OSI Pharmaceuticals, Inc. (NASDAQ: OSIP) today announced that
its Board of Directors, after careful review and consideration with
the assistance of OSI’s management and outside legal and financial
advisors, has unanimously rejected the unsolicited, conditional
tender offer from Astellas US Holding, Inc., a wholly-owned
subsidiary of Astellas Pharma Inc., to acquire all outstanding
shares of OSI common stock for $52.00 per share in cash. The OSI
Board unanimously recommends that OSI stockholders reject the offer
and not tender their shares into the offer.
Robert A. Ingram, Chairman of the Board of Directors of OSI,
commented, “After carefully analyzing and considering Astellas’
offer, the Board has unanimously concluded that the offer does not
fully reflect OSI’s fundamental, intrinsic value. We believe that
OSI is a unique asset – the only profitable, mid-cap biotech
company with a growing, high quality and fully integrated oncology
franchise and a strong diabetes and obesity franchise which also
has a proven track-record of success. The OSI Board takes its
fiduciary duties seriously and will continue to do what’s right for
OSI stockholders. In that regard, the Board of Directors has
instructed OSI management, with the assistance of the Company’s
financial advisors, to contact appropriate third parties in order
to explore the availability of a transaction that reflects the full
intrinsic value of the Company.”
OSI Chief Executive Colin Goddard, PhD, added, “OSI is well
positioned and we continue to successfully execute on our strategic
plan. In addition to our blockbuster oncology drug, Tarceva, and
our highly differentiated pipeline in two of the highest growth and
most attractive therapeutic areas, we have substantial financial
assets, including significant DPIV patent royalties, substantial
cash balances and net operating loss carryforwards. Our business
remains strong, as exemplified by our 13% revenue growth in 2009,
which we accomplished while solidifying our patent position and
advancing our pipeline. We expect 2010 to be another year of
strategic and financial growth.”
Centerview Partners LLC is acting as lead financial advisor to
OSI. Lazard also recently was retained as a financial advisor to
OSI. Skadden, Arps, Slate, Meagher & Flom LLP & Affiliates
is acting as legal advisor.
The basis for the Board’s recommendation is set forth in a
Solicitation/Recommendation Statement on Schedule 14D-9, which was
filed by OSI today with the Securities and Exchange Commission,
accompanied by a letter to stockholders. The full text of the
letter appears below.
March 15, 2010
Dear Fellow Stockholders:
On March 2, 2010, Astellas Pharma Inc. (“Astellas”) launched an
unsolicited, conditional tender offer (the “Offer”) to acquire your
shares of common stock of OSI Pharmaceuticals, Inc. (“OSI” or the
“Company”) for $52.00 per share in cash.
Your Board of Directors has reviewed the Offer with the
assistance of the Company’s management and legal and financial
advisors and, after careful consideration, the OSI Board has
unanimously determined that the Offer is inadequate, substantially
undervalues the Company and is not in the best interests of OSI
stockholders.
Your Board of Directors unanimously recommends that you
REJECT THE OFFER and NOT TENDER your shares to Astellas.
The Board’s conclusion is based on numerous factors that are
detailed in the enclosed Schedule 14D-9, including:
- The Offer Substantially
Undervalues OSI Relative to its Fundamental, Intrinsic Value.
- OSI’s flagship oncology drug,
Tarceva® (erlotinib), with approximately $1.2 billion of worldwide
revenue in 2009, is one of the few blockbuster oncology drugs. As
of March 12, 2010, Tarceva was approved for sale in 109 countries
for the treatment of advanced non-small cell lung cancer, or NSCLC.
The exclusivity period for Tarceva (which is expected to range from
2019 to 2020 in the major U.S., European and Japanese markets)
provides the Company with strategically valuable long-term cash
flows.
- OSI’s financial assets, which
include significant DPIV patent royalties, substantial cash,
investments and marketable securities, and net operating loss
carryforwards of over $700 million as of December 31, 2009, are
estimated to be worth approximately $1.3 billion, which implies
that Astellas’ Offer values OSI’s strategic assets at only $2.3
billion.
- OSI’s revenues were
approximately $428 million for the fiscal year ended December 31,
2009, an increase of nearly 13% from the prior year, and non-GAAP
net income from continuing operations increased to $181 million (or
$2.89 per share) in 2009, an increase of approximately 15% over the
prior year. OSI also generates strong cash flow from operations,
with $160 million of cash flow from operations generated in fiscal
year 2009 resulting in approximately $540 million in cash,
investments and marketable securities at fiscal year end.
- The Offer Does Not
Appropriately Value OSI’s Highly Differentiated Oncology and
Diabetes and Obesity New Product and Line Extension Pipeline.
