UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14D-9
Solicitation/Recommendation Statement under Section 14(d)(4)
of the Securities Exchange Act of 1934
OSI Pharmaceuticals,
Inc.
(Name of Subject Company)
OSI Pharmaceuticals,
Inc.
(Name of Person Filing Statement)
Common Stock, $0.01 par value per share
(Title of Class of Securities)
671040103
(CUSIP Number of Class of Securities)
Barbara A. Wood, Esq.
Senior Vice President, General Counsel and Secretary
41 Pinelawn Road
Melville, New York 11747
(631) 962-2000
(Name, address and telephone number of person authorized to
receive notices
and communications on behalf of the persons filing statement)
With copies to:
Roger S. Aaron, Esq.
Robert B. Pincus, Esq.
Steven J. Daniels, Esq.
Skadden, Arps, Slate, Meagher & Flom LLP
Four Times Square
New York, New York 10036
(212) 735-3000
o
Check
the box if the filing relates solely to preliminary
communications made before the commencement of a tender offer.
TABLE OF CONTENTS
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Item 1.
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Subject
Company Information
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(a)
Name
and Address
The name of the subject company to which this
Solicitation/Recommendation Statement on
Schedule 14D-9
(together with any exhibits attached hereto, this
Statement) relates is OSI Pharmaceuticals, Inc., a
Delaware corporation (OSI or the
Company). The Companys principal executive
offices are located at 41 Pinelawn Road, Melville, New York
11747. The Companys telephone number at this address is
(631) 962-2000.
(b)
Securities
The title of the class of equity securities to which this
Statement relates is the Companys common stock, par value
$0.01 per share (the Common Stock), including the
associated rights to purchase shares of Series SRP Junior
Participating Preferred Stock, par value $0.01 (the
Rights, and together with the Common Stock, the
Shares), issued pursuant to the Rights Agreement,
dated as of September 27, 2000, by and between the Company
and The Bank of New York, as Rights Agent (the Rights
Agreement). As of March 11, 2010, there were
59,584,137 Shares outstanding.
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Item 2.
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Identity
and Background of Filing Person
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(a)
Name
and Address
The name, business address and business telephone of the
Company, which is the subject company and the person filing this
Statement, are set forth in Item 1 above. The
Companys website address is
www.osip.com
. The
information on the Companys website should not be
considered a part of this Statement or incorporated herein by
reference.
(b)
Tender
Offer
This Statement relates to the unsolicited tender offer by Ruby
Acquisition, Inc. (Purchaser), a Delaware
corporation and a wholly-owned subsidiary of Astellas US
Holding, Inc. (Parent), a Delaware corporation and a
wholly-owned subsidiary of Astellas Pharma Inc.
(Astellas), a corporation formed under the laws of
Japan, pursuant to which Purchaser has offered to purchase all
of the issued and outstanding Shares, at a price of
$52.00 net per Share in cash (subject to applicable
withholding taxes), without interest, upon the terms and subject
to the conditions set forth in the Offer to Purchase dated
March 2, 2010 (the Offer to Purchase) and in
the related Letter of Transmittal, (which, together with any
amendments or supplements thereto, collectively constitute the
Offer). The Offer is described in the Tender Offer
Statement on Schedule TO (together with exhibits thereto,
as amended, the Schedule TO), filed with the
Securities and Exchange Commission (the SEC) on
March 2, 2010 by Purchaser, Parent and Astellas.
The Schedule TO indicates that the purpose of the Offer is
to acquire control of, and ultimately the entire equity interest
in, the Company. The Offer, as the first step in the acquisition
of the Company, is intended to facilitate the acquisition of all
issued and outstanding Shares. If the Offer is consummated,
Astellas and Purchaser intend, as soon as practicable after
consummation of the Offer, to have Astellas and Purchaser, or
another direct or indirect wholly-owned subsidiary of Astellas,
consummate a second-step merger (the Proposed
Merger). At the effective time of the Proposed Merger,
each then outstanding Share (other than Shares held by Astellas
and its subsidiaries, Shares held in the treasury of the
Company, Shares held by subsidiaries of the Company, if any, and
Shares held by the Companys stockholders who have
perfected their appraisal rights in accordance with
Section 262 of the General Corporation Law of the State of
Delaware (DGCL)) would be canceled and converted
automatically into the right to receive an amount in cash per
Share equal to the highest price per Share paid by Purchaser
pursuant to the Offer, without interest (and less any applicable
withholding taxes). Upon consummation of the Proposed Merger,
the Company would be a direct or indirect wholly-owned
subsidiary of Astellas.
