Astellas buys OSI for $4 billion

JapanÔÇÖs Astellas Pharma has agreed to buy OSI Pharmaceuticals for $4 billion in cash, having raised its bid by 11 percent.  As a result of the deal, Tokyo-based Astellas will gain the worldÔÇÖs fourth best-selling lung cancer medicine and a US sales team for oncology drugs. Melville, New York-based OSI, which was founded in 1983, will give Astellas the Tarceva drug for cancer, a disease area the Japanese company has identified for growth. In addition, OSI will give Astellas three cancer medicines currently undergoing patient studies, including one in the final stages of clinical trials. OSI has said that this year it expects the Tarceva drug to generate $7 billion in revenue through 2020. The drug generated $1.6 billion for OSI and its Basel, Switzerland-based partner Roche Holding last year. US regulators approved the drug on April 16 for use in non-small-cell lung cancer as an initial maintenance therapy, to control symptoms or progression of a disease. Astellas will also gain a 90-strong sales and marketing team in the US and facilities in New York, Colorado and New Jersey, as well as the UK. OSIÔÇÖs operating income was $153 million against revenue of $428 million last year. AstellasÔÇÖ revised bid is around eight times OSIÔÇÖs estimated 2010 revenue. Astellas said the deal, which is the second largest US acquisition by a Japanese drugmaker, will add to earnings from the first year, helping to reverse the impact of competition from cheaper generic medicines that the company said last week would cause profits to fall for a third consecutive year. Masafumi Nogimori, president and chief executive officer of Astellas, said: "The merger with OSI provides Astellas with a top-tier oncology platform in the US and an expanded product portfolio and pipelines. In addition to Tarceva(R), we are pleased to add its oncology infrastructure, discovery platform, expanded pipelines and talent base to our existing businesses. We look forward to working together with our OSI colleagues to grow the combined business and realize our shared goal of improving the health of the people around the world every day." Colin Goddard, chief executive officer of OSI Pharmaceuticals, added: "We believe today's announcement recognizes the significant value we have built for our stockholders while providing the merged companies the opportunity to forge a stronger collective path forward in a shared mission to provide innovative new medicines to patients around the world." Takeda Pharmaceutical and Eisai, AstellasÔÇÖ Japanese rivals, have also completed multi-billion dollar acquisitions within the past few years to expand in the US, which is the worldÔÇÖs largest drug market. Osaka-based Takeda bought Millennium Pharmaceuticals for $8.9 billion and Tokyo-based Eisai purchased MGI Pharma for $3.9 billion. OSI's board resisted AstellasÔÇÖ takeover during the tender offer launched March 2, and throughout the year of negotiations prior to that. However, it now unanimously supports the new takeover offer. The OSI deal was Astellas' second hostile takeover attempt in just over a year. It made a failed $1 billion bid in January 2009 for the US biopharmaceutical company CV Therapeutics.