Could Merck (MRK) Join the Bidding for Medivation (MDVN)?

Is Merck (NYSE: MRK) in the running for Medivation (NASDAQ: MDVN) too? That is the sense BMO Capital analyst Alex Arfaei gets after the company's earnings release.

Merck said, "Business development is a top priority, and we are actively pursuing the best external science through licensing or bolt-on acquisitions."

"We believe Merck is preparing investors for a mid-sized deal, perhaps in line with or larger than the $9.5Bn Cubist deal," Arfaei said. "In our view, this puts Medivation (NASDAQ: MDVN), which has been the subject of considerable takeout discussions, as a potential target for Merck as well."

He added, "Medivation could offer Merck an oncology franchise that that is complementary to its growing IO franchise. However, Merck would be competing with a number of other large cap Biopharma companies for Medivation, and as a result the price could be higher than expected; this could explain the special mention in the press release. Overall, given the recent pullback in the Biotech sector (NBI down 24% YTD), we believe the likely targets are mid-cap biotechs."

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