Activist investor fumes over Otsuka bid for Astex

It's a "he said, she said" situation over the true value of Astex Pharmaceuticals. An activist shareholder has thrown up a roadblock for a proposed $886 million bid from Otsuka that it thinks is too low, accusing Astex of failing to reach out to all potential bidders--claims the company denies.

According to an open letter from Sarissa Capital, the transaction announced last month "significantly undervalues" Astex ($ASTX). Sarissa owns about 5% of outstanding Astex shares. And the investment firm, founded by infamous proxy brawler Alex Denner--a former Icahn associate who most recently helped oust more than half the board over at Vivus ($VVUS)--says it does not intend to tender them.

In the letter, Sarissa takes issue with the auction process, claiming Astex neglected to get in touch with all potentially interested bidders. It also didn't care for Astex's timing. As the hedge fund's letter notes, Astex is trying to wrap up the sale process before reporting trial data for cancer drug SG-110--results Sarissa says could "most definitively illustrate the value the drug will confer to Astex."

But Dublin, California-based Astex disagrees. According to the company's own shareholder letter, it contacted 33 firms--of which only Otsuka made a final bid. With an eye on Astex's cancer drugs pipeline, the Japanese pharma has offered $8.50 a share--a price Astex says represents 52%, 89%, 84% and 181% premiums over the closing prices for the last 30 days, 60 days, 90 days and a year. It also says it negotiated that price up from an original offer of $7.75 per share. As for the issue of timing, Astex says its board took into account the potential future economic risks and benefits of its pipeline products, including SGI-110.

In addition to Astex, Otsuka is anxious for this one to go its way. Continuing in the footsteps of its Japanese counterparts, it's keen on overseas dealmaking--especially in the cancer arena. The company already has a small cancer business which would be bolstered by the addition of cancer drug specialist Astex. And facing a 2015 patent expiration on its largest product, atypical antipsychotic Abilify, Otsuka needs whatever sales it can get.

Astex is not the only company to recently face shareholder discontent over M&A. Several Onyx ($ONXX) shareholders were up in arms over Amgen's $10.4 billion deal to buy the company, a transaction analysts hailed as a bargain for Amgen ($AMGN). Shareholder rights attorneys undertook an investigation of the buyout, and disgruntled shareholders reportedly filed multiple class-action lawsuits.

- see Sarissa's shareholder letter
- and Astex's response
- get more from Reuters

Special Reports: The 15 Best-Selling Drugs of 2012 - Abilify | Top 10 Pharma Advertising Budgets 2012 - Otsuka

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