Pharmaceutical giant Pfizer's $14 billion purchase of Medivation -- a firm which produces one drug, Xtandi, used to treat prostate cancer -- sent ripples through the oncology community, and is likely to create a buying frenzy to prevent Pfizer from cornering the market in commercial-stage breast and prostate cancer treatments.
The appeal of such specialized treatments for companies like Pfizer is that unlike drugs for other diseases, regimens for cancer have been immune to much of the cost-cutting across the industry, oftentimes selling for well over $100,000 per year.
Following the success of its breast cancer drug Ibrance, Pfizer branched out into the prostate cancer market, purchasing Medivation and its sole product, Xtandi, at what now appears to be an above-market price. (Shares of Medivation were selling for under $30 as recently as February, but Pfizer paid $81.50 per share in cash.)
The rationale behind this overbuy isn't simply to provide shelter from industry-wide cost-cutting -- Pfizer is interested in two other drugs Medivation has in development, talazoparib and pidilizumab, both of which are also used to treat cancer.
While the company explicitly states that its interest in Medivation is primarily because of Xtandi, insiders believe that its main target is pidilizumab, a drug which is being developed to treat blood cancers, but which shows immunotherapeutic promise -- meaning that it could be used as part of a regimen that would allow the body's immune system to fight cancer.
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