Leerink: Medivation Buyout 'Inevitable,' AstraZeneca And AbbVie Most Likely Buyers

Leerink’s Geoffrey C. Porges believes that acquirer interest in Medivation Inc MDVN and the appreciation in the stock valuation as “evidence of investors’ views that more value lies in the sale of the company vs. its independence.”

Porges maintained a Market Perform rating on the company, with a price target of $39.

The analyst had expected management to resist acquisition bids in 2016 but to ultimately agree to a sale of the company after about 12-18 months from now.

Expected Valuation

In fact, Porges expects a valuation range from $35 to $70 per share, driven by Medivation’s Xtandi for breast cancer and the recently acquired PARP inhibitor, talazoparib, in solid tumors.

“The biggest variation comes from the assumed revenue outlook for Xtandi (incl. potential upside in prostate cancer M0 and breast cancer), but tax and cost of capital assumptions are almost as important,” Porges explained.

Likely Acquirers

The analyst expects companies that have a low tax rate, along with low cost of capital, to be the most likely acquirers, as long as those benefits can be applied to the cash flows from Medivation, following acquisition.

Porges sees AstraZeneca plc (ADR) AZN and AbbVie Inc ABBV as being the best positioned to acquire Medivation.

Sanofi SA (ADR) SNY “can probably pay $2-3 less than AbbVie, assuming it values the company’s revenue and earnings outlook roughly equally,” Porges stated.