OSI’s clinical pipeline targets two of the highest growth and most
attractive therapeutic areas where major unmet clinical need
remains: (i) oncology and (ii) diabetes and obesity. OSI – together
with its partner Roche – is committed to advancing a comprehensive
development plan for Tarceva, which is expected to yield data and
label expansion opportunities that will provide the basis for
continued growth of the Company’s Tarceva related revenues
throughout the patent exclusivity period. In addition, OSI focuses
its development resources on advancing high quality and
differentiated development assets, including OSI’s IGF-1R/IR
inhibitor, OSI-906, and its GPR119 agonist, PSN821, both of which
have the potential to be blockbusters, “first-in-class” and/or
“best-in-class” and are highly competitive in these much sought
after target areas. OSI also has additional agents in clinical
development, including OSI-027 and PSN010, which together represent
valuable and differentiated pipeline assets and substantial
commercial opportunities.
- The Offer Does Not Recognize
the Scarcity Value of OSI's Growing, High Quality, and Profitable
Oncology Franchise. OSI’s profitable, growing and integrated
oncology business (anchored around its blockbuster drug, Tarceva)
represents a unique asset in the mid-cap biotechnology arena. The
Board believes that OSI’s oncology organization offers potential
acquirers and strategic partners a full array of high quality and
differentiated capabilities and know-how from discovery and cancer
cell biology research through commercialization in the U.S.
oncology market.
- The Offer Does Not Recognize
the Value of OSI’s Second Profitable and High Quality Disease Area
Franchise in Diabetes and Obesity, Which Has a Proven Track-Record
of Success. OSI’s diabetes and obesity franchise, based in our
wholly owned, state-of-the-art R&D facility in the UK, is a
profitable business anchored around OSI’s DPIV patent estate
revenue stream. Twelve companies have acquired licenses to this
estate which generated 2009 revenues of $67 million in milestones
and royalties and provides a rapidly growing revenue source that is
expected to increase by more than 30% in 2010.
- Despite the Growth of
the Company, Astellas’ Offer is Lower Than the Price Range in
its Previous Inadequate Nonbinding Indication of Interest.
Since February 2009, when Astellas first submitted a conditional
nonbinding indication of interest to acquire the Company, OSI has
had strong financial performance, revenue and net income growth, an
increased net cash position, secured the re-issue of a key Tarceva
patent and made advances in its pipeline. Despite this growth and
positive performance, in its Offer, Astellas proposes to pay OSI
stockholders even less for their shares than the price range
reflected in Astellas' prior nonbinding indication of interest,
which the OSI Board determined was inadequate and not in the best
interests of OSI and its stockholders.
- The Offer Represents a Low
Revenue Multiple Compared to Recent, Precedent Oncology
Transactions. Revenue multiples paid in recent oncology
transactions were substantially higher than the revenue multiple
implied by Astellas’ $52.00 per share Offer. For example, the
forward year revenue multiple paid by Takeda Pharmaceutical for
Millennium Pharmaceuticals was 13.5x, and the forward year revenue
multiple paid by Eli Lilly for ImClone Systems was 7.8x. Based on
Wall Street research estimates, the 2010 revenue multiple implied
by Astellas’ Offer for all of OSI is only 6.3x, and is even lower –
below 5.8x – for the strategic assets of OSI (based on a value of
approximately $1.3 billion for OSI’s financial assets).
- The Offer Values OSI at a
Price Below Current Trading Levels. OSI’s stock price has
remained above Astellas’ Offer price of $52.00 per share since the
public announcement of the Offer on March 1, 2010. The closing
price per share on the NASDAQ Global Select Market on March 12,
2010, the last trading day prior to the date of the enclosed
Schedule 14D-9, was $57.68 and the 10-day trailing average closing
price per share on the NASDAQ Global Select Market since the March
1st announcement of Astellas' intention to commence the Offer was
$56.92 per share.
- Astellas’ Offer is Highly
Conditional and Creates Substantial Uncertainty as to Whether
Astellas Would be Required to Consummate the Offer. The Board
considered the fact that the Offer is subject to numerous and
subjective conditions. Many of these conditions are completely
within the control, judgment, interpretation or discretion of
Astellas.
- The Offer Is Financially
Inadequate. The OSI Board has received separate oral opinions,
confirmed by delivery of written opinions, dated March 12, 2010,
from the Company’s financial advisors, Centerview Partners LLC
(“Centerview Partners”) and Lazard Frères & Co. LLC (“Lazard”),
as to the inadequacy, from a financial point of view and as of the
date of such opinions, of the $52.00 per share Offer price to
holders of OSI common stock (other than Astellas and its
affiliates). The opinions were provided to the Board (solely in its
capacity as such) for its information in its evaluation of the
Offer from a financial perspective and were based on and subject to
certain assumptions, qualifications, limitations and other
considerations. The opinions do not address any other aspect of the
Offer or any related transactions and are not intended to
constitute, and do not constitute, recommendations as to whether
any stockholder should tender shares in the Offer or as to any
other matters.
