* Deal to build up portfolio as key drug loses patent cover
* Latest in a series on biotech deals by global drug firms
* Otsuka to offer $8.50 a share via tender
* Astex stock trades at $8.57 in pre-market dealings (Adds details cancer drugs, break fee, share price, advisers)
By Tim Kelly
TOKYO, Sept 5 (Reuters) - Japanese drugmaker Otsuka Holdings Co has agreed to buy Astex Pharmaceuticals Inc for about $886 million to tap cancer drugs under development by the U.S. biotechnology company.
The move comes as Otsuka seeks to increase revenue streams as patents for its mainstay Abilify schizophrenia treatment will begin to expire.
Large pharmaceutical companies facing such patent losses have increasingly been looking to acquire smaller biotech firms to gain access to new drugs that could bolster income, with cancer therapy an especially hot area for deal-making.
Amgen Inc last month struck the fifth-largest biotechnology deal in history by agreeing to buy Onyx Pharmaceuticals Inc for $10.4 billion.
Other cancer deals in recent weeks have included AstraZeneca Plc buying privately-owned Amplimmune for up to $500 million.
Cancer is attracting increased investment from biotech and pharmaceutical companies as a series of breakthroughs in understanding the genetic basis of the disease fuels a run of promising new medicines.
In the first half of 2013, the overall volume of healthcare mergers and acquisitions jumped more than 30 percent compared with the same period last year.
Otsuka said on Thursday it would launch a tender offer for Astex within the next 10 days at $8.50 a share - a 48 percent premium to the average closing stock price for the previous 30 days.
Shares of Astex had surged as much as 41 percent to a nine-year high of $9.39 on the Nasdaq on Wednesday after a purchase price of $900 million was reported earlier by Japanese business daily the Nikkei.
The stock traded at $8.57 a share in pre-market dealings on Thursday, suggesting some investors believe that Astex may yet get a higher offer from another bidder.
Astex said Otsuka would have to pay a $31 million termination fee if it did not go through with the planned acquisition
Astex, whose only approved drug, Dacogen, treats a blood disorder called myelodysplastic syndromes, is developing drugs to treat leukemia, prostate, lung and ovarian cancer.
The biotech company said last month that SGI-110, an experimental drug for acute myeloid leukemia, produced positive results in a Phase II mid-stage clinical trial.
Shares in Otsuka - which analysts have been expecting to make acquisitions since an initial public offering three years ago - fell 1 percent in Tokyo on Thursday, compared with a flat benchmark Nikkei average.