Sanofi Plays Hardball…And Loses

The drugmaker could have avoided a bidding war for Medivation by submitting a higher, friendly offer to begin with.
At Closing, June 18th
68.25 EUR

When it comes to dealmaking, hardball tactics can backfire -- as Sanofi is finding out.

Late Tuesday, the French drugmaker dropped hostile efforts to acquire oncology specialist Medivation after being granted access to its target's confidential data. 

The bad news? They're not the only ones: Medivation said it has opened its books to other parties. These include Pfizer, Celgene and Amgen, according to CNBC and Reuters. The fact that it's so coveted means Sanofi likely has no choice but to lift its offer yet again in order to add Xtandi, Medivation's FDA-approved prostate-cancer drug, to its portfolio.

Cure for Cancer

Medivation suitors could bolster their respective oncology arms with the addition of its projected $1.85 billion in fiscal 2020 sales

Source: Credit Suisse

*Credit Suisse notes Bayer is the least likely to bid because its ODM-201 drug (licensed from Orion) would compete with Medivation's Xtandi

A competitive process could have been avoided from the get-go. Rather than offering $52.50 a share back in April and then attempting to replace Medivation's board after its advances were rejected, Sanofi could have made a bid that was compelling enough to gain the recommendation of that same board. Instead, it established bad blood with management who have spurned its latest offer of $58 a share (plus a contingent value right worth $3 at most) and effectively put Medivation within the grasp of other suitors.

As I wrote in April, Sanofi can afford $70 a share without factoring in synergies  -- or well north of that, depending on estimated cost savings. And if the French behemoth chooses not to pay up to strike an accretive deal, it faces punishment by investors who have identified that the company needs to do something to boost its profitability. Its EPS is expected to grow at a compounded annual rate of just 5.6 percent between 2015 and 2020, trailing the sector median of 9.3 percent, according to Oddo Securities. 

The Price is Right?

Medivation could fetch $70 a share or more in any takeover, which is above its all-time high of $67.78

Source: Bloomberg

Medivation may well slip through Sanofi's grips. If so, Sanofi's shareholders can only hope the drugmaker learns from its mistakes. 

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

    To contact the author of this story:
    Gillian Tan in New York at

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    Beth Williams at

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