Astellas Remains Unchallenged in Bid for OSI Pharma

Includes: ALPMF, OSIP
by: The Burrill Report

By Michael Fitzhugh

The clock is running down on Astellas Pharma's (OTCPK:ALPMF) hostile bid for OSI Pharma (OSIP) , the cancer drug maker that Tokyo's Astellas hopes will help firmly plant its flag in the U.S. oncology market. The pair could sew up a deal soon, since an April 23 expiration of Astellas' offer approaches. Astellas could also extend the deadline for its offer as it did at the end of March.

The Japanese company could use a boost since its lead revenue generators, Prograf and Flomax, are both facing strong generic competition, from Novartis (NYSE:NVS) and Impax Laboratories (NASDAQ:IPXL). Adding to its challenges, Astellas may need to open its wallet a little wider to convince OSI shareholders to tender their shares when the time comes. Anticipation of a deal has pumped up the value of OSI's shares, which has climbed past $60 at times, far above the $52 per share offer now on the table.
Astellas claims OSI rejected as too low an offer for $55 to $57 per share as recently as mid-2009. One factor that may justify a higher bid would be a soon-to-be-decided label expansion for Tarceva, OSI's lead product. It is already FDA-approved as a second-line treatment for non-small cell lung cancer and as a first-line combination treatment for advanced pancreatic cancer. But it could also be approved for first-line maintenance in advanced non-small cell lung cancer as early as April 18.
Lung cancer is the leading cause of cancer death in the United States, where it killed about 159,000 people in 2009, according to the American Cancer Society. Non-small cell lung cancer is the most common variant of the disease.
OSI's partner on Tarceva, Roche (OTCQX:RHHBY), has been noted as the best bet for lodging a counter-bid to Astellas' offer, but it has yet to come forward.

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