* 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 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
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
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
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.
Jefferies is acting as financial adviser to Astex, while
Goldman Sachs is working for Otsuka.
(Additional reporting by Ben Hirschler in London; Editing by
Chris Gallagher and Mark Potter)