Biotech Update: Astellas Targets OSI Pharmaceuticals

Brian Hicks

Updated March 1, 2010





As I wrote in an earlier story entitled, The Brewing Bull Market in Biotech, the fast growing market for new drugs is one that “Big Pharma” just can’t keep it hands off of.

The reason for this, of course, is pretty simple. Faced with shrinking pipelines and falling revenues, the old way developing drugs through chemistry alone is giving way to modern technologies such as gene sequencing, protein analysis, biologics, DNA vaccines and nanotechnology.

In these areas, biotech companies dominate.

And the truth is without the cutting edge research and development that these biotechs bring to the table, revenues at the Big Pharma level will likely hit a wall.

So acquiring a small biotech or two is one method the traditional big players have turned to these days to add to their own research and development. 

The examples of this strategy are simply everywhere you look.

In fact, just this morning, Astellas Pharma ,  announced a hostile $3.5 billion  offer for OSI Pharmaceuticals ( Nasdaq: OSIP) or $52 a share, which is a 40% premium over Friday’s close.

Like every other major drug company Astellas, Japan’s second largest drugmaker, has been scrambling to develop new drugs as patents on its established products continue to expire.

That’s why the firm has spent the last 13 months courting OSI since Astella believes the deal will strengthen its effort to become a global leader in oncology. OSI specializes in molecular targeted therapies addressing needs in oncology, diabetes and obesity—each and every one of them a massive market opportunity.

 “We firmly believe in the compelling strategic rationale behind the combination and the opportunity it provides to the OSI stockholders to realize full and fair value, in cash, immediately,” Masafumi Nogimori, Astellas’ chief executive, said in a statement.

But that wasn’t the only big M&A deal to break of late in the biotech world.

After a week of speculation, German pharmaceutical company Merck (NYSE:MRK) said today that it would buy U.S. life sciences tools maker Millipore (Nasdaq:MIL) for $7.2 billion.

That effectively ended the wrangling over the deal as Merck walked away the winner. Of course, it was just last week when Thermo Fisher Scientific Inc.(NYSE:TMO)  had made a $6 billion offer for Millipore, only to be denied.

As a result of these two big deals, shares of the SPDR S&P Biotech ETF (NYSE: XBI)  have jumped 6.5 % in just three sessions. Take a look:




Its holdings include stakes in Amgen Inc. (NASDAQ: AMGN), Celegene Corp. (NASDAQ: CELG), and Cubist Pharmaceuticals Inc. (NASDAQ: CBST), to name just a few.

That allows investors to spread out their risk across the entire sector—in what has become a brewing bull market.

After all, these two deals are just the tip of the iceberg.

Related Articles:

Biotech Vaccines Boost the Bull Market

Biotech Research Companies

Biotech’s Health Care Bonanza

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