Bayer to acquire cancer drug maker Algeta for $2.9bn

12/19/2013 03:41:02 PM
Bayer to acquire cancer drug maker Algeta for $2.9bn
[Big News Network (United Arab Emirates)]

Published Date: December 19, 2013 03:40:53 PM EST

FRANKFURT / OSLO German chemical and pharmaceutical major Bayer has won the backing of Norwegian cancer drug maker Algeta's Board of Directors to make a takeover offer to its shareholders, after receiving an increased $2.9 billion bid.

The revised bid of Norwegian crowns (NOK) 362 per share in cash represents a premium of 37 % over the closing price on November 25, the day before Algeta confirmed that it had received a preliminary, non-binding acquisition proposal from Bayer, or a premium of 48 % over the unaffected three-month volume-weighted average share price on the same day.

The offer implies an equity value of NOK 17.6 bn (EUR 2.1 bn) and an enterprise value of NOK 16.2 bn (EUR 1.9 bn)., Bayer stated.

Bayer initially offered $2.4 billion, or 336 crowns per share.

The company's largest shareholder, the venture capital firm HealthCap, and Algeta's directors had agreed to tender their shares, and the transaction, which is subject to regulatory approval, requires that shareholders tender a minimum of 90 per cent of the company's stock.

Bayer intends to make the offer through a subsidiary of Bayer Nordic SE once the offer document has been cleared by the Oslo Stock Exchange.

The deal would help Bayer get full control over Xofigo, a new prostate cancer treatment it has worked on since 2009 and developed jointly with Algeta, without having to share earnings or pay royalty.

In May this year, the companies got United States Food and Drug Administration's approval for Xofigo and started its sale in one of the biggest markets. In November, the European Commission also granted marketing authorization for the product.

Bayer sees high market potential for Xofigo, a radioactive agent that gives the radiation treatment a piggyback ride into the center of a cancer cell, in order to attack cancer with fewer side effects.

Although Xofigo sales were only $17 million in the third quarter, they are expected to rise to $1 billion or more by 2018.

Xofigo is one of the five most important new drugs in Bayer's portfolio. Together these five drugs have annual sales potential of 5.5 billion euros ($7.6 billion).

Bloomberg quoted Odile Rundquist, a Geneva-based analyst for Helvea SA, as saying that the deal would probably boost margins in Bayer's drugs unit, even as it gave access to the even newer, targeted-radiation therapies in Algeta's pipeline like thorium-227, which would make the linking of alpha-particle radiation therapy with a monoclonal antibody possible.

Bayer is meanwhile, funding more clinical trials for the drug, which is among new therapies, it has tapped as sources of growth as earnings gains slowed at its plastics division.

"We are absolutely convinced of the potential of this drug and the underlying technology," Bayer chief executive officer Marijn Dekkers said in a statement.

For Bayer, Algeta fits with Dekkers' strategy of driving growth by building up the pharmaceuticals division.

Algeta said on Thursday that its board had unanimously recommended that shareholders should accept Bayer's sweetened offer.

A fund that is the company's largest shareholder and senior Algeta managers, together representing 14 percent of Algeta's share capital, planned to accept, Algeta said.

"We believe that the offer recognizes the strategic value of Algeta and delivers a considerable cash premium to Algeta's shareholders," said Stein Holst Annexstad, Chairman of the Board of Directors of Algeta.

"Having worked with Bayer since 2009, the Board of Directors of Algeta is convinced of Bayer's commitment to establishing Xofigo globally, and maximizing its full potential.

"We are also pleased that Bayer intends to further explore Algeta's Thorium platform that has successfully been established as a potential novel form of targeted therapy."

The transaction is expected to close during the first quarter of next year.

Bayer's shares were up 1 percent, while Algeta's rose 1.5 percent by 5:21 a.m. ET in line with the Stoxx Europe 600 health care index.

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