BTIG: Medivation Acquirer Could Pay 20-30% Premium And Still Buy At Low Valuation

Media reports suggest Medivation Inc (NASDAQ: MDVN) has hired an investment bank to look into acquisition interest from other companies, while it has no plans to sell itself. BTIG’s Hartaj Singh said that the latest media reports had resulted in “frenzied speculation” of potential suitors, price and if management would agree to sell.

While saying, “We will not speculate on these matters,” analyst Hartaj Singh 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 ~$7.5B 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.”

Investment Thesis

Singh maintained a Neutral rating for the company, saying that Xtandi’s currently robust sales growth is likely to slow going ahead, while Opex may rise, operating leverage may decelerate slow and R&D development risk is likely to increase.

“While we are slowly becoming positive on Medivation, it is more likely that an acquirer could realize scale and synergy benefits quicker,” the analyst commented.