SunTrust: Medivation M&A Chatter Highlights Value, Company's 'Unique' Industry Position

The M&A rumors continue to swirl around biotech firm Medivation Inc MDVN, and a SunTrust analyst has commented that the latest take-over chatter highlights the value of the company.

A Bloomberg report said Medivation has rejected a take-out offer from Sanofi SA (ADR) SNY, which is said to be working with advisers on a potential offer and hasn't ruled out making a hostile bid.

San Francisco-based Medivation, which makes prostate-cancer drug Xtandi, is seeking a higher price than initial proposals have indicated, the report said.

Meanwhile, media reports suggest Medivation has hired an investment bank to look into takeover interest from other companies, while it has no plans to sell itself.

Related Link: BTIG: Medivation Acquirer Could Pay 20–30% Preminum And Still Buy At Low Valuation

Possible Names

The companies speculated to be targeting Medivation include Gilead Sciences, Inc. GILD, Amgen, Inc. AMGN, AstraZeneca plc (ADR) AZN and Sanofi.

The above pharma majors are looking to expand their cancer drug sales and are in search of potential companies that fit their bill. The robust sales growth from Xtandi has made Medivation an obvious target for these firms.

SunTrust's Speculations

Meanwhile, an analyst at SunTrust Robinson Humphrey said the company could be valued at $62 (range $51–$71) in a take-out scenario. Analyst Peter Lawson said over the past three years, nine mid-cap peers have been acquired.

Related Link: Why Medivation Could Be The Next Big Biotech

"We believe that MDVN can approach similar levels organically; we reiterate our BUY rating and $56 PT," Lawson wrote in a note to clients.

Lawson said, "Scarcity remains a key part of the story around Medivation. Medivation is unique; a profitable mid-cap biotech. There are approximately nine profitable public U.S. biotech companies. Medivation is the only one that is a mid-cap (~$7 billion), and a pure-play."

He added, "Medivation has a cancer pipeline in two of the hottest areas of oncology — immuno-oncology and genetically defined cancers (PARP inhibitor). We believe the stock should command a scarcity value."

Apart from Xtandi, which Medivation sells along with its partner Astellas Pharma, the company is developing Pidilizumab for blood cancer and Talazoparib for the breast cancer.

Other Analysts

Meanwhile, BTIG's Hartaj Singh said, "We will not speculate on these matters," but mentioned that the company is "at an appropriate stage in the Xtandi and R&D product cycle" where a global biopharma company may be able to boost sales and achieve cost synergies to drive operating leverage.

Singh added that with ~$7.5 billion EV, a suitor may be willing to pay a 20–30 percent premium to Medivation's current price and "still be at the bottom-end of the 3X- 5X future peak sales multiple of previous biotech M&A."

Shares of Medivation are up roughly 7 percent early Wednesday afternoon, seen trading at $48.88.