Bayer considers itself a disciplined M&A strategist. Apparently, its discipline stretched far enough to accommodate a $500 million increase in its bid for Algeta, the Norwegian drugmaker that's also its partner on the Xofigo cancer treatment.
|Bayer CEO Marijn Dekkers|
And that $500 million boost, to $2.9 billion, won backing from the Algeta board. So, Bayer is on its way to a beef-up in its cancer business. Already riding a new wave of growth from its new oncology drug Stivarga (regorafenib), Bayer sees Xofigo as a solid contributor to its growth in the field.
"We are absolutely convinced of the potential of this drug and the underlying technology to provide patients with innovative treatment options," Bayer CEO Marijn Dekkers said in a statement. The company has pegged Xofigo as a blockbuster, with $1 billion-plus in peak sales.
Recently approved for prostate cancer that has spread to the bone, Xofigo is also in trials combining the radiotherapy with other prostate cancer treatments, including Johnson & Johnson's ($JNJ) fast-growing pill, Zytiga. Xofigo's promise is that cancer-killing radiation can be precisely targeted at tumors, sparing healthy cells and minimizing side effects.
Plus, Algeta is working on other radiation-based cancer technologies, including an armed-antibody approach. Apparently, the company figured its pipeline was another justification for a bigger offer from Bayer.
At least one Algeta investor figures that Bayer's offer will probably go through. "It looks like the board has done its best to get an increased bid," Alfred Berg Capital Management fund manager Leif Eriksroed told Reuters. "So this won't be the hardest decision we've had to make." Eriksroed added that he doesn't expect any competing offers.
Did Bayer bid too high, then? Some analysts think so. DZ Bank analyst Peter Spengler called the price "a bit stiff," Reuters notes. But Bayer wants to be a bigger player in oncology, and its other cancer partner--Onyx Pharmaceuticals, which co-markets Stivarga as well as the older cancer treatment Nexavar--is now part of Amgen ($AMGN).
"It strengthens Bayer's oncology business," Helvea analyst Odile Rundquist said of the deal. "We expect a positive impact on Bayer's pharma margin." And Spengler noted that the buyout would save Bayer milestones and royalties of more than €500 million ($683 million).
Already approved for kidney and liver cancer, Nexavar nabbed a thyroid cancer indication earlier this year. And Stivarga, originally marketed for colorectal cancer, added an indication in gastrointestinal stromal tumors (GIST) in February.
Special Report: Top 10 Late-Stage Cancer Drugs - Regorafenib | Bayer - Top Pharma Companies by 2012 Revenues