UPDATED: Bayer's $2.4B bid to buy Algeta fits neatly with cancer drug strategy

Earlier this year, Bayer happily heralded the FDA's approval of Xofigo for castration-resistant prostate cancer as an important milestone for its steadily growing portfolio of cancer therapies. And now the German pharma company has set its sights on bagging Algeta--the Norwegian company that discovered the therapy and subsequently partnered with Bayer--for $2.4 billion.

Germany's Frankfurter Rundschau initially broke the story, but it got the numbers wrong. In a statement, Algeta confirmed an offer from Bayer but said the bid was for 336 Norwegian kroner per share, not 306 kroner, a 27% premium that would value the company at $2.4 billion.

A tie-up would make good sense for Bayer, which has been steadily building up its oncology work. The cancer division at Bayer includes a partnership on Nexavar and the second-generation therapy Stivarga, now managed by Amgen ($AMGN) following the Onyx buyout. When Algeta signed its $800 million collaboration deal with Bayer 4 years ago, the savvy Norwegian company kept its hands on co-promotion rights in the U.S. while carving out a royalty stream from Bayer.

Algeta was also convinced there's a second act for Xofigo's pinpoint alpha-radiation approach to treat cancer. The company has been zeroing in on combining thorium-227 with cancer-targeting antibodies for a next-gen treatment, offering the potential for a subsequent step-up in its marketing activities. And while a 27% premium would be considered rather thin this year, with stock prices and valuations up across the board, Bayer can afford a bump in the price.

"If you believe consensus, they should pay way more than ($2.4 billion)," UBS analyst Guillaume van Renterghem told Bloomberg. "They should probably pay $3 billion."

During the lead-up to Amgen's acquisition of Onyx, a number of analysts speculated that Bayer would make a natural buyer in this market. But some hesitated, wondering whether the conservative German player would be likely to trigger a big bidding war for the biotech company.

An Algeta buyout, though, would fall right into Bayer's comfort zone.

- here's the release from Algeta
- read the story from Bloomberg

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