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Astellas Presses Bid For OSI

Pharmaceuticals: Japanese firm hopes to add oncology to its U.S. operations

by Rick Mullin
March 8, 2010 | APPEARED IN VOLUME 88, ISSUE 10

Credit: Roche
OSI’s cancer drug, Tarceva, is marketed by Roche.
Credit: Roche
OSI’s cancer drug, Tarceva, is marketed by Roche.

Astellas Pharma launched a hostile bid last week to acquire OSI Pharmaceuticals, a Melville, N.Y.-based biotechnology firm specializing in oncology therapies. At $52.00 per share, Astellas’ all-cash offer represents a 40% premium over the closing price of OSI’s stock on Feb. 26, for a deal valued at 
$3.5 billion.

Astellas’ bid follows a Feb. 12 meeting between the two firms at which OSI rejected the $52.00-per-share offer, stating that it “very significantly undervalues OSI.” Astellas’ overture last week to OSI shareholders was accompanied by a lawsuit enjoining OSI and its directors from interfering with the bid. The offer is scheduled to expire on March 31. Astellas says the companies have been sparring over a possible acquisition for 13 months.

OSI currently has one drug on the market, Tarceva, which it codeveloped with Roche. The Swiss firm sells the product. OSI attributed revenues of $358 million, approximately 80% of its total revenues in 2009, to Tarceva.

Astellas is one of several Japanese drug firms that have been looking for acquisitions in the U.S. in recent months. Last year, for example, Takeda Pharmaceuticals paid roughly $75 million to acquire IDM Pharma, and Dainippon Sumitomo Pharma agreed to pay 
$2.6 billion for Sepracor. Astellas operates at seven locations in North America. The acquisition of OSI would add oncology to its U.S.- and Canada-based efforts in cardiology, dermatology, infectious diseases, neuroscience, transplants, and urology.

OSI’s rebuff of Astellas and the resulting hostile bid have sparked speculation that a “white knight” bidder may emerge. Published reports suggest that Roche may challenge Astellas.

In a note to investors, health care stock research firm Leerink Swann said an offer to acquire OSI is not surprising given that the biotech firm would fit well with a number of possible buyers. On the basis of comparable deals, Leerink says, an offer better than the current one may be achievable.

The investment company names Pfizer as a possible suitor, citing the big drug firm’s work on a treatment for non-small-cell lung cancer. Celgene, which is completing Phase III trials for a drug to treat small-cell lung cancer and could use OSI’s commercial infrastructure, is another possibility, according to Leerink.



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