2
The Schedule TO provides that the Offer is conditioned upon
fifteen conditions including, among other conditions,
(i) there having been validly tendered and not properly
withdrawn before the expiration of the Offer at least the number
of Shares which, together with the Shares then owned by Astellas
and its subsidiaries (including Purchaser), represents at least
a majority of the total number of Shares outstanding calculated
on a fully-diluted basis, (ii) the Companys Board of
Directors (the Board or the OSI Board)
having redeemed the Rights or Purchaser being satisfied, in its
reasonable discretion, that the Rights have been invalidated or
are otherwise inapplicable to the Offer and the Proposed Merger,
(iii) the OSI Board having approved the Offer and the
Proposed Merger such that, or Purchaser otherwise being
satisfied, in its reasonable discretion, that, the restrictions
on business combinations with interested stockholders set forth
in Section 203 of the DGCL are inapplicable to the Offer
and the Proposed Merger, (iv) the Company not having
directly or indirectly sold, licensed or otherwise transferred
or encumbered in whole or in part (and not having agreed
directly or indirectly to sell, license or otherwise transfer or
encumber in whole or in part) any rights or assets related to or
in connection with its flagship oncology product,
Tarceva
®
(erlotinib) other than as provided in, and only to the extent
(if any) required by, agreements to which the Company is a party
and which have been filed by the Company with the SEC on or
prior to February 26, 2010 and (v) any applicable
waiting period under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, having expired
or been terminated.
According to the Schedule TO, Astellas principal
executive office is located at 3-11, Nihonbashi-Honcho, 2-chome,
Chuo-ku Tokyo
103-8411,
Japan and its telephone number at such address is
(81) 3-3244-3000, and the executive offices of Parent and
Purchaser are located at Three Parkway North, Deerfield, IL
60015. The telephone number of Parent and Purchaser at such
address is
(847) 317-8800.
With respect to all information described in this Statement or
the annexes and exhibits to this Statement contained in the
Offer to Purchase, the related Letter of Transmittal, the
Schedule TO, and any exhibits, amendments or supplements
thereto, including information concerning Astellas, Parent and
Purchaser or their respective affiliates, officers or directors,
or actions or events with respect to any of them, the Company
takes no responsibility for the accuracy or completeness of such
information or for any failure by Astellas, Parent or Purchaser
to disclose events or circumstances that may have occurred and
may affect the significance, completeness or accuracy of any
such information.
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Item 3.
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Past
Contacts, Transactions, Negotiations, and Agreements
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Except as described in this Statement or in the excerpts from
the Companys Definitive Proxy Statement on
Schedule 14A, filed with the SEC on April 29, 2009
(the 2009 Proxy Statement), relating to the
Companys 2009 Annual Meeting of Stockholders, which
excerpts are filed as Exhibit (e)(1) to this Statement and
incorporated herein by reference, or as otherwise incorporated
herein by reference, to the knowledge of the Company, as of the
date of this Statement, there are no material agreements,
arrangements, or understandings, nor any actual or potential
conflicts of interest between the Company or any of its
affiliates, on the one hand, and (i) the Company or any of
its executive officers, directors or affiliates, or
(ii) Astellas, Parent, Purchaser or any of their respective
executive officers, directors or affiliates, on the other hand.
Any information incorporated herein by reference shall be deemed
modified or superseded for purposes of this Statement to the
extent that any information contained herein modifies or
supersedes such information.
The information contained in Item 4 below is incorporated
by reference into this Item 3. In addition, Exhibit (e)(1)
includes the following sections of the 2009 Proxy Statement:
Voting Securities and Principal Stockholders,
Executive Compensation and Director
Compensation, which are incorporated herein by reference.
3
Fujisawa
License Agreement
In December 2003, the Company entered into a license agreement
(the Fujisawa License Agreement) with Fujisawa
Pharmaceutical Co., Ltd. (Fujisawa), in order to
obtain from Fujisawa an exclusive license to certain Fujisawa
patents implicated in the Companys use of its clinical
candidate, OSI-930, in the field of oncology. The current party
to the Fujisawa License Agreement with the Company is Astellas,
the
successor-in-interest
to Fujisawa. Under the terms of the Fujisawa License Agreement,
the Company made an initial payment of $300,000 to Fujisawa and
a $400,000 milestone payment upon the approval of the
Investigational New Drug Application for a licensed product
containing OSI-930, any of its derivatives or any
c-kit
inhibitor (a Licensed Product). The Company
currently pays an annual $50,000 maintenance fee, which the
Company is obligated to pay Astellas (until the launch of the
first Licensed Product). Pursuant to the terms of the Fujisawa
License Agreement, the Company is also required to pay
$3,000,000 upon the first approval of a New Drug Application on
a Licensed Product in the United States and royalties equal to
3.5% of the net sales of a Licensed Product in any country where
Fujisawa has a valid patent claim. Each party has agreed to
indemnify and hold harmless the other party and its
representatives and affiliates for certain losses in connection
with the transactions contemplated by the Fujisawa License
Agreement. Each party may terminate the Fujisawa License
Agreement upon
sixty-days
prior written notice to the other party in the event that the
other party has committed certain breaches set forth in the
Fujisawa License Agreement or has filed a petition for
bankruptcy, corporate reorganization, civil rehabilitation or
other insolvency proceedings. Unless earlier terminated, the
term of the Fujisawa License Agreement will continue until the
last to expire of the valid patent claims or published patent
applications of the patent rights licensed under the Fujisawa
License Agreement.
