The second quarter began with collapse of what would have been pharma's biggest ever M&A deal; Pfizer's proposed $160 billion merger with Allergan, which was scuppered at the hands of the US Treasury Department in early April.
Those who feared that failure to complete would put the brake on further consolidation have seen this very scenario play out; anyone with a vested interest in sector M&A has been focused on a second deal that has yet to happen – Sanofi's drawn out pursuit of Medivation.
Whether other players will bid for Medivation remains to be seen, but a handful of Big Pharma competitors are said to be interested in the prostate cancer specialist. Sanofi remains in the driving seat but is yet to raise its opening bid some three months later; the company has made efforts to replace Medivation's board and there is a suggestion it could use a CVR to bridge the gap between its offer and a price deemed acceptable by the current Medivation hierarchy.
There is a strong sense that Medivation is open to a deal at the right place but things have become somewhat personal. In a recent letter to shareholders, the biotech suggested that Sanofi's inadequate offer reflects in part its poor track record in cancer drug development; AbbVie's 2015 acquisition of Pharmacyclics was also cited as a suitable benchmark in terms of the multiple that Medivation should command. Whether Sanofi, or rival bidders, are willing to match AbbVie's aggressive spending is conjecture at this point, however.
In the meantime, AbbVie has reinforced a growing reputation for generous valuation by virtue of a pricey-looking deal to acquire Stemcentrx, announced in May. Analysts appeared to be caught offside by AbbVie's $5.8 million upfront offer (with additional payments potentially worth $4 billion), particularly as Stemcentrx only emerged from stealth mode in the past year. The deal has come under increased scrutiny since new data for Stemcentrx's lead asset Rova-T in small cell lung cancer was presented at ASCO in early June; AbbVie's investment is no write off but the company is gaining a reputation it would rather not have.
Pfizer is one of the companies linked to Medivation but since collapse of the Allergan merger, investor focus has largely shifted back to whether management will split the company into two separate businesses (focused on innovative and established products), with a decision expected by year end. In the meantime, however, Pfizer has splashed some cash by paying $5.2 billion to acquire the dermatology specialist Anacor.
This bolt-on deal is focused sharply on crisaborole, an oral PDE-4 inhibitor developed by Anacor for the treatment of mild-to-moderate atopic dermatitis, which is expected to gain FDA approval in early 2017 - Physician Views Poll Results: 70 dermatologists provide feedback on market potential of Pfizer's crisaborole for mild-to-moderate atopic dermatitis.
In recent months, the sector has seen some high profile activity shaped around broader organisational changes. Sanofi has agreed to swap its Merial animal health business – valued at 11.4 billion euros – for Boehringer Ingelheim's 6.7 billion euro consumer health business, with Boehringer also paying Sanofi 4.7 billion euros in cash. Teva has made a number of generics portfolio divestures to accommodate acquisition of Allergan's generics business, while Biogen confirmed recently it is to spin put its haemophilia portfolio; a decision which appears largely to have stemmed from failure to attract a suitable sale price.
With high profile clinical catalysts thin on the ground through to the end of 2017, many investors are looking for a spike in M&A activity to revive the fortunes of biopharma stocks. There is no shortage of potential acquirers with Gilead top of the list; the company expanded its NASH pipeline with the purchase of Nimbus Therapeutics in April but fund managers are holding out for a mega-deal in the oncology market.
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