A medley of M&As

Though the ongoing Sanofi/Medivation struggle drags on, multimillion-dollar deals are still getting done

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PARIS & SAN FRANCISCO—Some M&A deals are deemed a “win-win” situation from the get-go by both companies, cases where the biggest hurdle is getting regulatory clearance. Others are a battle of stubbornness between a dedicated suitor and an extremely uninterested-in-being-wooed target.
The Sanofi/Medivation Inc. tale, now entering the third month of its standoff, definitely falls into the second category.
This particular acquisition saga began back on April 28, when Sanofi announced that it had issued a letter to Medivation making a non-binding proposal to acquire the biopharmaceutical company for $52.50 per share in cash, for a transaction value of roughly $9.3 billion. At the time, that price represented a premium of more than 50 percent over Medivation’s two-month volume weighted average price.
Medivation boasts Xtandi, a prostate cancer therapy, and two other oncology assets in clinical development. Sanofi touted the deal as “a compelling strategic and financial opportunity to drive immediate and certain value for Medivation’s shareholders while benefiting patients and both companies’ respective stakeholders.”
Medivation wasn’t so convinced. It acknowledged the receipt of the proposal on April 28, and the next day issued a press release stating that its board of directors had unanimously rejected the unsolicited proposal, decrying it as not being in the best interests of Medivation or its shareholders.
“Sanofi’s opportunistically timed proposal, which comes during a period of significant market dislocation and prior to several important near-term events for the company, is designed to seize for Sanofi value that rightly belongs to our stockholders. We believe the continued successful execution of our well-defined strategic plan will deliver greater value to Medivation’s stockholders than Sanofi’s substantially inadequate proposal,” said Dr. David Hung, Medivation’s founder, president and CEO.
The board claimed the deal undervalued Medivation, noting that Xtandi is on track to reach its sales guidance in the U.S. of $1.525 billion for 2016. The drug, Medivation noted, has seen worldwide annual net sales of $2.2 billion on a run rate basis, less than four years after gaining approval, and has “significant patent life, with 10+ years of remaining exclusivity.”
Medivation also called the timing of the deal “opportunistic,” pointing out that “Sanofi approached Medivation following a period of significant market dislocation in biotech and just as the market was beginning to recover.” Though the $52.50 per share price was a 50-percent premium over Medivation’s two-month average, Medivation stated that it was 21 percent lower than the company’s 52-week trading high of $66.40.
After a few more weeks of Medivation remaining staunchly uninterested, Sanofi announced on May 25 that it had filed preliminary consent solicitation materials with the SEC in an effort to remove and replace Medivation’s board with eight independent candidates. It filed its definitive consent solicitation materials to this end on June 13, noting that it believed “there is overwhelming support for Medivation to undertake a sale process that includes Sanofi” among Medivation’s shareholders, and that “We have been clear that if Medivation were to engage and provide information, we would be in a position to increase our offer and are confident that we would be able to offer significant additional value.”
Medivation countered by filing a definitive consent revocation statement on June 13, urging to shareholders to reject Sanofi’s efforts to replace the current Medivation board. Medivation shareholders will have until July 25 to vote on the proposal.
Part of the reason why Sanofi is in such a hurry might be the fact that Medivation could be right about its stock rebounding; the company is expecting data on Xtandi’s potential in treating breast cancer in the second half of the year, and the FDA is set to make a decision in October regarding expanding the drug’s label in prostate cancer.
Another reason could be a recent Bloomberg report that listed six other heavy hitters that could be interested in Medivation, including Gilead Sciences, Celgene, AstraZeneca, Novartis, Pfizer Inc. and Amgen Inc. Though no one has made any official announcements, rumor has it that Pfizer and Amgen have both signed non-disclosure agreements with Medivation. John Carroll of FierceBiotech noted that “If Pfizer steps in, the speculation hovers at a minimum of $65 per share,” though Geoffrey Porges at Leerink thinks “it will take $70 to get the job done.”
In other M&A news, here are some cross-country—and much friendlier—acquisitions that are underway for a few other big-name companies.