The foregoing summary of the Fujisawa License Agreement is
qualified in its entirety by reference to the text of the
Fujisawa License Agreement, a copy of which is filed as Exhibit
(e)(2) to this Statement and incorporated by reference into this
Item 3.
Mr. Kenneth
B. Lees Former Role as Consultant to Astellas Venture
Capital an Affiliate of Astellas
From November 2003 to November 2005, Mr. Kenneth B. Lee,
Jr., a member of the Companys Board, served as a
consultant to Astellas Venture Capital (AVM,
formerly Yamanouchi Venture Capital), a wholly-owned venture
fund of Astellas (formerly Yamanouchi). In connection with his
service as a consultant, Mr. Lee received annual
compensation from AVM of $22,500 in 2004 and $15,000 in 2005,
when his engagement was terminated.
Beneficial
Ownership of Shares
According to the Schedule TO, Parent owned
1,000 Shares as of March 2, 2010. The
1,000 Shares owned by Parent represent less than 1% of the
issued and outstanding Shares as of March 15, 2010.
Cash
Consideration Payable to Directors and Executive Officers
Pursuant to the Offer and Proposed Merger
As a group, the directors and executive officers of the Company
held an aggregate of 324,263 Shares as of March 15,
2010. In the event that the directors or executive officers were
to tender any Shares they own for purchase pursuant to the
Offer, or if the Proposed Merger were to occur, the directors
and executive officers would receive the same cash consideration
per Share (on the same terms and conditions) as the other
stockholders of the Company. If the directors and executive
officers were to tender all of the 324,263 Shares owned by
them for purchase pursuant to the Offer and those Shares were
purchased by Purchaser for $52.00 per Share, the directors and
executive officers would receive an aggregate of approximately
$16.9 million in cash, less applicable withholding taxes.
The foregoing amount does not include Shares subject to
restricted stock units and options to purchase Shares, which are
addressed in the following paragraph and in the section entitled
Potential Severance and Change of Control Benefits.
As discussed below under Item 4 The
Solicitation or Recommendation,
4
to the knowledge of the Company, none of the Companys
directors or executive officers currently intends to tender any
of their Shares pursuant to the Offer.
The Companys directors and executive officers have
outstanding equity awards under the Companys three Equity
Incentive Plans (collectively, the Company Equity
Incentive Plans): the 1997 Incentive and Non-Qualified
Stock Option Plan, the 1999 Incentive and Non-Qualified Stock
Option Plan and the Amended and Restated Stock Incentive Plan.
As of March 15, 2010, the directors and executive officers
of the Company beneficially held vested and exercisable options
to purchase 1,250,447 Shares, with exercise prices ranging
from $15.02 to $82.88 and an aggregate weighted average exercise
price of $42.01 per Share for the options that were vested and
exercisable as of that date. If the directors and executive
officers were to exercise all vested options and tender all of
the Shares subject thereto for purchase pursuant to the Offer,
the directors and executive officers would receive an aggregate
of approximately $63.8 million in cash with respect to such
options (net of the exercise price necessary to purchase the
Shares pursuant to the option exercise). See below under the
section entitled Potential Severance and Change of Control
Benefits of Executive Officers for information about
unvested equity awards held by executive officers and directors.
If the Proposed Merger is consummated following the Offer, the
directors and executive officers would receive cash
consideration equal to the product of the number of vested
options they own and the difference between $52.00 and the
exercise price of the options and the same cash consideration
for each Share underlying a restricted stock award as the other
stockholders of the Company would receive per Share, less any
applicable withholding taxes.
The foregoing summary is qualified in its entirety by reference
to the Company Equity Incentive Plans, copies of each of which
are filed as Exhibits (e)(3) through (e)(5) to this Statement
and incorporated herein by reference.
Potential
Severance and Change of Control Benefits of Executive
Officers
The Companys executive officers have entered into, or
participate in, as applicable, the various agreements and
arrangements discussed below, which provide for severance and
other benefits in connection with termination upon a change in
control of the Company.
Colin
Goddard, Ph.D. and Mr. Pierre Legault
The employment agreement, dated as of June 14, 2006,
between the Company and Dr. Colin Goddard, the
Companys Chief Executive Officer, as amended on
June 21, 2006, provides that if Dr. Goddard is
terminated by the Company without cause, or terminates his
employment for good reason, then he will be entitled to receive
his accrued but unpaid salary and benefits, a continuation of
health and disability benefits for a period of three years,
three years of base salary and the pro-rata bonus he would have
been entitled to receive for the fiscal year in which the
termination occurs. The definition of good reason
under Dr. Goddards agreement includes a change of
control of the Company.
