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Otsuka Snags Astex for $886M in Cash

By Marie Powers
Staff Writer

Japanese giant Otsuka Pharmaceutical Co. Ltd. made a strategic buy of Astex Pharmaceuticals Inc. less than a week after the Dublin, Calif., oncology drug developer reported positive top-line results from the company’s Phase II trial of cancer candidate SGI-110 in acute myeloid leukemia (AML) and myelodysplastic syndrome (MDS). The deal, unanimously approved by the boards of directors of both firms, calls for Otsuka to acquire the outstanding shares of Astex for $8.50 per share in cash, representing a 48 percent premium to the stock’s average closing price for the prior 30-day period. The purchase price values the company at approximately $886 million on a fully diluted equity basis. Tokyo-based Otsuka plans to conclude the transaction through a tender offer, which is expected to close early in the fourth quarter, subject to customary conditions. Shares of Astex (NASDAQ:ASTX) spiked Wednesday afternoon after rumors of the transaction began circulating. The stock traded as high as $9.39, a 52-week high, before closing at $8.27 for a gain of $1.59, or 24 percent. Volume was 16.1 million shares, or nine times the daily average. On a call with investors early Thursday morning, James S.J. Manuso, president and CEO of Astex, said the company will remain intact and operate as a wholly owned subsidiary of Otsuka. The acquisition process began with an internal five-year review of Astex that included the prospect of a sale, he added. A subcommittee of the board confidentially contacted prospective buyers to see which best “would recognize the value of our pipeline, discovery process, development capability and people.” Otsuka emerged as the highest bidder, Manuso said. Astex already has an approved MDS product in Dacogen (decitabine), but the company generates revenue primarily through royalties from global sales by licensing partners Eisai Co. Ltd. in North America and Janssen-Cilag International NV, a unit of Johnson & Johnson, in the rest of the world. Royalty revenue amounted to $16.6 million in the second quarter, and Astex reported cash of $134.0 million as of June 30. Dacogen also recently was approved in Europe to treat AML in patients over age 65. SGI-110, a subcutaneous hypomethylating agent, is being evaluated in multiple studies for a variety of hematological and solid tumor oncology indications, including MDS, AML, ovarian cancer and liver cancer. The compound is considered a second generation to Dacogen and competitor Vidaza (azacitidine, Celgene Corp.) that would improve treatment by dramatically extending the half-life, more than doubling exposure time. Astex also has the candidate AT13387, a second generation HSP90 inhibitor that is being studied in prostate and lung cancers.

See Friday's BioWorld Today for More on This Story.