This $10 billion drug maker is the hottest thing in the industry -- and it knows it

Medivation is the drug industry’s hottest takeover target, and it is doing everything it can to milk that.

The company has received at least two bids from Sanofi, and earlier this week said it entered into confidentiality agreements with other potential bidders.

Medivation’s appeal lies in an experimental breast cancer treatment called talazoparib. It still hasn’t been approved for use, but the drug also has potential as a treatment of cervical, lung, and ovarian cancers.

And so, as it enters into talks with potential buyers after rebuffing them for weeks, Medivation is counting on talazoparib as it tries to push its value higher. Sanofi has already said it will make an additional payment to shareholders — starting in 2022 — depending on the drug’s sales.

That’s not good enough, and Medivation held a conference call on Wednesday to pitch investors on the drug’s importance.

The drug, the company said, has the potential to be “best-in-class” among so-called PARP inhibitors — a new type of medicine that block a particular enzyme that’s used by our cells to repair DNA so that tumours can’t survive.

The presentation cited quotes from Wall Street analysts:

As well as side-by-side comparisons with other PARP inhibitor drugs that are available or being developed.

But Medivation can only go so far with this line, some analysts say.

It’s true that the hunt for new drug pipelines has driven record-breaking takeovers in the drug industry in recent years, but — like any drug in development — talazoparib carries some big risks. It’s not just that it has to get past FDA approval, but also that it faces competition both from other PARP inhibitors and other kinds of cancer treatments in development.

Jefferies analyst Biren Amin, who rates Medivation’s stock a hold, used a pun to sum up his thoughts on the call: “PARPosterous Expectations for Talazoparib.”

“The view that added clinical benefit is derived from PARP trapping vs inhibition could not have been more strongly communicated,” Amin wrote in a note. “Eventually any acquirer must assess what value it hopes to place on this pipeline asset.”

Talazoparib’s phase 3 data will be out soon, so why even sell the company at all, RBC Capital Markets analyst Simos Simeonidis asked in a note after the call. His reasoning (emphasis ours):

“We think it’s because CEO Dr. David Hung is actually a very seasoned and astute executive. He has done a remarkable job getting Medivation up to this point, in our view. But he also understands both risk in drug development and how to make a deal (anyone remember the 2008 deal he made with Pfizer for Dimebon? That was for $225M upfront…in 2008). So, we believe that despite all the talk about the potential of this agent, MDVN understands both 1) the risks still in front of them in terms of talazoparib’s own development, and 2) the shifting competitive landscape in the PARP space. Therefore, we believe that if and when a much improved offer comes (and we believe it will), from either Sanofi, or another party, that assigns significantly higher value to the company in general, and to talazoparib specifically, MDVN will be a lot more realistic than they may appear to be on the surface and will end up doing the right thing for shareholders and for themselves.”

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