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OSI rejects Astellas' takeover bid

OSI Pharmaceuticals has turned down Astellas' unsolicited takeover offer of $3.5bn saying that the bid is too low

OSI Pharmaceuticals has turned down Astellas' unsolicited takeover offer of $3.5bn saying that the bid is too low.

On the day the bid was offered, the sum represented $52 a share in cash – a 40 per cent premium to the share price. But OSI said it did not reflect "OSI's fundamental intrinsic value" nor did it account for the future revenues that Tarceva, its lung and pancreatic cancer drug, could generate – in treating different types of the disease, for example.

Robert Ingram, chairman of OSI, said: "We believe that OSI is a unique asset – the only profitable, mid cap biotech company with a growing high-quality and fully integrated oncology franchise and a strong diabetes and obesity franchise, which also has a proven track record of success."

Astellas will proceed to offer the deal direct to OSI's shareholders. The directors have advised its shareholders to reject the bid, but according to court documents a group of OSI shareholders have filed a case seeking to prevent OSI's board from blocking Astellas' takeover.

The acquisition of OSI would help Astellas to become more competitive in oncology medication and OSI's existing drugs and pipeline would provide the Japanese company with short and medium-term profits. Some anticipate that Astellas will "modestly sweeten" its offer to complete the transaction.

Astellas needs to expand its pipeline as it faces a tough domestic market with three drugs coming off patent over the next few years as well as a growing generics market. It wants to expand its US presence and build up its activities in oncology.

If the bid is rejected by shareholders, it will leave Astellas in pursuit for a US suitor for the second time in 12 months, further to last year when it made a bid for CV Therapeutics but lost out to Gilead Sciences. The offer expires on March 31.

16th March 2010

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