Japanese pharmaceutical company Astellas Pharma Inc has launched a $3.5-billion hostile takeover bid for US drug company OSI Pharmaceuticals, a researcher and developer in molecular targeted therapies for oncology, diabetes and obesity.

Tokyo-based Astellas Pharma, Japan's second-largest pharmaceutical company after Takeda Pharmaceutical, said that it has been attempting for 13 months to engage in meaningful discussions with OSI, and its latest offer made on 12 February was rejected by OSI as ''too low.''

Astellas Pharma said that it will now take its offer directly to OSI shareholders and commence a tender offer today to acquire all the outstanding common stock of OSI for $52 per share, or about $3.5 billion in an all-cash deal.

Astellas' offer represents a premium of over 40 per cent to OSI's closing price of $37.02 on 26 February.

Melville, New York-based OSI confirmed yesterday that it has received an unsolicited proposal from Astellas Pharma and it was not interested in undertaking a sale of OSI at that price, since it believes Astellas' proposal very significantly undervalues the company.

In March 2009, Astellas Pharma had made a $1-billion hostile bid for Palo Alto, California-based CV Therapeutics, (See: Japan's No.2 drugmaker Astellas makes $1-billion hostile bid for US firm CV Therapeutics) but withdrew its four-month hostile bid after US biotechnology firm Gilead Sciences Inc made a higher offer of $1.4 billion. (See: Astellas withdraws from race to acquire CV Therapeutics)

OSI specialises in the discovery and development of molecular targeted therapies for oncology, type 2 diabetes and obesity and its revenues are derived mainly from its non-small cell lung and pancreatic cancer drug Tarceva.

Tarceva, which had US sales of $209 million and global sales of $1.2 billion in 2009, is sold in partnership with Swiss drugmaker Roche, which paid OSI $146 million in royalties from for international sales.

According to analysts, since Roche already has a tie-up with OSI, it may make a rival bid, just like Gilead Sciences made and acquired CV Therapeutics. (See: Gilead Sciences to acquire CV Therapeutics for $1.4 billion)

Masafumi Nogimori, president and chief executive officer of Astellas, said, "Our proposal and its significant premium recognise both the value created by OSI to date and its future prospects. Of course, we are open to, and we hope that OSI's board and management will commence, discussions with us to effect a negotiated transaction."

Astellas said that the acquisition will strengthen its position in oncology and provide it with a top-tier oncology business in the US as well as an expanded product portfolio and pipeline.

Astellas was formed by the historical merger of Japan's third and fifth largest pharmaceutical companies - Yamanouchi, founded in 1923, and Fujisawa, founded in 1894.

Today, Astellas is the second-largest pharmaceutical company in Japan with a market capitalisation of approximately $17.7 billion as of January 26, 2009, and, for the fiscal year ended 31 March 2008, net income of approximately $1.8 billion.

Astellas is on the prowl for new drugs after its best seller, Prograf, a treatment used in organ transplants, lost US patent protection in April 2008.

In 2007, Astellas signed a $537-million deal to acquire US biotech firm Agensys as part of its plan to accelerate its antibody research, especially in the field of cancer. (See: Astellas acquiring cancer biotech firm Agensys)

The purpose of the acquisition was to catapult itself to the forefront of the world's antibody drug research business.

Nogimori also needs to fill a gap in Astellas's product pipeline. The company has not released a new homemade medicine expected to sell more than $1 billion annually since the bladder-control treatment Vesicare in 2004, and Astellas expects its next major seller, a urinary control known as YM178, to be at least a year away.

Astellas also had to stem an expected loss of revenue after last its April 2008 patent expiration in the US for the Prograf organ-transplant drug, which generated a fifth of the company's sales.

Nogimori had also abandoned a three-year effort to sell a successor treatment after the US regulator asked for more data.