Astellas finally convinces OSI Pharmaceuticals to agree to merger after raising offer to $4 billion
Per-share price of $57.50 represents 55 percent premium over closing price the day before Astellas made its previous $3.5 billion offer
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TOKYO—When we last covered the acquisition dance between Japanese company Astellas Pharma Inc. and Melville, N.Y.-based OSI Pharmaceuticals in ddn in April, Astellas was migrating toward hostile overtures and OSI was still standing fast that $52 per share was simply not enough. But a new, roughly $4 billion acquisition deal announced May 16 brings both companies almost to the point of ending the uncertainties and waiting.
This is good news to Astellas which, if the deal makes it through the final regulatory and other closing hurdles, will receive the boost to its oncology aspirations that it desires. The company also can save face with the investment world, which was wondering if this might be another failed acquisition attempt along the lines of CV Therapeutics in 2009, during which Gilead Sciences Inc. won the bidding war. In addition, OSI gets to feel a bit more financially appreciated.
It also prevents the nastiness of a hostile takeover bid taken directly to investors and makes it unnecessary for Astellas to push through a plan to nominate a full slate of new directors for the OSI board later this year.
All this for the price of $57.50 per share, a premium of 55 percent to the closing price for OSI's shares of $37.02 on February 26, 2010, the closing price the day before Astellas made its earlier $52-per-share offer. For that amount, OSI Pharmaceuticals—a biotechnology company primarily focused on the discovery, development and commercialization of molecular targeted therapies addressing medical needs in oncology, diabetes and obesity—has agreed to be acquired by Astellas, with the boards of directors of both companies having unanimously approved the combination.
Most analysts, even those who didn't think a rival company would show up to try to snatch OSI away from Astellas, figured that the Japanese pharma would need to go up from the $52-per-share offer it has been sticking to for so long—if it wanted to close the deal peacefully. But the final number falls short of the $60 or more per-share price that some had suggested might be necessary.
As the BioHealth Investor blog noted in mid-March, the problem has always been wider than current OSI share prices, since "OSI has been public long enough that it is one of the oldest in its class. For a brief period in 2000 to 2001 its shares hit $80 a share. Then it even more briefly went up to almost $100.00 per share in 2006 and spent several months north of $60.00 on its own."
A lot of that—at least the share value from 2004 on—is due to OSI's successful therapeutic Tarceva, which is indicated for the treatment of patients with locally advanced or metastatic non-small cell lung cancer after failure of at least one prior chemotherapy regimen, and in combination with gemcitabine is indicated for the first-line treatment of patients with locally advanced, unresectable or metastatic pancreatic cancer. In addition, there is ongoing testing of Tarceva in patients with genetic mutations who may benefit from using the drug as an early treatment, now in the third and final stage of testing, and upcoming data on its potential for treating ovarian cancer, due in the first half of 2011.
With its plans for expanded indications for Tarceva, OSI believes it could boost annual sales over $1.2 billion, which was the approximate worldwide take for the drug in 2009. For its part, Astellas hopes that sales from OSI's products will offset the loss of patents on its blockbuster drugs Flomax and Prograf.
According to Astellas, the combined company creates a world-class oncology platform supporting Astellas' stated growth strategy of becoming a global category leader in oncology, a high- priority therapeutic area for the Japanese firm.
"The merger with OSI provides Astellas with a top-tier oncology platform in the U.S and an expanded product portfolio and pipelines," says Masafumi Nogimori, president and CEO of Astellas. "In addition to Tarceva, 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."
"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," says Dr. Colin Goddard, CEO of OSI Pharmaceuticals.
The deal is for an all-cash transaction with no financing conditions to close, and the transaction is subject to other customary closing conditions, including the tender of a majority of OSI's shares of common stock on a fully diluted basis. The HSR waiting period applicable to the acquisition of OSI by Astellas expired on March 19, 2010.
