The Bayer [BAYN.DE] share price dropped 7.61% on 5 August, after the German pharmaceutical giant announced a deal totalling $2bn to acquire Vividion Therapeutics. The stock recovered by 2.12% on 6 August to close out the week down 6.89% at €47.02.
The deal, which is expected to be finalised in the third quarter of this year, will enable Bayer to strengthen its drug discovery capabilities. Bayer will pay $1.5bn upfront, plus up to $500m if certain development milestones are met.
San Diego-based biotechnology firm Vividion had been preparing to launch an initial public offering up until late June but u-turned after Bayer’s offer. Vividion, which focuses on developing medications aimed at proteins thought to be ‘undruggable’, will continue to operate as an independent organisation.
Valuation of Bayer's acquisition deal with Vividion Therapeutics
With the long-term potential of Vividion’s newly discovered therapies, combined with a threat over some of Bayer’s product patents, could the acquisition support revenue and the Bayer share price longer-term?
Can Vividion’s therapies give the Bayer share price a boost?
While Vividion develops therapies against cancers and immune disorders, its technology platform, which screens the surfaces of proteins for ‘undruggable’ binding targets shallower than ever previously considered, can be applied to any disease area, reports Bloomberg.
Vividion’s IPO documents state: “Despite the hundreds of human proteins known to cause disease, about 10% of these targets are drugged by current therapies and the remaining targets, inaccessible to conventional chemistry, are perceived as pocketless or undruggable,” reports MarketWatch.
President of Bayer’s pharmaceuticals division, Stefan Oelrich, is certainly optimistic, saying: “Vividion’s technology is the most advanced in the industry, and it has demonstrated its ability to identify drug candidates that can target challenging proteins.”
“Vividion’s technology is the most advanced in the industry, and it has demonstrated its ability to identify drug candidates that can target challenging proteins” - Stefan Oelrich
With around 90% of known disease-causing proteins not currently targeted by existing medicines, the huge potential for unlocking new therapy areas provided by Vividion’s unique technology could offer fresh long-term revenue streams for the German conglomerate. It may also give the Bayer share price a lift after the deal is completed.
Can the Bayer-Vividion deal counter expiring patents?
Bayer’s acquisition of Vividion will clearly fuel innovation and growth at its pharma unit, and the deal comes at a crucial juncture, with some of its top medicines, such as Xarelto and Eylea, facing the loss of patent protection. Xarelto, an oral blood thinner, faces a generic threat in China, while the product will lose its patent protection over the next few years in other major markets, reports FiercePharma.
According to Oelrich, “...post-patent expiry sales are decreasing [moderately] over time in many parts of Europe and in many emerging markets as well, while in the US the sales decline can be very pronounced”. The good news for the company – and for Bayer’s share price prospects – is that European sales contribute more than half of total Xarelto revenue. Therefore, Bayer expects a “staggered impact” from the loss of exclusivity of Xarelto, with a top-line “trough” in 2024, according to Oelrich.
Referring to Vividion, Oelrich said: “This acquisition is a cornerstone of our strategy to fuel our pipeline with breakthrough innovation … together with Bayer’s existing know-how, we will be able to develop first-in-class drug candidates, increasing the value of our pipeline. We want to provide innovative therapies for patients whose medical needs are not yet met by today’s treatment options.”
“This acquisition is a cornerstone of our strategy to fuel our pipeline with breakthrough innovation … together with Bayer’s existing know-how, we will be able to develop first-in-class drug candidates, increasing the value of our pipeline” - Stefan Oelrich
Analysts forecast Bayer share price gains
The Vividion deal could well offer the Bayer share price significant new opportunities, and Wall Street appears to share both companies’ optimism. The average 12-month price target for the Bayer share price among 14 Wall Street analysts covering the stock is €66.08, according to MarketBeat, which represents a 39.7% rise from 10 August’s close of €66.08. With nine buy ratings and five hold ratings, analysts’ consensus rating on the Bayer share price is a resounding buy.
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