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Gilead - Medivation Too Costly, How About Smaller Fish Like Arrowhead In HBV Or A NASH Target?

Summary

Pfizer wins Medivation by paying up big time.

Gilead needs to do something, anything, including buying or partnering with smaller companies, until it can close a big deal to offset Harvoni declines.

Arrowhead pharmaceuticals would be a good target in HBV, for example, or maybe a NASH target.

Gilead Sciences, Inc. (NASDAQ:GILD) needs to make a move. With its main drug Harvoni starting a predictable decline in sales (HCV products down 33% year-over-year (conference call)), the company needs to do something (even if it is small) to shake off the monotony of ever increasing buybacks as the stock tumbles lower and lower. If a big fish like Medivation (NASDAQ:MDVN) is proving too difficult to land, how about buying a smaller company in the HBV (hepatitis B) or NASH (non-alcoholic steatohepatitis) field that could easily fit into its wheelhouse of knowledge to supplement the company's drug pipeline until a bigger company comes along that Gilead can snag. As time passes and Gilead continues to sit on its hands, it becomes clearer and clearer that action needs to be taken, or the selloff of the company will be justifiably extended.

Some of the most interesting news Monday morning came from the healthcare sector as Pfizer won Medivation's heart with a ~$14 billion offer that translates to a price approximately 33% higher than last Friday's close (article). This concludes a bidding war with other rivals including Celgene (NASDAQ:CELG), Merck (NYSE:MRK), AstraZeneca (NYSE:AZN) and Sanofi (NYSE:SNY), who had two previous offers for the company being rejected as inadequate. All of this back and forth has resulted in Medivation's stock more than doubling from February's lows as the purchase price finally became too high for even a company with deep pockets like Gilead to digest.

MDVN data by YCharts

Gilead was looking for an immediate growth driver in Xtandi, Medivation's leading prostate cancer drug with projected 2020 sales of $5.7 billion, but wasn't willing to pay the price needed for it, as a lot of the big drug companies are looking for blockbuster drugs with nice runways in front of them, and have the cash on hand to pay the premium for them.

With the failure of Gilead to land this deal, maybe it...


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