Estimates of future growth in the oncology market, a predicted increase of 11% per year in sales, and the need to expand drug-development pipelines to sustain profits have been driving up the value of corporate mergers, such as Pfizer's purchase of Medivation for $14 billion.
This past spring, pharmaceutical giant Sanofi offered to pay $52.50 per share for San Francisco, CA–based Medivation, which makes the androgen blocker enzalutamide (Xtandi; marketed with Astellas Pharma). Considered too low, that price sparked an aggressive 5-month campaign by multiple companies to acquire Medivation, with Pfizer walking away as the winner, paying $81.50 per share, for a total of $14 billion.
Other recent blockbuster pharmaceutical deals include AbbVie's $21 billion purchase of Sunnyvale, CA–based Pharmacyclics to obtain the BTK inhibitor ibrutinib (Imbruvica) for B-cell malignancies, and Amgen's acquisition of Onyx, in South San Francisco, CA, for more than $10 billion to acquire the proteasome inhibitor carfilzomib (Kyprolis) for multiple myeloma.
Such mega-mergers prompt the question: Why the high prices? It's the strong market desire for cancer drugs right now, says Bruce Booth, a partner at Atlas Venture, a life sciences venture capital firm headquartered in Cambridge, MA.
According to a 2014 report by Evaluate Pharma, oncology drug sales are expected to grow 11% annually, more than any other pharmaceutical sector, until at least 2020. By then, cancer therapeutics will account for $153 billion in worldwide sales annually, up from $73 billion in 2013. That number could go even higher if, for example, existing drugs prove effective for multiple indications.
Medivation's enzalutamide, already approved to treat metastatic, castration-resistant prostate cancer, is being tested in earlier-stage disease and in breast cancer. The company has two other drugs in late-stage clinical development: pidilizumab, a monoclonal antibody for the treatment of diffuse large B-cell lymphoma, and talazoparib, a PARP inhibitor for germline BRCA-mutant breast cancer.
“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 David Hung, MD, founder, president, and CEO of Medivation, when he announced the deal in August.
“Medivation's acquisition is certainly another example of how incredibly exciting of a time it is today in the cancer field,” Booth notes. “Further, the [immuno-oncology] arms race and the centrality of combination therapy are creating enormous demand for new innovation.”
Multiple suitors have been seeking to ally with companies that have immunotherapies in development, Booth adds, given the commercial success of drugs such as the PD-1 inhibitors nivolumab (Opdivo; Bristol-Myers Squibb) and pembrolizumab (Keytruda; Merck). This year, Novartis beat out competitors with a $170 million offer of research support for Surface Oncology's pipeline, and Celgene committed $225 million up front to collaborate with Jounce Therapeutics and promised to pay as much as $2 billion more if its immunotherapy candidates make it to market. Based in Cambridge, MA, Surface and Jounce both focus on therapies that go beyond checkpoint inhibition, such as some that relate to effector T cells and tumor-associated macrophages.
Booth predicts that deal-making will continue to be aggressive in coming years. Public pushback over drug costs means that pharmaceutical companies won't be able to sustain profits by raising prices. Internal research and development also faces continuing challenges. To compensate, Booth argues, “big pharma” will increasingly look to buy into promising new drugs, especially ones that could prove lifesaving for patients. –Karen Weintraub