In conventional or online stock trading, a merger or acquisition could spring up an opportunity worth considering, with a strong potential for exponential success. The pharmaceutical industry has been through significant struggles, but right now Pfizer (NYSE: PFE) could be one such stock with opportunity.
Pfizer on the Path to Medivation Acquisition
The pharmaceutical major is close to its acquisition of Medivation Inc, the biotech behind innovative cancer drugs. $PFE has been bidding for this move for quite some time, with an eye on the multibillion-dollar cancer drug market. Medivation has developed and sells a leading drug for the treatment of prostate cancer, and the $14 billion deal could give Pfizer access to this lucrative segment that is currently ruled by independent biotechs such as Medivation. And Medivation has been one of the most desired of these biotech firms.
Pfizer ($PFE) has been looking to expand its oncology treatment lineup. Its potentially blockbuster Ibrance breast cancer drug can add to the success of Medivation’s Xtandi for prostate cancer treatment and make Pfizer a leader in the oncology drug market. Medivation drugs in the development stage could also contribute to Pfizer’s development of cancer agent combinations with immunotherapies. These innovative drugs employ the immune system for treating the cancer.
Cancer Treatment a Lucrative Segment
Investors would be aware that cancer is one of the most revenue generating segments, and therefore quite controversial too with alternative treatment campaigners warning the public against conventional treatments such as chemotherapy and encouraging them to take up alternative and natural treatments that are not only much cheaper but also aren’t stressful on the body. Chemotherapy damages other healthy cells of the body along with the cancer cells causing greater damage to the body, while these alternative, natural therapies have no such side effects. However, the ambiguity associated with these therapies and the lack of sufficient empirical evidence regarding their healing properties have led to the continuous growth of conventional cancer treatment.
Pharmaceutical industry intelligence firm EvaluatePharma states that global sales of cancer drugs amount to around $80 billion each year, with an annual 10% growth. In spite of the prices often exceeding $100,000 each year per patient, reimbursement from insurance providers hasn’t been hard to come by unlike for other diseases where new drugs are facing this issue, leading to limited sales. And innovative new products such as immunotherapies and other advanced drugs aim for a more natural treatment process, reducing the severe side effects often associated with conventional treatment.
Xtandi Is a Blockbuster Drug
Medivation has an already approved cancer treatment that is selling quite well, though its Xtandi prostate cancer drug has the competing Zytiga from Johnson & Johnson. In spite of the competition, EvaluatePharma estimates that Xtandi, which is also sold by Astellas Pharma Inc, could end up becoming one of the highest selling cancer drugs by 2020.
No wonder then, that Pfizer wants a bite of the cherry. It did have competition for the Medivation bid from French company Sanofi SA. But its offer of $52.50 per share in cash was considered to undervalue the company significantly, especially considering Medivation’s evaluation of $6 billion in the early part of the year. Pfizer’s offer of $14 billion is more than double the evaluation of the independent biotech.
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