Myovant Accepts Higher Sumitovant Offer In Deal That Values It At $2.9bn
Women’s Health, Prostate Cancer Assets To Get A Boost
Executive Summary
Sumitovant, a Sumitomo subsidiary, will pay $27 per share for the 48% of Myovant shares it does not already own, for a deal value of $1.7bn, up from a $22.75-per-share bid in early October.
The revised terms of Sumitovant Biopharma Ltd.’s bid to purchase the portion of outstanding Myovant Sciences Ltd. shares that it does not own brings revenue-generating products fully into parent company Sumitomo Pharma Co., Ltd.’s portfolio at a critical time. And in addition to generating a better return for Myovant’s minority shareholders, the deal, announced on 24 October, increases the resources behind the smaller firm’s women’s health and prostate cancer drug portfolio.
Sumitovant, a wholly owned Sumitomo subsidiary, already owns 52% of Myovant’s shares but it now has agreed to pay $27 each for the remaining shares, or $1.7bn. The all-cash deal values Myovant at $2.9bn, compared with the $2.4bn enterprise value of Sumitovant’s offer three weeks ago of $22.75 per share, which Myovant’s board of directors had rejected as not reflecting the true value of the commercial-stage company. Myovant markets Orgovyx (relugolix) for prostate cancer and Myfembree (relugolix/estradiol/norethindrone acetate) for uterine fibroids and endometriosis.
The transaction – expected to close in the first quarter of 2023, pending regulatory clearance and majority approval by shareholders who own the remaining 48% of Myovant – completes an effort that Sumitomo began three years ago to acquire five companies created by Roivant Sciences. The Japanese pharma firm saw that deal as an opportunity to access entities with multiple products that could help it grow despite a future decline in revenue when generics for its antipsychotic Latuda (lurasidone) reach the market in 2023. (Also see "$3bn Roivant Deal To Fill Holes At Dainippon" - Scrip, 6 Sep, 2019.)
The Roivant transaction gave Sumitomo partial ownership of five companies and a deadline to potentially purchase the remaining portions of those firms, including Myovant, plus options to acquire additional Roivant subsidiaries. (Also see "Sumitovant Keeping Sumitomo Dainippon-Acquired Roivant Companies On Track" - Scrip, 29 Jan, 2020.) Myovant was the final holdout after Sumitovant – the wholly owned subsidiary Sumitomo set up to manage its interests in the first five Roivant-originated companies – brought the other four in as wholly owned Sumitovant subsidiaries. It acquired one of the companies, Urovant Sciences, Inc., in November 2020. (Also see "Deal Watch: Lilly Finds New Partners For Genetic Disorders, Protein Degradation" - Scrip, 25 Nov, 2020.)
The $27 price that Sumitovant is paying for each remaining Myovant share reflects a 50% premium to the firm’s 30 September closing price, the last US trading day before the Sumitomo subsidiary’s first bid for Myovant was revealed.
“Moving forward, we expect [Myovant’s] stock to largely trade based on deal dynamics, and barring unforeseen circumstances, we expect the deal to close by the anticipated 1Q23 timeline,” SVB Securities analyst Roanna Ruiz said in a 24 October note. “And, since Sumitovant already owns ~52% of Myovant, we do not anticipate a higher bid to emerge. We note that the agreed upon ($27/share) deal price is ~19% above the bid price outlined in Sumitovant’s initial nonbinding proposal on Oct 2.”
Ruiz cited FactSet data that suggest “the cost basis of the top 15 institutional shareholders (which make up ~27% ownership of the company) range[s] between $11-$21, with a median of ~$16 and as such, the transaction should bring meaningful value to Myovant’s minority shareholder base.”
Deal Benefits Sumitomo’s Bottom Line, Myovant’s Pipeline
The boards of directors of Sumitovant and Sumitomo approved the Myovant deal terms. And, after a special committee of Myovant independent directors unanimously recommended Sumitovant’s revised deal terms, Myovant’s board of directors – with Sumitovant-designated directors recusing themselves – approved the transaction.
Sumitovant CEO Myrtle Potter and Sumitomo CEO Hiroshi Nomura asserted in a statement about the deal that, under the Sumitovant and Sumitomo umbrella, Myovant will boost its expertise, platforms and resources for commercializing its existing products and bringing forward new medicines. Nomura said Sumitomo also will be able to accelerate the contribution of Orgovyx and Myfembree sales to the parent company’s overall growth.
Myovant CEO David Marek said in the companies’ joint statement that Sumitovant’s revised deal terms recognize Myovant’s success and will expand the impact of the company’s approved therapies while helping to advance its research and development programs.
Myovant’s R&D pipeline includes the MVT-602, an oligopeptide kisspeptin-1 receptor agonist that is being evaluated in a Phase II clinical trial for its potential to trigger egg maturation in women undergoing assisted reproduction, including in vitro fertilization.
Evercore ISI analyst Gavin Clark-Gartner pointed out in a 19 October note that Myovant “is planning to give a broader pipeline update by [year-end 2022]. They’ve specifically mentioned potential new indications for MVT-602 … and relugolix in other hormone sensitive cancers and women’s health indications outside fertility.” The company will report its earnings for the second quarter of its 2022 fiscal year – the three-month period ended 30 September – on 26 October.
Also in its R&D pipeline, Myovant expects a US Food and Drug Administration approval decision by 23 January on its supplemental new drug application (sNDA) for Myfembree as a treatment for uterine fibroids for longer than the two years allowed under its current US label. The company also is testing the drug as contraceptive therapy in the single-arm Phase III SERENE study in women with uterine fibroids and endometriosis.
Goldman Sachs analysts said in an earnings preview note on 29 September that its analysts expect Myovant to report $6.5m in Myfembree sales for its fiscal year 2022 second quarter versus analyst consensus of $7.1m with $41.5m expected from Orgovyx for the quarter ended 30 September versus consensus of $42m.
“Though Orgovyx represents the bigger product at the moment, we think Myfembree sales will drive [near-term] investor interest,” the Goldman Sachs analysts said.