Medivation’s Drug for Stubborn Cancers Raises Its Allure

  • Xtandi’s U.S. sales rose to more than $1 billion in 2015
  • Shared sales, thin pipeline haven’t deterred Sanofi interest

A drug called Xtandi that’s helping men fight hard-to-treat prostate cancers is luring a big drugmaker to its manufacturer, Medivation Inc.

That’s made Medivation the latest hot target in biotech and the subject of a $9.3 billion takeover bid from Sanofi that could rise even higher if other potential buyers step in. If it goes through, it would the the biggest takeover of a biotech company since AbbVie Inc.’s May 2015 purchase of Pharmacyclics Inc., according to data compiled by Bloomberg.

Biotechnology companies often boast of their deep, extensive pipelines of candidate drugs. Some analysts see Medivation, in contrast, as a bit of a one-trick pony -- and that pony is a great one: Xtandi, approved in 2012 for use in late-stage prostate cancer, has quickly gained traction, topping $1 billion in U.S. sales in 2015. That’s a property any big drugmaker’s cancer franchise would like to have, according to Cowen & Co. analyst Eric Schmidt.

“There just aren’t that many mid-cap oncology companies with meaningful ownership of a blockbuster drug,” Schmidt said. “I don’t think it’ll come down to strategic fit, just which company is willing to pay the most.”

Xtandi blocks androgen, a male hormone that drives prostate cancer growth, and has shown effectiveness after other drugs failed to work. In 2011, a final-stage trial was stopped early so that all participants could receive the medication. Advantages also include its one-pill-a-day dosing, said Mary-Ellen Taplin, a Harvard Medical School associate professor of medicine at the Dana-Farber Cancer Institute in Boston.

Room to Grow

“Compared to traditional chemotherapy, it’s user-friendly for the patient," said Taplin, who has run clinical trials for Medivation. A spokeswoman for the company declined to comment.

With an annual price of more than $100,000 before discounts and rebates, Xtandi’s first-quarter U.S. sales were $307.6 million, compared with $272 million for its main competitor, Johnson & Johnson’s Zytiga. Medivation splits Xtandi’s U.S. sales with Tokyo-based Astellas Pharma Inc.

There’s room for Xtandi to grow: it’s being tested in a form of hard-to-treat breast cancer and earlier stages of prostate cancer. While it’s unclear if the drug would work as a front-line treatment, success in this realm would double or triple the population of eligible patients, according to Cowen’s Schmidt.

“We think Xtandi is a very important drug in prostate cancer and it also has very attractive life-cycle management opportunities,” said Jack Cox, a spokesman for Paris-based Sanofi. “What we know about it is some publicly available information. Part of our interest in having them open up the information is so we can learn more.”

Medivation may look like an imperfect target, starting with its revenue-sharing arrangement. Yet there’s precedent for such a deal: AbbVie shelled out $21 billion for Pharmacyclics and its single drug, Imbruvica, which is partnered with J&J.

Two Candidates

There’s also Medivation’s pipeline, consisting of just two experimental treatments. A drug in mid-stage testing for blood cancers, called pidilizumab, isn’t given much weight by analysts, since it isn’t clear how it works.

The more advanced is a breast cancer treatment, talazoparib, that was bought from BioMarin Pharmaceutical Inc. and is currently in final testing for patients with advanced breast cancer who have mutations in BRCA, a gene linked to the disease. Study results will come in the first half of 2017, and more tests are being done in small cell lung cancer, prostate cancer and ovarian cancer.

According to Medivation, talazoparib has a $30 billion market opportunity, twice that of Xtandi. That’s yet to be seen, according to Simos Simeonidis, an analyst at RBC Capital Markets. Talazoparib inhibits a protein called PARP that’s involved in DNA repair. It’s a relatively new drug mechanism, and researchers don’t yet know if PARP inhibitors will only work in cancers with specific mutations, he said.  

Less Is More

It will also face competition: AstraZeneca Plc has already reached the market with a similar drug, while Tesaro Inc. and Clovis Oncology Inc. are developing versions.

Medivation’s pipeline is skimpy compared with that of Incyte Corp., a mid-sized company with upwards of a dozen drug candidates that’s frequently been named as a possible takeover target. Yet that simplicity may only add to Medivation’s allure.

Chief Executive Officer David Hung “didn’t make huge factories or hire thousands of people for early R&D,” Simeonidis said. “Someone could acquire Medivation for this great drug and strip out everything else, which isn’t a lot.”

Medivation has rejected Sanofi’s offer of $52.50 per share, saying it undervalues the company’s potential. The French drugmaker may yet raise its bid, as it seeks to replace revenue from its aging insulin blockbuster, Lantus. Medivation closed Wednesday at $61.14, suggesting that investors believe the bid will be raised by Sanofi or another suitor.

“Sale of the company seems to be inevitable and only subject to delivery of a price that satisfies the company’s investors," Leerink Partners analyst Geoffrey Porges said in a note to clients. “We now believe that the company, and its stock and its management, have gone beyond the point of no return."

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