloomberg reported that the failed bid had damaged Sanofi's reputation, and had also alienated the management and shareholders of Medivation with an opportunistic bid while shares were cheap.

The French firm eventually backed down from its hostile attempt to parachute in a new board for Medivation.

Sanofi said in a statement that it had appreciated the opportunity to “engage constructively” with Medivation, but had clearly been unwilling to fork out the $14 billion Pfizer will eventually pay for the Californian biotech.

“We are first and foremost a disciplined acquirer and remain committed to acting in the best interest of Sanofi shareholders,” the company said in a statement.

Under pressure because of falling sales of lead product Lantus (insulin glargine), and a delay to approval of its insulin-GLP-1 combination product in the US, Sanofi said it still plans to “reshape its portfolio” and strengthen its position in oncology.

There were also suggestions that Pfizer had overpaid for Medivation, which Sanofi valued at around $9.3 billion in its first bid in April.

But Pfizer said it believes Xtandi is only at the beginning of its “growth cycle” and a potential earlier use in prostate cancer will be key to growing sales.

In a conference call late on Monday, Pfizer said the Medivation deal will not affect any decision on whether to split itself into two companies.

The company still plans to decide by the end of the year whether to split itself into separate companies selling either generic or patent-protected drugs.

Crucially Pfizer said it is still open to M&A deals of “all sizes” in the future.

Sanofi's rivals will be just as disappointed to have missed out – and with Pfizer still on the acquisition trail, the French firm will have to fight to acquire companies seen as consolation prizes after it lost out on Medivation.