OSI’s Board of Directors has Instructed OSI’s Management,
With the Assistance of OSI’s Financial Advisors, to Contact Other
Parties. In its efforts to maximize value for OSI stockholders,
the Board instructed OSI management, with the assistance of the
Company’s financial advisors, Centerview Partners and Lazard, to
contact appropriate third parties in order to explore the
availability of a transaction that reflects the full intrinsic
value of the Company. Third parties expressing legitimate interest
in a transaction with OSI will be afforded an opportunity to engage
in a due diligence review of certain OSI confidential information,
subject to their entering into an appropriate nondisclosure
agreement with the Company. No assurance can be given as to whether
any of these contacts will result in any transaction.
Prior to Astellas launching its unsolicited Offer, OSI offered
to provide Astellas with certain non-public information that the
Company believed was fundamental to understanding the value of OSI,
subject to it entering into a nondisclosure agreement, a proposed
draft of which OSI provided to Astellas. Astellas NEVER
responded to the Company’s proposal, NEVER asked to review any of
the Company’s confidential information and NEVER made any attempt
to negotiate the terms of the draft nondisclosure agreement.
OSI remains willing to share confidential information with
Astellas, as with other interested parties, subject to their
entering into an appropriate nondisclosure agreement with the
Company.
Accordingly, and for the reasons described both above and in
the enclosed Schedule 14D-9, the Board of Directors of the Company
unanimously recommends that you REJECT the Offer and NOT TENDER
your shares pursuant to the Offer.
We urge you to read the enclosed Schedule 14D-9 so you will be
fully informed before you make your decision. If you have questions
or need assistance, please call our information agent, MacKenzie
Partners, Inc. by calling 800-322-2885 toll free or by calling
212-929-5500 or by emailing osipharma@mackenziepartners.com.
Sincerely,
/s/
Robert A. Ingram
/s/
Colin Goddard, Ph.D.
Robert A. Ingram Colin Goddard, Ph.D. Chairman of the Board
Chief Executive Officer OSI Pharmaceuticals OSI Pharmaceuticals
This letter contains both GAAP and non-GAAP financial measures.
A reconciliation of the non-GAAP financial measures to their GAAP
equivalents can be found in OSI’s earnings release for the year
ended December 31, 2009, which is available via the investor
relations section of OSI’s website (www.osip.com).
About OSI Pharmaceuticals
OSI Pharmaceuticals is a biotechnology company committed to
building a scientifically strong and financially successful top
tier biopharmaceutical organization that discovers, develops and
commercializes innovative molecular targeted therapies, or MTTs,
addressing major unmet medical needs in oncology, diabetes and
obesity. OSI’s largest area of focus is oncology where its business
is anchored by Tarceva, a small molecule inhibitor of the epidermal
growth factor receptor, or EGFR, which achieved global sales of
over $1.2 billion in 2009.
As of March 12, 2010, Tarceva was approved for sale in 109
countries for the treatment of advanced non-small cell lung cancer,
or NSCLC, in patients who have failed at least one prior
chemotherapy regimen and 80 countries for the treatment of patients
with advanced pancreatic cancer in combination with the
chemotherapy agent, gemcitabine.
Additional Information
In connection with the unsolicited tender offer commenced by
Astellas, OSI is filing a Solicitation/Recommendation Statement on
Schedule 14D-9 with the U.S. Securities and Exchange Commission
(“SEC”). STOCKHOLDERS OF OSI ARE URGED TO READ THE SCHEDULE 14D-9
AND OTHER DOCUMENTS FILED WITH THE SEC CAREFULLY IN THEIR ENTIRETY
BECAUSE THEY CONTAIN IMPORTANT INFORMATION. Stockholders may obtain
a free copy of the Schedule 14D-9 (when available) and other
documents filed by OSI with the SEC through the web site maintained
by the SEC at http://www.sec.gov. Stockholders may also obtain,
without charge, a copy of the Schedule 14D-9 from MacKenzie
Partners, Inc., OSI’s information agent, by calling 800-322-2885
toll free or by calling 212-929-5500 or by emailing
osipharma@mackenziepartners.com.
Forward Looking Statements
This news release contains forward-looking statements. These
statements are subject to known and unknown risks and uncertainties
that may cause actual future experience and results to differ
materially from the statements made. Various factors may cause
differences between current expectations and actual results,
including risks and uncertainties associated with Astellas’ offer.
Other Factors that might cause such a difference include, among
others, OSI’s and its collaborators’ abilities to effectively
market and sell Tarceva and to expand the approved indications
for Tarceva, OSI’s ability to protect its intellectual property
rights, safety concerns regarding Tarceva, competition to Tarceva
and OSI’s drug candidates from other biotechnology and
pharmaceutical companies, the completion of clinical trials, the
effects of FDA and other governmental regulation, including pricing
controls, OSI’s ability to successfully develop and commercialize
drug candidates, and other factors described in OSI’s filings with
the SEC. This news release also contains both GAAP and non-GAAP
financial measures. A reconciliation of the non-GAAP financial
measures to their GAAP equivalents can be found in OSI’s earnings
release for the year ended December 31, 2009, which is available
via the investor relations section of OSI’s website
(www.osip.com).
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