The employment agreement, dated as of December 16, 2008,
between the Company and Mr. Pierre Legault, the
Companys Executive Vice President, Chief Financial Officer
and Treasurer, provides that if Mr. Legault is terminated
by the Company without cause, terminates his employment for good
reason, or resigns within 60 days following a change of
control, he will be entitled to receive his accrued but unpaid
salary and benefits, a continuation of health benefits for a
period of two years, and a lump sum equal to two years of base
salary plus two years of his target bonus and his pro-rated
target bonus for the year of termination through the date of
termination. As used in Mr. Legaults employment
agreement, good reason means a material reduction in
duties, responsibilities or reporting responsibilities; a
reduction in base salary or target bonus; or a requirement of
relocation whereby Mr. Legault is based more than
35 miles from the Companys headquarters or his
average commute from residence exceeds 45 minutes.
The employment agreements between the Company and each of
Dr. Goddard and Mr. Legault also provide for a
reimbursement (or
gross-up)
in respect of any golden parachute excise taxes
imposed on their severance payments and any other payments and
benefits under Section 4999 of the
5
Internal Revenue Code, provided that Mr. Legaults
excise tax
gross-up
will not be made if the total amount of change of control
protection benefits exceeds the threshold by which such excise
tax is triggered by less than 10%. If this threshold is not met,
Mr. Legaults severance payments and benefits would be
reduced to the extent necessary to avoid the application of such
excise tax.
Mr. Gabriel
Leung
The employment agreement, dated as of May 16, 2003, between
the Company and Mr. Gabriel Leung, the Companys
Executive Vice President and President, Pharmaceutical Business,
as amended on January 5, 2004, provides that if
Mr. Leung is terminated by the Company without cause, or
terminates his employment for good reason, he will be entitled
to receive his accrued but unpaid salary and benefits, a
continuation of health benefits for a period of one year,
payment of base salary for one year following and a pro-rata
amount of the bonus he would have been entitled to receive for
the fiscal year in which the termination occurs, based on the
portion of such year during which he was employed. The
definition of good reason under
Mr. Leungs employment agreement includes a change of
control of the Company, which is defined as the sale of all or
substantially all of the assets of the Company, or a merger or
consolidation where the existing stockholders of the Company
cease to hold a majority of the voting power of the Company,
which would occur if the Proposed Merger is consummated.
Anker
Lundemose, M.D., Ph.D., D. Sc.
The service contract, dated as of September 20, 2005,
between Prosidion Limited, a wholly-owned subsidiary of the
Company (Prosidion), and Dr. Anker Lundemose,
the Companys Executive Vice President, Corporate
Development and Strategic Planning, provides that if he is
terminated by the Company without cause, or terminates his
employment for good reason, then he will be entitled to receive
his accrued but unpaid salary and benefits and a lump sum
payment equal to (a) one year of base salary and
(b) the pro-rata bonus he would have been entitled to
receive for the fiscal year in which the termination occurs,
based on the portion of such year during which he was employed.
The definition of good reason under
Dr. Lundemoses agreement includes a change of control
of the Company or Prosidion.
Mr. Robert
L. Simon
The employment letter agreement, dated as of November 15,
2001, between the Company and Mr. Robert Simon, the
Companys Executive Vice President, Pharmaceutical and
Technical Operations, as amended on September 20, 2005,
provides that if Mr. Simon is terminated by the Company
without cause or terminates his employment within six months of
a change in control of the Company for good reason, he will be
entitled to receive a continuation of health benefits for a
period of one year, payment of his base salary for a period of
one year and a pro-rata bonus for the year of termination. Under
Mr. Simons employment letter agreement, good
reason includes a reduction in his total compensation
package, duties or responsibilities, or the requirement that he
relocate more than forty (40) miles from his present
location or home.
Linda E.
Amper, Ph.D. and Barbara A. Wood, Esq.
The change of control agreement, dated October 4, 2001, as
amended and restated on December 4, 2007, between the
Company and Dr. Linda Amper, the Companys Senior Vice
President, Human Resources and the change of control agreement,
dated as of October 4, 2001, between the Company and
Ms. Barbara Wood, Esq., the Companys Senior Vice
President, General Counsel and Secretary, as amended on
September 20, 2005, each provide that if the officers
employment with the Company is terminated without cause or if
the officer voluntarily terminates for good reason at any time
within six months following a change of control, then the
officer will receive a lump sum severance payment equal to the
officers annual salary for a period of one year, a
pro-rated bonus for the year of termination, and one year of
health benefits. Good reason under the terms of the
change of control agreements for Dr. Amper and
Ms. Wood includes (i) a decrease in total compensation
package, (ii) the assignment of duties or responsibilities
which are not commensurate with the officers position
immediately prior to the
6
sale or change of control, or (iii) the requirement to
relocate to an office or facility more than forty
(40) miles from the officers present location or
forty (40) miles from the officers home.
The aggregate value of the cash severance payments and medical
benefits which would be received by the executive officers
referred to above, if the employment of each of them was
terminated on March 15, 2010 in connection with the
consummation of the Offer would be approximately
$11.1 million.
Jonathan
Rachman, M.D., Ph.D.
The employment agreement, dated as of March 2, 2005,
between Prosidion and Dr. Jonathan Rachman, the
Companys Senior Vice President, Research and Development,
Diabetes and Obesity, provides for a six month notice of
termination or a payment of salary and benefits in lieu thereof.