Astellas' all-cash tender offer for $57.50 per share for all of the currently outstanding shares of common stock (including the associated stock purchase rights) of OSI Pharmaceuticals, Inc. will expire no later than 10 business days after the amendment to the Schedule TO is filed (which is expected to be filed on or before May 21st), unless extended. As of 4 p.m. Eastern U.S. time on May 14, 2010, 299,214 shares of OSI had been tendered in and not withdrawn pursuant to Astellas' offer.
This is good news to Astellas which, if the deal makes it through the final regulatory and other closing hurdles, will receive the boost to its oncology aspirations that it desires. The company also can save face with the investment world, which was wondering if this might be another failed acquisition attempt along the lines of CV Therapeutics in 2009, during which Gilead Sciences Inc. won the bidding war. In addition, OSI gets to feel a bit more financially appreciated.
It also prevents the nastiness of a hostile takeover bid taken directly to investors and makes it unnecessary for Astellas to push through a plan to nominate a full slate of new directors for the OSI board later this year.
All this for the price of $57.50 per share, a premium of 55 percent to the closing price for OSI's shares of $37.02 on February 26, 2010, the closing price the day before Astellas made its earlier $52-per-share offer. For that amount, OSI Pharmaceuticals—a biotechnology company primarily focused on the discovery, development and commercialization of molecular targeted therapies addressing medical needs in oncology, diabetes and obesity—has agreed to be acquired by Astellas, with the boards of directors of both companies having unanimously approved the combination.
Most analysts, even those who didn't think a rival company would show up to try to snatch OSI away from Astellas, figured that the Japanese pharma would need to go up from the $52-per-share offer it has been sticking to for so long—if it wanted to close the deal peacefully. But the final number falls short of the $60 or more per-share price that some had suggested might be necessary.
As the BioHealth Investor blog noted in mid-March, the problem has always been wider than current OSI share prices, since "OSI has been public long enough that it is one of the oldest in its class. For a brief period in 2000 to 2001 its shares hit $80 a share. Then it even more briefly went up to almost $100.00 per share in 2006 and spent several months north of $60.00 on its own."
A lot of that—at least the share value from 2004 on—is due to OSI's successful therapeutic Tarceva, which is indicated for the treatment of patients with locally advanced or metastatic non-small cell lung cancer after failure of at least one prior chemotherapy regimen, and in combination with gemcitabine is indicated for the first-line treatment of patients with locally advanced, unresectable or metastatic pancreatic cancer. In addition, there is ongoing testing of Tarceva in patients with genetic mutations who may benefit from using the drug as an early treatment, now in the third and final stage of testing, and upcoming data on its potential for treating ovarian cancer, due in the first half of 2011.
With its plans for expanded indications for Tarceva, OSI believes it could boost annual sales over $1.2 billion, which was the approximate worldwide take for the drug in 2009. For its part, Astellas hopes that sales from OSI's products will offset the loss of patents on its blockbuster drugs Flomax and Prograf.
According to Astellas, the combined company creates a world-class oncology platform supporting Astellas' stated growth strategy of becoming a global category leader in oncology, a high- priority therapeutic area for the Japanese firm.
"The merger with OSI provides Astellas with a top-tier oncology platform in the U.S and an expanded product portfolio and pipelines," says Masafumi Nogimori, president and CEO of Astellas. "In addition to Tarceva, 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."
"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," says Dr. Colin Goddard, CEO of OSI Pharmaceuticals.
The deal is for an all-cash transaction with no financing conditions to close, and the transaction is subject to other customary closing conditions, including the tender of a majority of OSI's shares of common stock on a fully diluted basis. The HSR waiting period applicable to the acquisition of OSI by Astellas expired on March 19, 2010.
Astellas' all-cash tender offer for $57.50 per share for all of the currently outstanding shares of common stock (including the associated stock purchase rights) of OSI Pharmaceuticals, Inc. will expire no later than 10 business days after the amendment to the Schedule TO is filed (which is expected to be filed on or before May 21st), unless extended. As of 4 p.m. Eastern U.S. time on May 14, 2010, 299,214 shares of OSI had been tendered in and not withdrawn pursuant to Astellas' offer.
