Big Pharma's Romance With Biotech Still Smolders, Despite Its Cold Shoulder to OSI

Many folks were surprised to see Astellas Pharma emerge as the victorious acquirer of OSI Pharmaceuticals (OSIP), thanks to a $4 billion bid. After all, OSI had already fought off a $3.5 billion hostile takeover attempt by Astellas, and it was known to be aggressively shopping around for another suitor.

Why didn't a dark horse bidder emerge? Or at the very least, why didn't Roche, OSI's partner on blockbuster lung and pancreatic cancer drug Tarceva (erlotinib), step in and play the white knight? I can think of a few reasons.

First, it's unlikely that big pharma just isn't all that interested in acquiring high-priced big biotechs. In fact, bankers have predicted big biotech acquisitions will increase this year, as pharma looks to spend its cash hoards on deals that can really move the needle.

It's more likely that big pharma just wasn't interested in OSI. Some analysts had predicted other bidders might be deterred by increasing competition to Tarceva, patent expirations looming within a decade, and OSI's unproven earlier-stage pipeline. Yet sources familiar with the deal said there were multiple parties conducting "serious due diligence," so I'm not entirely sure that's the answer either.

Most likely, Astellas came out on top because it just wanted OSI more than anyone else and was willing to do whatever it took to get them. The Japanese pharma firm's last hostile takeover attempt -- of cardiology firm CV Therapeutics -- failed when Gilead (GILD) emerged with a higher offer, so maybe after being once bitten the big pharma wasn't about to be twice shy about putting up some cash.

And besides, cardiology isn't even one of Astellas' five main therapeutic focus areas, while oncology is -- making this deal even more important that their last try. Astellas recently licensed a Phase III prostate cancer drug from Medivation (MDVN) and a Phase II leukemia drug from privately-held Ambit Biosciences, but it needed a marketed product and a U.S. oncology sales force to become a real player in the space. And aside from OSI, a very select few acquisition targets (like maybe one) fit that bill.

Handshake photo by Flickr user AndyRob, CC.