The above summaries and descriptions of the employment or other
agreements entered into with the executive officers are
qualified in their entirety by reference to the agreements and
the amendments and addenda thereto, copies of each of which are
filed as Exhibits (e)(6) through (e)(20) to this Statement and
are incorporated herein by reference.
Vesting
of Equity upon a Change of Control
As of March 15, 2010, the executive officers of the Company
as a group hold an aggregate of 944,813 unvested stock options
and 193,557 unvested restricted stock and restricted stock
units. The employment agreements or other arrangements described
above for each of the Companys executive officers, other
than Dr. Rachman, provide that upon a change of control of
the Company, all of their outstanding unvested equity grants
vest
and/or
become immediately exercisable. Dr. Rachmans most
recent stock option agreement and restricted stock unit
agreement, a copy of each of which is attached as Exhibits
(e)(21) and (e)(22) and incorporated herein by reference, each
provide for the acceleration of equity upon his termination
following a change of control, unless the termination is for
cause or a resignation without good reason. For
purposes of these agreements, good reason includes
(i) a decrease in total compensation package, (ii) the
assignment of duties or responsibilities which are not
commensurate with the officers position immediately prior
to the sale or change of control, or (iii) the requirement
to relocate to an office or facility more than forty
(40) miles from the officers present location or
forty (40) miles from the officers home. In the event
that all such awards were to vest as of March 15, 2010 in
connection with the Offer or the Proposed Merger, as applicable,
the executive officers of the Company would receive an aggregate
amount of approximately $24.2 million in respect of such
awards (net, in the case of options, of the exercise price
applicable to the option).
7
The following table describes for each executive officer the
potential payments due upon the acceleration of vesting of
awards as of March 15, 2010 (net, in the case of options,
of the exercise price applicable to the options):
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Acceleration
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Acceleration
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of Vesting
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of Vesting
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Restricted
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Restricted
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Acceleration of
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Stock
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Stock Unit
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Vesting of
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Name
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Awards (1)
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Awards (1)
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Options (2)
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Total
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Colin Goddard, Ph.D.
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Chief Executive Officer
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$
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217,100
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$
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5,281,050
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$
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3,503,864
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$
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9,002,014
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Pierre Legault
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Executive Vice President, Chief
Financial Officer and Treasurer
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-
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$
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2,076,550
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$
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1,059,500
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$
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3,136,050
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Robert L. Simon
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Executive Vice President,
Pharmaceutical and Technical
Operations
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$
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65,000
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$
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1,676,486
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$
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1,045,460
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$
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2,786,946
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Gabriel Leung
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Executive Vice President and
President, Pharmaceutical Business
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$
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87,100
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$
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1,439,080
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$
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895,700
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$
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2,421,880
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Anker Lundemose, M.D. Ph.D., D. Sc.
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Executive Vice President, Corporate
Development and Strategic Planning
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$
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87,100
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$
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1,448,500
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$
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930,384
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$
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2,465,984
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Barbara Wood, Esq.
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|
|
|
|
|
|
|
|
Senior Vice President, General
Counsel and Secretary
|
|
|
$
|
65,000
|
|
|
|
$
|
1,086,375
|
|
|
|
$
|
702,000
|
|
|
|
$
|
1,853,375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Linda E. Amper, Ph.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Vice President, Human
Resources
|
|
|
|
-
|
|
|
|
$
|
1,068,188
|
|
|
|
$
|
768,300
|
|
|
|
$
|
1,836,488
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jonathan Rachman, M.D., Ph.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Vice President, R&D Diabetes
and Obesity, UK
|
|
|
|
-
|
|
|
|
$
|
332,000
|
|
|
|
$
|
348,400
|
|
|
|
$
|
680,400
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Assumes a purchase price of $52.00 per Share, and 100%
acceleration of all unvested restricted stock and restricted
stock unit awards.
|
|
|
(2)
|
Represents the net proceeds for 100% of unvested options,
assuming options are exercised and Shares sold at $52.00 per
Share.
|
Benefits
Related to Ardsley Site Relocation
In 2009, the Compensation Committee of the Board approved the
award of commitment bonuses to all of its
U.S.-based
employees who agreed to relocate to the Companys new
facility in Ardsley, New York. Of the Companys
executive officers, Messrs. Legault, Simon and Leung and
Ms. Wood and Dr. Amper received these commitment
bonuses. Dr. Goddard elected to forgo such commitment
bonus. Certain relocation benefits were also provided to
Messrs. Leung and Simon and Dr. Amper.
