Bayer has won over Algeta's board with a sweetened acquisition offer that values the Norwegian drugmaker at $2.9 billion.

The 362 krone-per-share deal has been hiked from a preliminary 336 krone offer that Bayer made last month and - if it goes through - would give the German pharma and chemicals giant total ownership of recently-launched Xofigo (radium-223 dichloride) for secondary bone metastases in prostate cancer.

Even the original offer was viewed by some analysts as being a little on the high side by some analysts, although Bayer seems convinced that Xofigo has significant sales potential, having racked up around $17 million in sales in its first few weeks on the market in the US. The bid to buy Algeta surfaced shortly after Xofigo got a green light in Europe.

Bayer's chief executive Marijn Dekkers said in a statement that the company is "absolutely convinced of the potential of this drug and the underlying technology to provide patients with innovative treatment options."

Another encouraging sign for Bayer is that the number of clinics in the US licensed to deliver the radiotherapy has already exceeded its target of 600. Last month Algeta revealed that some 625 sites were ready to treat patients, with another 100-200 expected to be added in the coming weeks.

Bayer has suggested that Xofigo sales could top €1 billion if it shows efficacy in additional indications, and currently has a programme that will examine use of Xofigo earlier in the course of the disease in combination with Johnson & Johnson's androgen inhibitor Zytiga (abiraterone acetate).

At the moment Xofigo treatment is started when patients start to develop symptoms such as pain, but if positive the new study could support use in asymptomatic patients. The primary endpoint in this study is symptomatic skeletal event (SSE) free survival.

Another trial is looking at the value of extending Xofigo treatment beyond the current six-dose regimen, while Algeta is also examining the potential of radium-223 dichloride in other cancers and has a follow-up radiotherapy based on thorium 227 ready for clinical trials. Thorium-227 could have potential in a broader range of cancers and could also be linked to targeting molecules such as monoclonal antibodies, according to Algeta.

The higher offer for Algeta has the backing of the company's board and has already been endorsed in principle by a block representing around 14% of shareholders in the firm.  Bayer said it will finance the deal - which it expects to close in the first quarter of 2014 - with a combination of cash on hand and debt.