Bayer in €1.77bn bid for prostate cancer drug partner Algeta
Drug maker Bayer has offered to pay €1.77bn for Norway's Algeta, its partner for a new prostrate cancer treatment.
The bid is at a 27pc premium to the stock's last close, Algeta said yesterday.
The deal would boost Bayer's drugs division by giving it outright control over Xofigo, a drug the two have developed jointly since 2009 and started selling in the US this year.
Investors, however, bet that the German drugs and chemicals group has a fight on its hands and Algeta's chief financial officer said that rival bids could not be ruled out.
Algeta shares jumped by a third in early trading, to a record 349.7 Norwegian crowns (€42.22), well above Bayer's bid of 336 crowns.
The Norwegian company said it was in early discussions that might lead to a transaction. A Bayer spokesman confirmed it had made an offer but said it did not want to provide details at this point. The decision to go public with the preliminary offer followed a leak in the German media overnight.
Algeta's chief financial officer Oystein Soug declined to comment on the level of the bid but told reporters that his company was under no pressure to do a deal. "I think this company has great prospects on a standalone basis," he said.
Asked if another company might be in a position to counter Bayer's offer, he said: "I would not exclude that opportunity, but of course that is not my call."
For Bayer, Algeta fits with chief executive Marijn Dekkers' strategy of driving growth by building up the pharmaceuticals division. The push by large pharmaceutical companies to acquire smaller biotech firms to gain new drugs that could bolster income is focusing increasingly on cancer therapy.
Amgen struck the fifth-largest biotechnology deal in history in August by agreeing to buy Onyx Pharmaceuticals for $10.4bn (€7.6m), while Japan's Otsuka agreed in September to buy Astex Pharmaceuticals for $886m.
Other recent cancer deals have included AstraZeneca buying privately-owned firms Amplimmune and Spirogen for up to $940m.
While much of the work in modern cancer medicine is concentrated on the genetic basis of the disease and the role of the immune system in controlling tumour growth, Xofigo is a different type of radiation treatment. It is a radioactive agent that migrates to parts of the body of prostate cancer patients with abnormal bone growth, thereby minimising damage to surrounding tissue.
Although Xofigo sales reached only $17m in the third quarter, it received marketing authorisation in the EU this month and analysts expect sales to take off.
Annual worldwide sales are expected to reach $940m by 2018, according to consensus forecasts compiled by Thomson Reuters Pharma.
Despite the promise of Xofigo, analysts following Bayer said the group appeared to be offering a high price.
"We do not see potential at Algeta justifying such a high takeover price," DZ Bank analyst Peter Spengler said, adding that further information might yield "some hidden value".
Analysts following Algeta, however, said the bid looked on the low side, given that large drugmakers have often paid a 50-60pc premium to acquire biotech companies. (Reuters)