Bayer looks for answers with $2bn Askbio acquisition

Bayer is betting big. The decision to splash out $2bn and potentially $2bn more in milestones for the private company Asklepios Biopharmaceuticals shows that the German company sees a large part of its future in the field of gene therapy.

This is a bold move for Bayer, whose sole previous exposure to gene therapy for human use was through a collaboration with Ultragenyx in haemophilia. But with the share price of the group having fallen 42% since the start of the year decisive action in at least one of its divisions was needed.

Gene genie

Buying Asklepios, also known as Askbio, gives Bayer access to one of the most productive gene therapy companies in the industry, even if that company has yet to bring a product to market.

The deal will also come as a welcome distraction from bigger problems at the German conglomerate. Bayer has spent the last four years trying to deal with the fallout from its ill-fated $63bn buyout of Monsanto, which saddled it with multiple lawsuits over the herbicide Roundup.

Bayer also faces pressure in pharma. The bestsellers Eylea and Xarelto are set to start losing patent protection from 2024. Bayer’s only other blockbuster, the contraceptive Mirena, is already off patent and none of the group’s biggest growth drivers is expected to turn in sales over $900m by 2026. A shot in arm for the pharma business is thus welcome news.

Reassuringly expensive

Given that Askbio only raised $235m in funding just over a year ago the $2bn Bayer is paying up front might seem a little rich. But it should be remembered that Askbio’s technology has been behind a number of spinout companies, including Nanocor Therapeutics, Chatham Therapeutics, which was sold to Baxter in 2014, and Bamboo Therapeutics, sold to Pfizer in 2016.

Askbio, founded by Jude Samulski, also boasts so-called third generation AAV promoters and capsids, which are thought to have better efficacy, immune response and tissue specificity than older adeno-associated virus vectors.

But is not just Askbio’s AVV-based technology platform that makes it attractive. The company also has a gene therapy manufacturing capability through a joint venture with Columbus Venture Partners. This is a valuable commodity in an industry dealing with production capacity constraints.

Deals, deals, deals

Bayer is not the only pharmaceutical company that has been lured into gene therapy purchases. In 2018 Novartis spent $8.7bn on Avexis, ostensibly for the spinal muscular atrophy product Zolgensma. In a twist, some of the technology behind Zolgensma originated from Askbio.

Roche spent $4.8bn on Spark in 2019 for a treatment for a rare inherited retinal disease, and the only other multi-billion deal before Askbio was Astellas's takeout of Audentes.  

In an attempt not to kill its potential golden goose post-acquisition, Bayer said Askbio would be run as a standalone at an arm’s-length distance to preserve its entrepreneurial culture. Bayer’s funding will be crucial for the long-term plan to move gene therapies from niche disease areas to mass-market disorders like heart failure.

Given the scale of this ambition, Bayer’s $2bn gamble on Askbio is very much a long-term bet, and while it will not solve the group’s more immediate problems it should be seen as a step in the right direction.