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Pfizer buys cancer drug developer

Published:Tuesday | August 23, 2016 | 12:00 AM
The Pfizer flag flies in front of its world headquarters, Monday, November 23, 2015, in New York.

Pfizer will pay about US$14 billion to buy cancer drug developer Medivation in a cash deal aimed at fortifying its hold in one of the hottest and most lucrative areas of medicine.

The New York drugmaker said on Monday that the acquisition will stock its product portfolio with leading treatments for the most common cancers in men and women by adding Medivation's pricey prostate cancer treatment, Xtandi, to a line-up that already includes the breast cancer drug Ibrance.

Pfizer CEO Ian Read called the acquisition a "rare opportunity" to add an established treatment and a pipeline of drugs under development.

Medivation presents an attractive target as a specialty drugmaker focused on developing medicines for cancer and serious diseases with few treatment options. Earlier this year, it rejected a US$9.3 billion offer from French drugmaker Sanofi.

Pfizer, best known for mass-market drugs such as impotence pill Viagra and cholesterol fighter Lipitor, began pursuing cancer drugs well after most industry leaders. It has been furiously playing catch-up, mainly through partnerships with university researchers and other drugmakers.

Last year, Medivation brought in US$943 million in revenue, mainly through Xtandi, which it sells in partnership with the Japanese drugmaker Astellas Pharma.

Xtandi has drawn attention from the public interest group Knowledge Economy International, which has protested the US$129,000-a year list price for the treatment. The US government covers much of the cost for Xtandi prescriptions filled under federal health programmes such as Medicare, Medicaid and the Veterans Administration.


Aside from Xtandi, Pfizer Inc said Medivation also has a promising pipeline of cancer drugs in late-stage clinical development. That includes the potential breast cancer treatment, talazoparib, and a potential lymphoma drug. Researchers also are studying Xtandi as a possible treatment for earlier-stage prostate cancers.

Pfizer said on Monday that it will pay US$81.50 per Medivation share. That's a 21 per cent premium to the San Francisco biotech's last Friday closing price of US$67.19.

The boards of both companies have approved the deal, which is targeted to close in the third or fourth quarter.

The Pfizer-Medivation deal is much smaller than Pfizer's proposed

US$160-billion combination with Ireland's Allergan, a plan the drugmakers scrapped after the Treasury Department issued new rules this spring aimed specially at blocking that deal. It was structured as a tax inversion, which means Pfizer's headquarters would move, on paper only, from New York to reduce the drugmaker's US tax bill.

There has been a push from Wall Street for the drugmaker to break itself up into smaller companies so that it can grow faster. While hesitant, Pfizer has promised to decide the issue by the end of this year.

In the meantime, the company has focused on a series of partnerships and deals showing that the company can grow as a whole. And company shares have begun to climb after years in the doldrums. Shares are up eight per cent this year, outpacing all major US trading indices.