Medivation Prescription Growth And Potential Price Increases Could Drive Upside This Year

Medivation Inc MDVN is in the limelight given the ongoing takeover by Sanofi SA (ADR) SNY, which is expected to gain momentum into the end of the solicitation period in early August. Barclays' Geoff Meacham maintained an Overweight rating for Medivation, with a price target of $70.

Meacham noted that although management continues to be amenable to a deal, it's unlikely to be anywhere close to the current bid of $52.50 per share.

“In our view, the 'anchor' assets would fit well in the oncology portfolios of many biopharmas with a straightforward upside case for Xtandi (breast cancer, M0 prostate and accelerating urologist adoption for M1 prostate) plus broad talazoparib potential (breast/ovarian/lung) assuming phase 3 differentiation,” Meacham wrote.

Value Drivers

The analyst mentioned the following events that could act as catalysts in the back half of 2016:

1. 2Q16 results
2. Competitive PARP data, especially Tesaro's niraparib in ovarian cancer
3. Phase 2 data for Xtandi in ER+/PR+ breast cancer
4. Phase 4 data for PLATO for Xtandi + Zytiga in prostate

The value drives for 2017 are likely to be:

1. Accelerating urologist adoption given TERRAIN inclusion on the Xtandi label
2. Phase 3 data from the EMBRACA study of talazoparib in breast cancer
3. Potential for M0 prostate phase 3 data from PROSPER

Meacham commented that while the bull case was clear for 2017, the main question was how impactful the developments over the next 60 days would be in order to justify a higher bid. “In our view, assuming that the near-term events are favorable, an incremental ~$10/sh beyond current levels seems very reasonable.”