Bayer to acquire cancer drug maker Algeta

Norwegian cancer drug maker Algeta said today that it had agreed to be acquired by German drug giant Bayer in a deal valued at about $2.9 billion.

The preliminary offer from the German company came last month. Initially Bayer had offered about $2.4 billion, but later raised its bid.

Algeta said today that Bayer, through a subsidiary, intended to launch a cash tender offer for the acquisition of outstanding stock of the company for 362 Norwegian kroner, or about $59.13, a share.

The offer is a 37-per cent premium on Algeta's closing price on 25 November, the day before the announcement of the offer.

According to Algeta, its board had unanimously recommended that the offer be accepted by shareholders.

The New York Times quoted, Stein Holst Annexstad, Algeta's chairman as saying, it believed the offer recognised the strategic value of Algeta and delivered a considerable cash premium to shareholders.

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.

The acquisition of Oslo-based Algeta would mean Bayer would not need to share earnings or pay royalties on the radiopharmaceutical radium dichloride-223 drug, called Xofigo, for late-stage prostate-cancer.

Bayer and Algeta are partners in the sale of the prostate cancer drug Xofigo, which the United States Food and Drug Administration approved for use, in May.

Bloomberg quoted Odile Rundquist, a Geneva-based analyst for Helvea SA, as saying that would probably boost margins in Bayer's drugs unit, even as the deal gave it access to the even newer, targeted-radiation therapies in Algeta's pipeline.

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,'' chief executive officer Marijn Dekkers said a statement.

Beyond Xofigo, the Norwegian biotechnology company has been working on a technology called thorium-227, which would make possible the linking of alpha-particle radiation therapy with a monoclonal antibody.

The antibody would in effect give the radiation treatment a piggyback ride into the center of a cancer cell, in order to attack cancer with fewer side effects.