Astellas Agrees to buy OSI for $4 Billion

Chandrasekhar Atreya
18 May, 2010
New York City

Japanese drug maker Astellas Phrama agrees to buy US firm, OSI Pharmaceuticals, maker of cancer drug Tarceva, in a share-cash bid, to stem dropping sales, gain control of experimental treatments for cancer, and also a geographical presence in the US market.

[R]Japanese drug maker Astellas Phrama agrees to buy US firm, OSI Pharmaceuticals, maker of cancer drug Tarceva, in a share-cash bid, to stem dropping sales, gain control of experimental treatments for cancer, and also a geographical presence in the US market.[/R]

Astellas Pharma Inc, Japan’s second-biggest drug maker, launched a $4.0 billion successful $57.50 per share-cash bid for New York-based OSI Pharmaceuticals to gain access to the cancer drug Tarceva and also make inroads in the United States.

This was a 11% hike over its first bid to gain control of experimental treatments for cancer and a US sales team for oncology drugs.

The boards of both companies approved the revised share-cash offer, at a 55% premium to the OSI stock price on February 26, the first bid date by Astellas.

The transaction will succeed if OSI shareholders give up at least 50% of the company stocks in the tender offer, which closes at midnight New York time on June 2, Astellas said.

This acquisition will help Astellas plug lost sales from Prograf, used to prevent organ rejection in transplant patients, and the urinary incontinence drug Flomax.

The drug Tarceva generated revenue of $1.6 billion last year.

Tarceva is approved in the US as a first-line treatment for pancreatic cancer and as a second line treatment for patients with non-small cell lung cancer.

Tarceva’s patents in the US are protected until November 2018.

Astellas shares rose for the first day in four, gaining as much as 2.4% to 3,210 yen on the Tokyo Stock Exchange. OSI fell 4.1% or $2.45 to close at $57.35 on the Nasdaq stock market yesterday.

The OSI acquisition would give Astellas instant profits from Tarceva as well as access to its product pipeline and an enhanced geographic presence. Astellas estimates that a majority stake in OSI would contribute 34 billion yen to this fiscal year’s revenue.

Centerview and Lazard are advising OSI Pharmaceuticals. Citigroup is advising Astellas.