Bayer Signs $875 Million Deal to Buy Women’s Health Biotech

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Bayer AG struck an $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 $425 million upfront and potential milestone payments of $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 ($1.17 billion) globally, Bayer said Tuesday in a statement. Bayer rose as much as 1.8% 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 $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 $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 $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 $100 million, the company said. The deal is expected to close in September.

©2020 Bloomberg L.P.

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