Why pharma giants are going after a relatively unknown cancer drugmaker

There's a new bidding war brewing in the drug industry.

Last week, Sanofi went public with a $9.3 billion bid for Medivation, a San Francisco-based biotech that already has one drug on the market to treat prostate cancer.

Medivation turned down that bid a day later, and it's already fielding other offers. Reuters is reporting that Pfizer has approached the company about a possible takeover.

Contests for promising pipelines aren't uncommon in the drug industry, and with news of Pfizer's approach breaking its very likely that other cash-rich drugmakers will be drawn into the fray.

Traders have already pushed Medivation's market cap up to $9.6 billion, and analysts at Stifel mention AstraZeneca and Roche as other companies that might make sense as acquirers.

Regardless, the analysts think Medivation could fetch at least $66 per share in a sale. That's about 13% above the current price. With a few tweaks to Stifel's assumptions on how much in cost savings a buyer could find, and how well they expect Medivation's pipeline to fare, the potential takeover price rises to as much as $85.

Here's what makes the company's pipeline so appealing:

• Medivation's one drug on market already is called Xtandi, or enzalutamide, which the company developed with Japan's Astellas. It's an oral drug that used to treat is used to treat late-stage prostate cancer. It was originally approved by the US Food and Drug Administration in 2012 based on a study that evaluated its ability to increase how long patients survived (median overall survival was 18.4 months for those who took Xtandi in the trial, compared to 13.6 months median overall survival for those who took a placebo). It does cost a list price of $129,000 in the US, which has gotten it in some hot water with Congress.
• Medivation is also researching how enzalutamide works in people with other types of prostate, breast and liver cancers.
• Medivation also has two other cancer drugs in late stage trials, including talazoparib, which it acquired last August. The drug is being studied in certain types of breast cancer, as well as other kinds of cancers including cervical, lung, and ovarian.
• Another drug to treat a certain kind of blood, pidilizumab, is also in a late-stage trial.
• The big thing with these drugs is that they're being explore in combination with immunotherapies, or treatments that use the immune system to fight off cancer cells. Response rates - instances in which the cancer stops spreading or shrinks in response to immunotherapy drugs - on their own are still fairly low, but researchers hope that cancer immunotherapies combined with other treatments (say, Medivation's oral drugs), could push that response rate way up.
• And immunotherapies are a huge business, with multiple investors setting up funds for companies developing immunotherapies.