AstraZeneca is keen to extend its presence in immunotherapy drugs, which harness the body’s own immune system to fight cancers.
Analysts noted the uncertainty surrounding any bid by the company for Medivation, whose shares lifted 6% in early New York trading.
But Shore Capital analyst Tara Raveendran said AstraZeneca’s chief executive Pascal Soriot may be facing pressure to achieve targets he set after US rival Pfizer tried to buy the UK group two years ago.
“We would not rule out a bid (for Medivation) at this stage,” Raveendran said.
AstraZeneca and other majors have so far appeared to focus on US-listed immunotherapy specialists in the hunt for promising drugs.
US-based MaxCyte is another company whose technology is used to develop and commercialise cell-based therapies in regenerative medicine and active cell immunotherapy.
Big companies such as AstraZeneca are looking at smaller firms with nascent drugs to boost their portfolios as their older products lose patent protection.
It has already bought a majority stake in Dutch-US blood cancer treatment developer Acerta Pharma for US$4bn.
Acerta has a treatment known as acalabrutinib being tested for treatment of a range of leukaemias, lymphomas and other cancers.
Medivation is the latest US-listed company to come under rivals’ takeover microscopes due to its development of similar drugs.
The San Francisco-based group makes best-selling prostate cancer treatment Xtandi and is developing a breast cancer product.
It is said to have taken on JP Morgan to assess potential interest and protect itself from a possible hostile bid.
The company is already thought to have rejected an approach from French group Sanofi worth about US$60 a share.
Market gossips have suggested Sanofi could up its bid to about US$65 while AstraZeneca is rumoured to be considering a similar offer.
Credit Suisse has suggested that Medivation, which has a market capitalisation of US$8.7bn, may attract bids of up to US$75 a share, valuing it at about US$12.8bn.
Neither AstraZeneca nor Medivation has commented on the unconfirmed speculation.
But Shore Capital said the US business would fit AstraZeneca’s recent strategic focus on oncology.
Existing AstraZeneca drugs such as Durvalumab, Lynparza and Tagrisso are expected to collectively earn US$12bn per annum in sales by the full year 2023.
That is a significant proportion of the US$45bn target set by Soriot following Pfizer's interest.
But ShoreCap said it was still unclear whether AstraZeneca would actually bid.
Raveendran said some had suggested that AstraZeneca was unlikely to enter a bidding war, given the potential competition from Sanofi and other mooted bidders such as Switzerland’s Roche.
She also cited Soriot’s comments that he would only do further large deals if they immediately boosted earnings and avoided dilution.
Brokers such as Liberum Capital and Deutsche Bank have AstraZeneca on their ‘buy’ lists.
In first quarter results on April 29, Deutsche expects AstraZeneca to report flat product sales at constant exchange rates.
It said the strong performance of new drugs Tagrisso, Lynparza and Farxiga was helping to offset pressure from Nexium generics and stockpile reductions ahead of the patent expiry of cholesterol drug Crestor.
“We’re buyers of AZN’s shares given our confidence in a return to above peer group growth post 2017,” it said.