8
Summary
of Potential Change of Control Benefits
The following table summarizes, as of March 15, 2010
(unless specified otherwise below), the aforementioned potential
severance and other benefits which may be payable in connection
with a change of control of the Company as defined under, and in
accordance with, the respective employment agreements or other
arrangements described above (excluding the amount of any
applicable withholding taxes), assuming termination of the
executive on March 15, 2010 and an Offer price of $52.00:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
|
|
|
|
Accelerated
|
|
|
|
|
|
|
|
|
Severance
|
|
|
|
Medical
|
|
|
|
Equity
|
|
|
|
|
|
Name
|
|
|
Payment
|
|
|
|
Continuation
|
|
|
|
Awards
|
|
|
|
Total
|
|
Colin Goddard, Ph.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Chief Executive Officer(a)
|
|
|
$
|
5,488,414
|
(c)
|
|
|
$
|
59,436
|
|
|
|
$
|
9,002,014
|
|
|
|
$
|
14,549,864
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pierre Legault
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Vice President, Chief
Financial Officer and Treasurer(b)
|
|
|
$
|
3,074,605
|
(d)
|
|
|
$
|
31,488
|
|
|
|
$
|
3,136,050
|
|
|
|
$
|
6,242,143
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Robert L. Simon
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Vice President,
Pharmaceutical and Technical
Operations
|
|
|
$
|
477,747
|
(e)
|
|
|
$
|
19,812
|
|
|
|
$
|
2,786,946
|
|
|
|
$
|
3,284,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gabriel Leung
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Vice President and
President, Pharmaceutical
Business
|
|
|
$
|
527,792
|
(e)
|
|
|
$
|
19,812
|
|
|
|
$
|
2,421,880
|
|
|
|
$
|
2,969,484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anker Lundemose, M.D. Ph.D., D. Sc. (f)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Vice President,
Corporate Development and
Strategic Planning
|
|
|
$
|
421,915
|
(e)
|
|
|
|
-
|
|
|
|
$
|
2,465,984
|
|
|
|
$
|
2,887,899
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Barbara Wood, Esq.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Vice President, General
Counsel and Secretary
|
|
|
$
|
426,800
|
(e)
|
|
|
$
|
15,744
|
|
|
|
$
|
1,853,375
|
|
|
|
$
|
2,295,919
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Linda E. Amper, Ph.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Vice President, Human
Resources
|
|
|
$
|
357,676
|
(e)
|
|
|
$
|
5,820
|
|
|
|
$
|
1,836,488
|
|
|
|
$
|
2,199,984
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jonathan Rachman, M.D., Ph.D.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Senior Vice President, R&D Diabetes
and Obesity, UK
(f)
|
|
|
$
|
158,955
|
(g)
|
|
|
|
-
|
|
|
|
$
|
680,400
|
|
|
|
$
|
839,355
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Dr. Goddard is entitled to
receive tax gross-up payments in the event that his receipt of
termination payments and other benefits following a change of
control subjects him to an excise tax under Section 4999 of
the U.S. Internal Revenue Code. Based on calculated severance
amounts, Dr. Goddard would be subject to such excise tax,
amounting to $3,219,274, assuming a March 15, 2010
termination date. This amount does not reflect the value that
may be attributable to Dr. Goddards six-month
non-competition and non-solicitation agreement with the Company.
Such value may be offset from the parachute payments attributed
to the executive in connection with a change in control.
|
|
(b)
|
|
Mr. Legault is entitled to
receive tax
gross-up
payments in the event that his receipt of termination payments
and other benefits following a change of control subjects him to
an excise tax under Section 4999 of the U.S. Internal
Revenue Code. Based on calculated severance amounts,
Mr. Legault would be subject to such excise tax, amounting
to $1,542,542, assuming a March 15, 2010 termination date.
This amount does not reflect the value that may be attributable
to Mr. Legaults one-year non-competition and
non-solicitation agreement with the Company. Such value may be
offset from the parachute payments attributed to the executive
in connection with a change in control.
|
9
|
|
|
(c)
|
|
Represents three years of 2010
base salary, pro-rated target bonus through March 15, 2010
and tax
gross-ups
in
the amount referenced in footnote (a) above for payment of
excise tax.
|
|
(d)
|
|
Represents two years of 2010 base
salary, two years of Mr. Legaults 2010 annual target
bonus, pro-rated target bonus through March 15, 2010, and
tax
gross-ups
in
the amount referenced in footnote (b) above for payment of
excise tax.
|
|
(e)
|
|
Represents one year of 2010 base
salary and a pro-rated target bonus for the year of termination.
|
|
(f)
|
|
Compensation amounts have been
converted from British Pounds Sterling to U.S. dollars using the
average exchange rate for the period ended February 28,
2010 of $1.59.
|
|
(g)
|
|
Represents six months of 2010 base
salary.
