DUBLIN – Sanofi SA CEO Olivier Brandicourt veered in the direction of hostile territory Thursday by going public with a $9.3 billion all-cash offer for Medivation Inc., following a month of behind-the-scenes overtures that failed to arouse any interest.

The offer, which values San Francisco-based Medivation at $52.50 per share, represents a 50 percent premium over the company's two-month, volume-weighted average price "prior to there being takeover rumors," Sanofi said. Shares in Medivation have since moved significantly higher on account of said rumors – the stock (NASDAQ:MDVN) closed Wednesday at $52.05, less than 1 percent below Sanofi's offer.

Sanofi's bid is, in all likelihood, nothing more than an opening shot in what could be a protracted bidding process. How much higher it is prepared to go will depend on the strategic importance it attaches to building out from its current weak position in oncology – and on whether its move will flush out alternative offers. Investors certainly see room for an improved bid. Medivation's stock closed at $56.17 Thursday, up $4.12, or 8 percent.

London-based Astrazeneca plc and Abbvie Inc., of North Chicago, were among those mentioned in dispatches as potential rival bidders, although the latter firm appears to have ruled itself out of the running. Five hours after Sanofi unveiled its unsolicited offer for Medivation, Abbvie disclosed an agreed $5.8 billion cash-and-shares acquisition of lung cancer drug developer Stemcentrx Inc., of South San Francisco, with another $4 billion in milestones attached. (See story in this issue.)

In revenue terms, oncology is currently a minority pursuit at Paris-based Sanofi. Its cancer portfolio delivered about €1.5 billion (US$1.7 billion) of the pharma firm's €37.1 billion in sales in 2015. It's a dwindling franchise, moreover, shored up by residual sales from former blockbuster franchises such as Eloxatin (oxaliplatin) and Taxotere (docetaxel). Sales contracted by 1.9 percent over the full year and by 7.9 percent in the fourth quarter. The pharma does have some modest growth drivers, however. Fourth quarter sales of the prostate cancer drug Jevtana (cabazitaxel) and stem cell mobilizer Mozobil (plerixafor) grew by 8 percent and 13 percent, respectively, last year, to €84 million and €38 million.

Adding Medivation to the mix would dramatically change the picture. It would bring in another prostate cancer drug, the androgen inhibitor Xtandi (enzalutamide), which attained $1.9 billion in sales last year and which is on an upward growth trajectory, as its label expands from castration-resistant prostate patients to treatment-naïve patients. Its potential in breast cancer is also being explored in several clinical trials. If its bid is successful, Sanofi would bolt on some but not all of that business – it would share the economics of the drug with Tokyo-based Astellas Pharma Inc. Under its original 2009 agreement with Astellas, Medivation gets 50 percent of the U.S. profits and double-digit royalties on ex-U.S. sales. For 2015, it reported $943 million in what it calls "collaboration revenue."

That kind of figure would bolster Sanofi's cancer business significantly, while Medivation would also add some substance to its threadbare oncology pipeline. Medivation paid $410 million up front last year to Biomarin Pharmaceutical Inc., of Novato, Calif., for its PARP inhibitor talazoparib (BMN 673), with up to $160 million more to come in milestones. The drug is currently undergoing a phase III trial in patients carrying germline BRCA1 or BRCA2 mutations who have metastatic or locally advanced breast cancer. The FDA recently lifted a partial clinical hold on another Medivation drug candidate, pidilizumab, which is in phase II for diffuse large B-cell lymphoma.

Although Sanofi is busy playing catch-up in immuno-oncology – it entered large-scale collaborations in the area last year with long-term partner Regeneron Pharmaceuticals Inc., of Tarrytown, N.Y., and with Mainz, Germany-based Biontech AG – those efforts have yet to yield clinical programs. Its only clinical-stage pipeline cancer drug, the anti-CD38 antibody isatuximab (SAR650984), is in phase II trials in myeloma, but its competitive potential is questionable, given the lead enjoyed by Johnson & Johnson and Genmab A/S. Their anti-CD38 antibody Darzalex (daratumumab) gained FDA approval last November.

A HIGHER OFFER?

Sanofi needs to make a significant move in oncology if it is to make good on its declaration last November that it would build a competitive position in the area, along with multiple sclerosis, immunology and consumer health. How much value it attaches to that aim is an open question for now – but maybe not for much longer. Analysts expect it to further up the ante. "We believe that an acquisition to even higher levels than today's [offer] is possible, given that Medivation is one of a few remaining pure plays in oncology with an oral agent, in one of the largest oncology markets, that is de-risked," Simos Simeonidis, analyst at RBC Capital Markets, wrote in a flash note. Talazoparib "adds a potential second leg of growth to the story," he added.

Biren Amin, analyst at Jefferies, also sees scope for a better offer. "We think at this juncture Medivation probably still has the majority of their shareholders; however we think they will force a sale on a higher offer, of a minimum of high 50s," he wrote in an flash note.

Xtandi has caught the eye of the political establishment, as well as that of Sanofi. In March, would-be Democratic presidential nominee Bernie Sanders was among 12 members of Congress who petitioned health secretary Sylvia Burwell and NIH chief Francis Collins to hold "an open and transparent hearing" on the NIH availing of its "march-in" rights under the Bayh-Dole Act, which enables federal agencies to license a patent to alleviate health or safety needs or if an invention is not available to the public on reasonable terms.

According to a petition from several NGOs, the treatment, whose development was supported by U.S. tax dollars, costs U.S. patients $129,000, whereas patients in Japan and Sweden pay $39,000 and those in Canada pay just $30,000. "We do not think that charging U.S. residents more than anyone else in the world meets the obligation to make the invention available to U.S. residents on reasonable terms," they wrote.

St. Catherines, Ontario-based generics maker Biolyse Pharma Corp. followed up last week with an offer to supply the Centers for Medicare & Medicaid Services (CMS) with generic enzalutamide at $3 per pill or $12 per day. U.S. patients are currently paying a daily excess of $250 for their treatment, it claimed. "We believe we can have generic versions approved by the FDA in less than three years if CMS is willing to allow Biolyse Pharma to supply the drug using the U.S. federal government's worldwide royalty license," company president Brigitte Kiecken stated in a letter to Andy Slavitt, acting administrator for CMS.

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