Pfizer Acquires Cancer Drug Maker Medivation For $14 Billion

Pfizer Inc. has outbid other pharmaceutical companies and agreed to buy U.S. cancer drug company Medivation Inc. for $14 billion in cash, along with its sensational prostate cancer drug Xtandi, which will add to the company's growing oncology roster.

According to Reuters, Medivation shares skyrocketed to about 20 percent to close at $80.42, a few dollars shy of the offer price of $81.50 per share. Shares of Pfizer, the largest U.S. drug company were down by 0.4 percent and closed at $34.84. The offer given is 55 percent more than Sanofi SA's initial bid to buy Medication for $52.50 per share in April, which triggered the company to put itself up for sale. Reports also said that it represents a 118-percent rise since March when Medivation had hired JP Morgan to handle interest from several companies in a potential acquisition.

A report from The Wall Street Journal reported analysts saying that Medivation's prostate cancer drug, Xtandi already generates about $2 billion in annual sales and has the possibility to double its amount. Pfizer also said that the deal would add 5 cents to earnings in the first full year after closing and is not expected to affect its 2016 financial guidance. Pfizer also revealed its plans to finance the transaction with its cash holdings. According to regulatory filing, if the acquisition would not be complete, Medivitation could pay Pfizer a hefty $510 million termination fee.

It was also reported by CNN that the drug maker had a bigger proposed merger with Allergan at $150 billion. However, it was blocked earlier this year when the current Obama administration issued new rules which was specifically designed to enforce corporate tax avoidance. It has been a while since Pfizer planned to expand its list of oncology treatments. Xtandi would give the New York-based drug company a good head start in prostate cancer which will complement its breast-cancer treatment Ibrance, also on its way to becoming a sensational drug.

Medivation's drugs that are being developed could also complement Pfizer's efforts to create combination cancer drugs with immunotherapies, which set up the immune system fight cancer. The takeover would further Pfizer CEO Ian Read's efforts to bolster what he refers to as the innovative side of the company's business. The move "accelerates our strategy in line with our priorities," he said on a call with analysts Monday.

The deal is expected to close in the third or fourth quarter of 2016 and is subject to customary closing conditions and U.S. antitrust clearance.