Japan’s Astellas to buy US drug maker OSI for $4 billion, eyeing cancer business expansion

Japan’s Astellas to buy US drug co. OSI for $4B

NEW YORK — Astellas Pharma Inc., Japan’s No. 2 drug maker, said Monday it will buy U.S. cancer drug company OSI Pharmaceuticals Inc. for $4 billion in cash in a bid to expand its cancer drug business worldwide.

Astellas said it will pay $57.50 per OSI share, up from $52 the Japanese company had offered earlier. The transaction will be completed within a month.

The deal ends a contentious 14-month courtship that began in January 2009.

The acquisition is part of Astellas’ drive to expand its cancer drug business worldwide. OSI’s drugs include Tarceva, for lung cancer, which generated $1.2 billion in global sales last year. Tarceva is marketed through a partnership with Roche’s Genentech unit. OSI reported about $428 million in revenue in 2009, and more than 80 percent of that total — about $359 million — came from the Tarceva partnership.

The Japanese maker said it hopes to jointly develop cancer drugs with OSI. Astellas is developing treatments for cancer of the prostate, breast, skin, pancreas, and ovaries. Its main areas include urology and transplant drugs, and it’s trying to expand its capabilities in immune and infectious diseases, metabolic diseases, and neuroscience.

Astellas reported $10.52 billion in revenue in fiscal 2009. It handles Japanese sales of drugs including the enlarged prostate treatment Flomax, the cholesterol drug Lipitor, and the anti-psychotic Seroquel.

OSI is testing Tarceva as a treatment for ovarian and colorectal cancer, and is seeking an additional approval in lung cancer, among other cancer indications. It is also developing a drug candidate intended to treat ovarian cancer and adrenocortical carcinoma, a cancer of the adrenal glands.

Apart from cancer, OSI focuses on diabetes and obesity treatments. It licensed a group of potential diabetes treatments to Eli Lilly & Co. in 2007, and one drug from that group is now in midstage clinical testing.

Astellas made a written offer of $52 per share for OSI in February 2009, but OSI said that price was too low. After several refusals, Astellas took its offer directly to shareholders in a hostile bid. It also filed suit to prevent OSI’s board from blocking the deal. Both boards have approved the transaction.

The offer is a 55-percent premium from the stock’s closing price on Feb. 26, before Astellas made its unsolicited bid. OSI shareholders have long been expecting a new offer. Shares of Melville, N.Y.-based OSI closed at $59.80 on Friday and traded above $60 in March. The stock fell $2.46, or 4.1 percent, to $57.34 in midday trading.

OSI had 512 full-time employees and 23 part-time employees at the end of 2009, compared to around 15,000 for Astellas. The fate of OSI’s management was not clear, as Astellas said the companies are still working on a transition plan.