Seeking Alpha
What is your profession? ×
Profile| Send Message|
( followers)

The war of words over Astellas Pharma's (OTCPK:ALPMF) $3.5 billion hostile bid for OSI Pharmaceuticals (OSIP) is entering overtime as the pair exchange final missives ahead of OSI's upcoming annual meeting. OSI is looking for a better offer. Astellas is holding firm for now. For those just tuning in, Astellas is after OSI's treatment for advanced non-small cell lung cancer and advanced pancreatic cancer, Tarceva. OSI earned $359 million from Tarceva-related sales in 2009 and tells investors it has big plans for expanding the franchise going forward.

Owning OSI would also help Tokyo-based Astellas gain a bigger foothold in the U.S. oncology market, where its competitors, Takeda Pharmaceutical (OTCPK:TKPHF) and Eisai (OTCPK:ESALY) have already planted their flags by buying into Millennium Pharmaceuticals (MLNM) and MGI Pharma (MOGN), respectively. The acquisition could also potentially help Astellas compensate for flagging sales of its biggest drug, Prograf, for treating organ rejection.
OSI’s board formally rejected Astellas’ $52 per share offer on March 15 and went on the offensive the same day, unfurling a lengthy slide show detailing its view of the company's value. In it, OSI says Astellas’ offer “implies no value for (OSI's) pipeline or technology platform assets.”
Beyond Tarceva, OSI's board say Astellas’ offer also fails to take its diabetes and obesity franchise into account. OSI's drugs addressing those areas generated $67 million in milestones and royalties during 2009, and it expects that revenue to grow 30 percent in 2010.
Rebuffed, Astellas says it will nominate its own slate of directors for OSI’s upcoming shareholder meeting, “to ensure that OSI’s stockholders have a voice in the outcome.”
OSI's board has balked, saying that “the Astellas director nominees’ only mandate is to support Astellas in acquiring OSI at an inadequate price.”
Astellas says OSI walked away from a sweeter offer in mid-2009, for between $55 and $57 per share. A valuation in that neighborhood is now reflected in OSI's shares, which are have broken through the $58 mark twice since March 15.
Of course, no fight would be complete without advisors. Mellville, New York-based OSI has engaged Centerview Partners and Lazard as financial advisors to help it find the right match. Astellas has lined up Citigroup and Morrison & Foerster.
Astellas tried to pick up Palo Alto, California's CV Therapeutics in 2009. That bid ended in failure when Gilead (NASDAQ:GILD) won over CV with a better offer.
Astellas’ offer for OSI expires at midnight EST, March 31 and so far, despite speculation that OSI partner Roche (OTCQX:RHHBY) could be its white knight, swooping in at the last minute with a better offer, signs of that scenario playing out have yet to appear.