|
Indemnification
of Directors and Officers
The Companys Restated Certificate of Incorporation, a copy
of which is attached as Exhibit (e)(23) and incorporated herein
by reference, provides that the Company shall, to the fullest
extent authorized by the DGCL, indemnify any person, or the
legal representative of any person, who is or was a director,
officer, employee or agent of the Company or is or was serving
at the request of the Company as a director, officer, employee
or agent of another corporation or of a partnership, joint
venture, trust or other enterprise against liabilities incurred
in his or her capacity as such. The Companys Restated
Certificate of Incorporation also provides that any amendment to
the DGCL shall only be applicable to the extent any such
amendment permits the Company to provide broader indemnification
rights than such law permitted the Company to provide prior to
such amendment. The Companys Restated Certificate of
Incorporation further provides that in the case of an action,
suit or proceeding initiated by the indemnified person, the
Company shall indemnify the person only if such action, suit or
proceeding was authorized by the OSI Board. Additionally, the
Companys Restated Certificate of Incorporation provides
that, to the fullest extent permitted by the DGCL, the Company
shall advance expenses to such directors and officers in
connection with defending a proceeding brought against such
directors or officers by reason of the fact that he is or was
serving in such capacity at the request of the Company. The
Companys Restated Certificate of Incorporation also
contains a provision eliminating the liability of its directors
to the Company or its stockholders for monetary damages for
breach of fiduciary duty except under certain specified
circumstances. The Companys Restated Certificate of
Incorporation also permits the Company to maintain insurance to
protect itself and any of its directors, officers, employees or
agents against any liability with respect to which the Company
would have the power to indemnify such persons under the DGCL.
The Company maintains officers and directors
liability insurance which insures against certain liabilities
that officers and directors of the Company may incur.
Item 4.
The
Solicitation or Recommendation
(a)
Solicitation
Recommendation
. The Board has reviewed the Offer
with the assistance of the Companys management and legal
and financial advisors and, after careful consideration, the
Board has unanimously determined that the Offer is inadequate,
substantially undervalues the Company and is not in the best
interests of the Company and its stockholders.
Accordingly,
and for the reasons described in more detail below, the Board of
Directors of the Company unanimously recommends that you REJECT
the Offer and NOT TENDER your Shares pursuant to the Offer.
A copy of a letter to stockholders communicating the
Boards recommendation and a form of press release
announcing such recommendation are filed as Exhibits (a)(1) and
(a)(2) hereto, respectively, and are incorporated herein by
reference.
(b)
Background of the Offer;
Reasons for Recommendation.
1.
Background
.
On January 14, 2009, Dr. Colin Goddard, OSIs
Chief Executive Officer, met with Dr. Masaki Doi, then Vice
President, Business Development of Astellas, and Dr. Kaori
Maeda, then Associate Director, Business Development of
Astellas, in San Francisco, California. In the course of the
meeting,
10
Dr. Doi indicated that Astellas was interested in acquiring
OSI. Dr. Goddard responded that OSI had an established
strategy for the creation of long-term stockholder value, but
that the OSI Board took its fiduciary responsibilities seriously
and would certainly consider the near-term merits of any
indication of interest in the Company against the longer term
stockholder value creation potential of its ongoing strategic
plan. Dr. Goddard noted, however, that in light of the
pursuit of the Companys strategic plan, he did not believe
that it was the right time to sell the Company.
On February 2, 2009, Dr. Goddard received a letter
from Mr. Masafumi Nogimori, President and CEO of Astellas
(the text of this letter is attached as Exhibit (e)(24) to this
Statement) containing a nonbinding indication of interest to
acquire OSI at a price between $55.00 $57.00 per
Share in cash. The February
2
nd
Astellas indication of interest was nonbinding and preliminary
in nature and subject to numerous conditions. In connection with
its indication of interest, Astellas indicated that it would
need approximately two months to complete its due diligence
investigation of OSI and that it would require OSI to negotiate
exclusively with Astellas until March 31, 2009, if OSI
wished to pursue the indication of interest.
On February 5, 2009, the OSI Board met by teleconference
with the Companys management and advisors to discuss the
nonbinding indication of interest received from Astellas. At the
direction of the OSI Board, Dr. Goddard sent a letter to
Mr. Nogimori (the text of this letter is attached as
Exhibit (e)(25) to this Statement) indicating that the OSI Board
would respond to Astellas indication of interest following
a careful and thorough review.
On February 18, 2009, OSIs Board met formally to
consider the nonbinding indication of interest received from
Astellas. Also present at the meeting were members of the
Companys management and advisors. The Board, along with
the Companys management and advisors, discussed
Astellas nonbinding indication of interest, the M&A
market in general and the Companys strategic plan and
future prospects. After deliberation, the Board unanimously
determined that the $55.00 $57.00 price reflected in
Astellas nonbinding indication of interest was inadequate
and substantially undervalued the Company based on a number of
factors, including: the momentum of global Tarceva sales; the
positive recent clinical results relating to Tarceva; the
multiple future label and market expansion opportunities
inherent in the Tarceva lifecycle plan; and the strength and
long-term value creation potential of OSIs research and
development pipeline in oncology and diabetes and obesity. In
reaching its determination, the Board also considered a number
of other factors, including:
|
|
|
|
|
Astellas request for a two-month due diligence period and
almost two months of exclusivity;
|
|
|
|
the highly conditional nature of Astellas indication of
interest;
|
|
|
|
Astellas limited experience in consummating acquisitions
together with the fact that Astellas was then actively engaged
in an unsolicited takeover attempt for CV Therapeutics; and
|
|
|
|
the fact that a number of large pharmaceutical companies that
might have been interested in a transaction with OSI were
engaged in major transactions at that time, including Roche, the
Companys partner in the Tarceva franchise.
|
On February 19, 2009, Dr. Goddard sent a letter to
Mr. Nogimori (the text of this letter is attached as
Exhibit (e)(26) to this Statement) informing him of the
Boards decision.
