What's a birth-control drug maker to do when its pills start to flag? Turn to a device instead. That's the strategy Bayer is using to bolster its contraceptives business, with plans to spend $1.1 billion in cash to buy California-based Conceptus and its Essure birth-control product. The $31-per-share bid is a 20% premium to last week's closing price.
Approved by FDA in 2002, Essure is a set of coils that are inserted in the fallopian tubes to stop conception. It's seen as an alternative to tubal ligation, another sterillization method. The product would join Bayer's intrauterine devices, Mirena and the newly approved Skyla, which release low doses of hormones to prevent pregnancy. The IUDs are used for several years at a time, while Essure is permanent.
The company also has a transparent birth-control patch awaiting approval in Europe and another IUD in late-stage development. "With this acquisition, Bayer will be able to offer a complete range of short-term, long-term and permanent contraceptive choices for women," the company said in a statement.
Bayer's multibillion-dollar line of contraceptive pills, including Yasmin and Yaz, have run into sales trouble recently amid generic competition and questions about their safety. The pills, which contain a synthetic hormone known as drospirenone, saw sales drop by 16% for the first quarter after studies flagged a potential increase in the risk of blood clots. Patients have filed thousands of lawsuits, and the company set aside €1.19 billion last year to cover litigation related to the pills. The company also faces lawsuits over alleged complications from Mirena use, and its hormonal contraceptive Diane has come under regulatory scruntiny in Europe. Meanwhile, the FDA has slapped the company for overstepping its bounds in promoting Yaz and Mirena.
Despite the setbacks, the company's contraceptive business brings in billions. The Yaz line accounted for €1.045 billion in 2012 sales, and Mirena brought in another €677 million. Diane, approved for birth control and to treat acne, added another $194 million, bringing the total for those three products to €1.916 billion, or $2.5 billion. The Conceptus deal could help shore up the business, analysts said. "They have been quite strong in this area," Helvea analyst Odile Rundquist told Bloomberg. "Now with generic competition for Yaz, they could offset a decline in that franchise. It's complementary."