Acquisition by Pfizer
On August 22, Medivation (MDVN) and Pfizer (PFE) entered into a definitive agreement. Pfizer will acquire Medivation for a consideration of ~$14 billion, translating $81.50 per share for Medivation. Since Sanofi’s (SNY) interest in Medivation from March 2016, the share price already has benefited investors with striking returns. For details on the share price appreciation, please read Why Did Medivation’s Share Price Increase so Much after Earnings?
The share price appreciation follows Medivation’s effort to explore a sale opportunity. Pfizer’s offer is almost 33% higher than Sanofi’s offer of $11 billion. To understand Medivation’s attractive pipeline that has attracted such a handsome price, see Will the Current Pipeline Help Medivation Go beyond Xtandi?
How will the acquisition benefit Pfizer?
With the MDVN acquisition, there won’t be any change in Pfizer’s 2016 financial guidance. However, the acquisition will be immediately accretive upon closure to Pfizer’s adjusted diluted EPS, or earnings per share. During the first full year of the deal, the accretion to adjusted diluted EPS will be $0.05, and it’s expected to grow after that.
The acquisition is expected to fuel Pfizer’s revenue and earnings growth. The addition should further help PFE become a leader in the oncology space with Medivation’s key drug, Xtandi. In the United States, Xtandi has been used by 64,000 male patients. We’ll discuss Xtandi in detail in the next part of this series. The drug. along with pipeline molecules, should strengthen Pfizer’s oncology franchise. With Ibrance and Xtandi, Pfizer will have a leadership position in two hormone-driven cancers, breast and prostate cancer.
Recent acquisition deals include Shire’s (SHPG) Baxalta acquisition, Pfizer’s Anacor acquisition, and Jazz’s (JAZZ) Celator acquisition. The success or failure of any pipeline drug results in stock volatility. If you want exposure to Medivation, you could opt for the Biotechnology ETF (BBH). BBH has a 4.8% weight in Medivation.