Luminex nabs Nanosphere, boosts diagnostic offerings
AUSTIN, Texas & NORTHBROOK, Ill.—Luminex Corp. and Nanosphere Inc. announced on May 16 that they had established a definitive agreement under which Luminex will acquire Nanosphere for $1.35 per share in an all-cash transaction. The total transaction value for this deal comes to roughly $58 million. Nanosphere is a leader in the molecular microbiology and molecular diagnostics market, with proprietary diagnostic tools that can offer rapid, accurate detection of respiratory, gastroenteric and blood stream infections. The deal was unanimously approved by both companies’ boards of directors.
Per the terms of the agreement, a new, wholly owned subsidiary of Luminex will commence a tender offer for all outstanding shares of Nanosphere for $1.35, with the tender to be followed by a merger to acquire any untendered shares. The tender offer is subject to the tender of a majority of the outstanding common shares and certain customary closing conditions. The deal is expected to close in the second quarter of Luminex’ fiscal year 2016.
Nanosphere saw roughly $21 million in revenue in 2015. As of the quarter ended March 31, 2016, the company recorded $6.6 million in revenue, with restricted and unrestricted cash of approximately $18.4 million. If the deal closes on or before July 1, the transaction is expected to add between $13 million and $16 million to Luminex’ 2016 consolidated revenue. Luminex expects the transaction to be accretive to its adjusted earnings by the end of 2017.
“The acquisition of Nanosphere will significantly enhance Luminex’s growth trajectory by expanding our product portfolio, delivering access to new markets and strengthening our pipeline of future products to make us the partner of choice for all molecular labs,” said Homi Shamir, president and CEO of Luminex. “The deal demonstrates prudent execution of our fourth strategic growth pillar—leveraging our financial strength to accelerate growth in our target markets.”
On May 23, the companies entered into an amendment to their agreement. In reaction to an unsolicited third-party offer for Nanosphere, priced at $1.50 per share, Luminex increased the purchase price to $1.70 per share, for a new transaction value of approximately $77 million. On June 2, Luminex announced that Commodore Acquisition Inc., its wholly owned subsidiary, had commenced the tender offer for Nanosphere.

$500-million deal provides Merck entry into IPF market
KENILWORTH, N.J. & SAN MATEO, Calif.—Merck kicked off June with the announcement that it had signed a definitive agreement with Afferent Pharmaceuticals, under which it will acquire the privately held pharmaceutical company, which is developing therapeutic candidates targeting the P2X3 receptor to treat common but poorly managed neurogenic conditions.
Per the agreement, Merck, via a subsidiary, will acquire all of Afferent’s outstanding stock for an upfront cash payment of $500 million. Afferent shareholders also stand to receive a total of up to an additional $750 million tied to the achievement of certain clinical development and commercial milestones for multiple indications and candidates, including AF-219, Afferent’s lead candidate, which is in Phase 2 trials in idiopathic pulmonary fibrosis (IPF). The deal is expected to close in Q3 2016.
“Afferent has pioneered the clinical development of novel investigational candidates selectively targeting the P2X3 receptor, an exciting area of research,” commented Dr. Roger M. Perlmutter, president of Merck Research Laboratories. “We look forward to advancing these innovative molecules for patients with conditions like chronic cough, an area of significant unmet medical need.”
Matthew Thaxter, a GlobalData analyst covering immunology, noted that according to Afferent, “73 to 86 percent of IPF patients suffer from chronic cough, and the two currently approved IPF treatments—Genentech’s Esbriet (pirfenidone) and Boehringer Ingelheim’s Ofev (nintedanib)—do not alleviate any disease-associated symptoms.” For its part, however, AF-219 “has no impact on the progression of IPF itself.”
Thaxter doesn’t expect AF-219 to offer Merck a huge leg up into the IPF, but he did note that “there does exist a large patient base for AF-219, with over 107,000 diagnosed prevalent IPF cases in patients aged 50 or above in the seven major markets of the U.S., Germany, France, Spain, Italy, the U.K. and Japan. AF-219’s large target population will act to offset its low price, and GlobalData anticipates its sales volumes will be higher if the product gains regulatory approval.”

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