German drug maker Bayer AG (BAYRY) said Monday morning that it intends to spend approximately $1.1 billion to buy California-based Conceptus Inc. (CPTS), the developer of the Essure®, its flagship non-surgical permanent birth control method. The deal values Conceptus at $31 per share, almost 20 percent about Friday’s closing price of $25.90. Friday’s price had already marked an all-time high share value for CPTS.
Conceptus is based in Mountain View, California and employs about 300 people.
Within the next 10 business days, Bayer said it will launch a public tender offer for Conceptus. Pending all approvals, the transaction is expected to be completed by the middle of the year.
Essure, a pair of flexible metal and fiber coils that are inserted in fallopian tubes, was approved by the U.S Food and Drug Administration in 2002. Ensure sales grew by 14.4 percent in 2012 compared to 2011.
More than 700,000 women have undergone the Essure procedure, according to Conceptus. The procedure takes only about 10 minutes and can be done in a physicians office without the risks of general anesthesia or tubal ligation, while carrying a 99.8-percent effective rate.
Conceptus revenue in 2012 totaled $140.7 million with net income of $5.4 million, or 16 cents per share, reversing a net loss of $7.9 million in 2011.
In the first quarter, as reported by Conceptus today, net income jumped to $1.9 million, or 5 cents per share, compared to a net loss of $2.8 million, or 9 cents per share, in the first quarter of 2012. Adjusted EBITDA was $7.7 million, compared to breakeven in the same period last year. Total revenue for the quarter was $34.1 million, representing a 17.5 percent increase over last year’s quarter.
“Bayer is committed to augmenting its organic growth with strategic bolt-on acquisitions. The acquisition of Conceptus represents an excellent fit for our HealthCare business – specifically in the United States, the world’s most important health care market,” said Dr. Marijn Dekkers, chief executive of Bayer.
Bayer needs the acquisition to bolster fleeting sales in its contraceptive business and to build sales to offset patent expiration of contraceptive pills Yaz and Yasmin. Further, Bayer faces more than 10,000 lawsuits currently for allegedly not informing women sufficiently about the risk of side effects from Yaz and Yasmin, as well as its other hormone-based contraceptive pill Yasminelle. Sales of Yaz and Yasmin dropped by 16 percent in the first quarter to 206 million euros (US$270.11 million).
To prevent pregnancy, Bayer also offers intrauterine device Mirena and oral pill Natazia.
In early Monday trading, shares of Conceptus have gapped near the proposed acquisition price and held. OTC-listed shares of BAYRY are essentially flat at $103.62.
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