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Aug 11, 2020

Bayer strikes US$875M deal to buy women's health biotech

The Bayer AG logo sits on banners outside the Bayer CropScience AG research and development facility in Frankfurt, Germany, on Monday, July 13, 2020. Germany’s economy continues to recover following the easing of coronavirus-related restrictions, but remains well below capacity, according to a government report. Photographer: Alex Kraus/Bloomberg

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Bayer AG struck an US$875 million deal to acquire British women’s health biotech Kandy Therapeutics Ltd., bolstering its pharmaceuticals division before patents expire on some key products.

The German drug and chemical company agreed to pay US$425 million upfront and potential milestone payments of US$450 million until the launch of Kandy’s experimental treatment for menopause symptoms.

Kandy’s drug NT-814 is expected to start a final-stage clinical trial next year and could generate peak sales of 1 billion euros (US$1.17 billion) globally, Bayer said Tuesday in a statement. Bayer rose as much as 1.8 per cent in Frankfurt.

With blockbuster blood thinner Xarelto and eye-care medicine Eylea losing patent protection in the next few years, Bayer’s pharmaceutical division has been looking for small-scale deals to boost earnings. The Leverkusen, Germany-based company has lacked major firepower for acquisitions after spending US$63 billion in 2018 on agriculture giant Monsanto Co. -- a deal that brought a host of legal headaches that Bayer is also trying to put behind it.

Last August, Bayer’s pharma unit agreed to pay as much as US$600 million to buy the remainder of cell therapy biotech BlueRock Therapeutics. At the time, Stefan Oelrich, Bayer’s head of pharma, said that the best value-creating deals in the industry in recent years have targeted early-stage companies whose products wound up becoming blockbusters.

While the Kandy deal is a “good start,” Bayer will need more such moves to make up for the coming loss in revenue from Xarelto and Eylea, which combined for 6.6 billion euros in sales last year, Michael Shah, an analyst with Bloomberg Intelligence, said in a note. Bayer’s late-stage product pipeline only has a peak sales potential of 3.8 billion euros, though the Kandy deal could increase that by 1 billion, Shah said.

Along with cardiology and oncology, Bayer has long been active in women’s health, marketing products in contraception and gynecological diseases. Last week, the company said it’s in talks to resolve thousands of lawsuits that claim its Essure contraception device failed to prevent pregnancy or injured women. Bayer acquired that product when it bought medical-device maker Conceptus Inc. for US$1.1 billion in 2013; Essure was pulled off the market in 2018.

Once Kandy’s drug comes to market, Bayer could make additional sales milestone payments that exceed US$100 million, the company said. The deal is expected to close in September.