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Pfizer to Buy Cancer Drug Company Medivation for $14 Billion 

The deal shows a shift in Pfizer’s M&A strategy from lowering taxes to strengthening its lineup of branded drugs.

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Pfizer Inc (PFE.N), beating out numerous other bidders, said it agreed to buy US cancer drug company Medivation Inc (MDVN.O) for $14 billion in cash, adding its blockbuster prostate cancer drug Xtandi to the company’s growing oncology roster.

Medivation shares jumped nearly 20 percent to close at $80.42, just shy of the offer price of $81.50 per share. Shares of Pfizer, the largest US drugmaker, were down 0.4 percent at $34.84.

The offer is a 55-percent premium to Sanofi SA’s (SASY.PA) initial bid to buy Medivation for $52.50 per share in April, which pushed the San Francisco-based company to put itself up for sale. It represents a 118-percent increase since Reuters reported on March 30 that Medivation had hired JP Morgan to handle interest from companies in a potential acquisition.

The planned purchase of Medivation, with its $2.2 billion-a-year Xtandi, is the latest in a number of deals by large drug-makers willing to pay top dollar for cancer drugs that are more effective than standard, older treatments. Perhaps the most notable example is AbbVie Inc’s (ABBV.N) $21 billion purchase last year of Pharmacyclics. The deal gave AbbVie shared ownership with Johnson & Johnson (JNJ.N) in the blockbuster leukemia drug Imbruvica.

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Analysts predicted the deal would not raise antitrust concerns because Pfizer does not currently sell a prostate cancer drug aside from generics.

Pfizer said its earnings would increase immediately after buying Medivation. The deal comes four months after Pfizer and Ireland-based Allergan Plc (AGN.N) scrapped their $160 billion merger. Pfizer has since bought Anacor Pharmaceuticals Inc in a $5.2 billion deal to add an eczema gel to its portfolio.

The Medivation deal illustrates a shift in Pfizer’s M&A strategy from lowering taxes – the rationale behind the failed Allergan tax inversion deal – to strengthening its lineup of branded drugs, especially lucrative cancer treatments.

Pfizer, in a conference call with analysts, said it still plans to decide by year-end whether to split into separate companies selling either low-growth generics or patent-protected brand medicines.

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Topics:  Pfizer 

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