WASHINGTON _ Pharmaceutical giant Pfizer Inc. is paying $14 billion to buy Medivation Inc., a San Francisco biotech company that sells a high-priced prostate cancer medication discovered by UCLA.
A year's worth of the drug, Xtandi, sells for about $129,000, and the medicine has generated about $2.2 billion in net sales worldwide over the last year, the companies said Monday in announcing the deal.
The potential for Xtandi in the growing market for cancer medicines _ it's also being tested for breast cancer treatment _ made Medivation a target of larger pharmaceutical companies.
Pfizer Chief Executive Ian Read said "the value of Xtandi and its future growth potential was the principal driver" of the deal.
"With this acquisition, we are expanding and strengthening our footprint in one of the highest-growth therapeutic areas in the biopharmaceutical industry," he told analysts on a conference call.
New York-based Pfizer agreed to pay $81.50 in cash for each share of Medivation, a 21 percent premium over Friday's closing price of $67.16.
Medivation stock closed up $13.26, or 20 percent, to $80.42 on Monday. Pfizer shares were down 14 cents, or 0.4 percent, to close at $34.84.
"We believe that Pfizer is the ideal partner to extend the reach of our blockbuster Xtandi franchise and take our promising, late-stage assets _ talazoparib and pidilizumab _ to their next stages of development so that they can be made available to patients as quickly as possible," said Dr. David Hung, Medivation's founder and chief executive.
Talazoparib is a breast cancer drug that is in phase 3 clinical trials. Pidilizumab is being developed to treat lymphoma and other blood-related diseases.
But Xtandi, which Medivation sells in partnership with Japan's Astellas Pharma Inc., was the star of the deal for Pfizer, said David Nierengarten, managing director and head of health care equity research at Wedbush Securities.
"They get a share of the best prostate cancer drug on the market," he said.
Xtandi's possible use as a breast cancer treatment boosted Medivation's,value, Nierengarten said.
With a highly desirable drug already on the market, Medivation was in strong demand. The company rebuffed a $9.3 billion bid from French pharmaceutical company Sanofi this year. Gilead Sciences Inc. and Celgene Corp. also were among companies reportedly interested in acquiring Medivation.
Adding to the attraction of Medivation was a decision in June by federal officials rejecting an effort to allow other companies to sell Xtandi for lower prices.
Two nonprofit groups had made the request, arguing that the federal government could allow lower-priced competition because UCLA scientists had used taxpayer-funded grants in their research.
Xtandi, also known by the generic name enzalutamide, was patented by UCLA in 2005 and licensed to Medivation.
The San Francisco company has about 600 employees and posted a $404 million loss on $206 million in revenue in the second quarter of this year. Medivation said the loss was related to expenses from its purchase last year of all worldwide rights to talazoparib from BioMarin Pharamaceuticals Inc.
Medivation reported a $245 million profit last year on $943 million in revenue. All the revenue came from Xtandi, the company's only federally approved drug.
Net sales of Xtandi in the U.S. increased 69 percent last year from 2014, and nearly doubled worldwide.
Worldwide sales of the drug were up 22 percent in the second quarter compared to a year earlier, and increased 11 percent in the U.S. during that period.
Medivation's stock began soaring in late 2011 after it reported positive results from its clinical trials of Xtandi. The following year, the Food and Drug Administration approved the medication for treatment of prostate cancer.
In March, Royalty Pharma, a pharmaceutical investment company, paid $1.14 billion to acquire the royalty rights to Xtandi in the largest-ever technology transfer deal involving a UC invention. UCLA received $520 million of the money for its 43.9 percent ownership stake in the drug.
UCLA put the money in a portfolio that was expected to generate $60 million a year until 2027, when major patents on the drug expire. UCLA said it would use the money to pay for research, undergraduate scholarships and graduate student fellowships.
The university opted for the lump-sum payment on Xtandi rather than annual royalties.
"I'm sure UCLA saw a potential use for that lump-sum payment that is greater than waiting around for that stream of royalty payments," Nierengarten said.
Westwood Technology Transfer, an advisory board established by UCLA to help maximize the value of the university's patents, recommended the deal with Royal Pharmacy.
At the time, Tom Unterman, the board's chairman, said that drug revenue could drop at any time if prices declined or better therapies became available. Unterman, founding partner of Santa Monica venture capital firm Rustic Canyon Partners, could not be reached for comment Monday. (Earlier in his career, Unterman was chief financial officer of Times Mirror Co., the Los Angeles Times' former owner).
The Pfizer-Medivation deal is subject to antitrust review, and the companies said they expect it to close by the end of the year. Each company's board of directors unanimously approved the deal. If the deal is not completed, Medivation will have to pay a $510 million termination fee, according to a regulatory filing.
