Myovant Spurns Sumitovant Offer, Remains Open To Higher-Value Deal
Sumitomo Pharma Subsidiary Already Owns 52%
Executive Summary
Sumitovant offered $22.75 per share in cash, valuing Myovant at $2.4bn total, to acquire what it does not hold as a result of its 2019 agreement to buy majority shares of five Roivant companies.
Myovant Sciences Ltd., buoyed by the recent upswing in its share price after achieving various milestones it laid out earlier in the year, has rejected an offer valuing it at $2.4bn from majority shareholder Sumitovant Biopharma Ltd., which wants to buy the 48% of the company it does not already own. Myovant said on 2 October that Sumitovant’s terms significantly undervalue the women’s health and prostate cancer firm, but it is prepared to consider other offers from the potential acquirer.
Sumitovant, a wholly owned subsidiary of Sumitomo Pharma Co., Ltd. (previously Sumitomo Dainippon Pharma Co. Ltd.; DSP), obtained its majority interests in Myovant and four other companies under a 2019 agreement with former Myovant parent company Roivant Sciences Ltd. That $3bn transaction, which gave Sumitomo options to acquire Roivant’s majority stakes in up to six additional “Vants” by the second half of the Japanese company’s 2024 fiscal year, was meant to boost Sumitomo’s near-commercial pipeline ahead of the launch of US generics for its blockbuster antipsychotic Latuda (lurasidone) in 2023. (Also see "$3bn Roivant Deal To Fill Holes At Dainippon" - Scrip, 6 Sep, 2019.)
The Sumitomo-Roivant deal closed nearly three years ago and Sumitovant launched as the parent organization for Sumitomo’s majority ownership interests in Myovant, Urovant Sciences, Inc., Enzyvant Therapeutics, Inc., Altavant Sciences, Inc. and Spirovant Sciences, Inc.; Myovant is the only one of the five that has not become a wholly-owned Sumitovant subsidiary since the transaction closed.
During the past three years, however, Myovant has won approval for three separate indications for its oral gonadotropin-releasing hormone (GnRH) receptor antagonist relugolix in the US – Orgovyx (relugolix) as an oral hormone therapy for advanced prostate cancer in December 2020, Myfembree (relugolix/estradiol/norethindrone acetate) for heavy menstrual bleeding associated with uterine fibroids in May 2021 and Myfembree for the management of moderate-to-severe endometriosis pain in August. (Also see "Myovant Expects Gradual Growth For Myfembree With Endometriosis Approval" - Scrip, 8 Aug, 2022.)
Myovant has achieved ex-US goals in 2022 that it outlined earlier in the year as well, including EU approval for Orgovyx in prostate cancer at the end of April. It also secured a new partner for the drug’s launch in Europe, Accord Healthcare Ltd. (Also see "Myovant's Next Act: Commercial Execution And Business Development" - Scrip, 8 Mar, 2022.) Pfizer Inc. is Myovant’s commercial partner for Orgovyx and Myfembree in the US and Canada, but the big pharma opted not to exercise an option to partner on the products in Europe. (Also see "Pfizer Gains New Commercial Drug Orgovyx In Deal With Myovant" - Scrip, 28 Dec, 2020.)
Myovant’s Stock Rising Before Sumitovant Offer
Basel, Switzerland-headquartered Myovant closed at $24.96 per share on 3 October, up 39% from 30 September on the prospect that the company may be able to negotiate better buyout terms with Sumitovant. However, Myovant’s stock price has been on the rise in recent month on its own because of the company’s recent achievements, particularly the Myfembree approval for endometriosis in August. Myovant closed at $17.96 at the end of September, representing a 15.4% year-to-date gain; its value rose 38.6% in the third quarter of 2022 alone.
In a 9 August note about Myfembree’s FDA approval for endometriosis, SVB Securities analyst Roanna Ruiz acknowledged the company’s incrementally increasing value in the eyes of investors despite ongoing turmoil in the broader stock market.
“In this tough macroenvironment, we believe Myovant is starting to ‘tick more boxes’ for investors looking for emerging, multi-product commercial growth stories without risky binary events like late-stage clinical trial readouts,” Ruiz said.
The analyst noted that Myovant will continue to have opportunities to increase the size of the Myfembree opportunity with ongoing and planned supplemental filings for approvals to increase the dosing of the drug beyond two years and with increased consumer-directed marketing in partnership with Pfizer. She forecast $1bn in peak sales for Orgovyx and $600m for Myfembree, in line with a $632m Myfembree forecast from Goldman Sachs.
“We estimate FY2025 Myfembree US sales of $125m in endometriosis and $325m in all indications,” Cowen analyst Phil Nadeau said in an 8 August note. “We continue to believe that MYOV is undervalued for the potential of Myfembree and Orgovyx.”
Orgovyx sales totaled $36m in Myovant’s fiscal year 2022 first quarter, which ended on 30 June, while Myfembree sales totaled $5.4m. Fiscal year 2021 sales totaled $83m and $6.4m, respectively.
Deal Terms ‘Undervalue’ Myovant
Sumitovant, which already owns 52% of outstanding Myovant shares, offered $22.75 per share in cash to buy the rest of the company in a deal that would give the relugolix developer an equity value of $2.4bn and an enterprise value of $2.5bn. The per-share offer price was a 27% premium to Myovant’s 30 September closing price and a 31% premium to the firm’s 60-day volume-weighted average price through the end of September.
“In our view, we think Sumitovant’s offer appears somewhat opportunistic, and bullish investors may be able to argue that Myovant could sell for a premium to the initial $22.75/share offer,” SVB’s Ruiz said in a 3 October note.
There is precedence for Sumitovant to pay a greater premium for the minority interest in Myovant. The remaining shares of Urovant – no longer an independent, publicly traded entity since Sumitovant bought out the 18% interest in the company that it did not already own in November 2020 – were acquired at $16.25 each, a 106% premium. (Also see "Deal Watch: Lilly Finds New Partners For Genetic Disorders, Protein Degradation" - Scrip, 25 Nov, 2020.)
The Sumitovant deal would take Myovant off the New York Stock Exchange, since the company would be absorbed by Sumitovant, whose parent company Sumitomo is publicly traded in Japan.
“The proposal is a natural step in the well-established relationship between Sumitovant and Myovant, and represents an unprecedented opportunity to combine expertise, platforms and resources to deliver innovative therapies addressing unmet patient needs in women's health and prostate cancer,” Sumitovant said in a statement. “If a transaction is completed, we will continue to provide support and resources to Myovant to enable achievement of its mission.”
Sumitovant noted that a transaction would provide immediate value to Myovant’s minority shareholders, but its acquisition of the company’s remaining shares depends on majority approval from the investors who own the shares that Sumitovant does not. The likelihood of another buyer for the entire company intervening is unlikely because majority shareholder Sumitovant said it will not support a third-party buyer.
In acknowledging receipt of Sumitovant’s offer, Myovant said its board of directors formed a special committee of independent directors, comprised of the members of its audit committee, to evaluate the initial proposal and any alternatives in consultation with financial and legal advisors. The special committee determined that Sumitovant’s first offer “significantly undervalues the company and, therefore, is not in the best interests of the company or its minority shareholders,” Myovant said.
The company noted that its special committee “remains open to considering any improved proposal that reflects the full and fair value of the company … and is prepared to engage further with Sumitomo regarding any such proposal.”