On a number of occasions after the February 18, 2009 Board
meeting through June 15, 2009, representatives of Astellas
contacted representatives of OSI reiterating Astellas
interest in OSI and requesting that OSIs Board reconsider
Astellas nonbinding indication of interest on the same
terms and conditions that were determined by the Board to be
inadequate and too conditional in February 2009. Although the
OSI Board met on a number of occasions to consider these
overtures, given that the terms and conditions of Astellas
nonbinding indication of interest had not improved at all and
that Astellas had
11
not eliminated any of the conditionality of its nonbinding
indication of interest or its request for exclusivity, the Board
determined not to pursue these indications of interest.
There were no communications between OSI and Astellas or their
representatives from July 1, 2009 until late December 2009.
On January 13, 2010, Dr. Anker Lundemose, OSIs
Executive Vice President of Corporate Development and Strategic
Planning, met with Dr. Maeda and Mr. Chihiro Yokota,
Vice President, Licensing & Alliances of Astellas, in
San Francisco, California. Mr. Yokota indicated that
Astellas continued to be interested in OSI. At the January
13
th
meeting, Dr. Lundemose gave a slide presentation to
Dr. Maeda and Mr. Yokota regarding OSIs business
and indicated that OSI would be willing to consider alternative
relationships with Astellas.
On January 29, 2010, Dr. Lundemose emailed
Mr. Yokota informing him that Dr. Goddard would be
available to travel to Japan in the next one to two months to
meet with Mr. Nogimori should Astellas still be interested
in a top-level interaction between the two companies. On
February 3, 2010, Mr. Yokota called Dr. Lundemose
to request a
face-to-face
meeting between Dr. Goddard and Mr. Nogimori during
the week of February 8, 2010 and again expressed
Astellas interest in a transaction with OSI.
On February 12, 2010, Dr. Goddard and
Mr. Nogimori met in New York City. Mr. Nogimori told
Dr. Goddard that Astellas would be willing to acquire OSI
for $52.00 per Share. Dr. Goddard told Mr. Nogimori
that this price would likely be too low for OSI to consider.
Dr. Goddard assured Mr. Nogimori that he would convey
Astellas proposal to the Board and that he would recommend
to the Board that Astellas be permitted to review certain
confidential information that Dr. Goddard believed would
allow Astellas to better understand the value of the Company,
subject to Astellas entering into a mutually acceptable
nondisclosure agreement.
On February 19, 2010, members of the OSI Board met with
members of Company management and representatives from
Centerview Partners LLC (Centerview Partners), the
Companys lead financial advisor, and Skadden, Arps, Slate,
Meagher & Flom LLP (Skadden) and Saul
Ewing LLP, the Companys legal advisors. Dr. Goddard
described the Companys recent discussions with Astellas.
Members of OSIs management reported on OSIs past and
current business operations, financial condition and future
prospects. Representatives of Centerview Partners reviewed with
the Board, among other matters, the M&A market in general,
certain financial projections prepared by the Companys
management and related financial matters. Representatives of
Skadden discussed certain legal matters relating to the
Boards consideration of Astellas proposal and
provided the directors with an overview of their fiduciary
duties in connection therewith. The Board extensively discussed
the recent communications with Astellas, including
Astellas most recent oral indication of interest. After
deliberation, the Board determined that the $52.00 price at
which Astellas said it was interested in acquiring the Company
very significantly undervalued the Company. Among the factors
considered by the Board were the strong financial performance,
continued growth in revenue and net income, increases in the
Companys cash position and advances in the Companys
pipeline, as well as other positive trends and developments in
OSIs business. At that meeting, however, the Board
determined to offer Astellas access to certain OSI confidential
information that was fundamental to the Boards valuation
of the Company, subject to Astellas entering into a mutually
acceptable nondisclosure agreement.
On February 22, 2010, Dr. Goddard sent a letter to
Mr. Nogimori (the text of this letter is attached as
Exhibit (e)(27) to this Statement) stating that the
Companys Board was not interested in pursuing a sale of
the Company to Astellas at the price at which Astellas had
expressed interest in a transaction, given the OSI Boards
belief that the price very significantly undervalued the
Company. The letter also stated that the Company would provide
Astellas with certain non-public information that the Company
believed was fundamental to understanding the value of OSI,
subject to Astellas entering into a nondisclosure agreement, a
proposed draft form of which was included with
Dr. Goddards letter. Astellas
never
responded to the Companys proposal,
never
asked to review any of the Companys confidential
information and
never
made any attempt to
negotiate the terms of the draft nondisclosure agreement.
12
On March 1, 2010, Astellas responded to the Companys
offer to provide confidential information by issuing a press
release announcing that it would commence its unsolicited tender
offer at $52.00 per Share and sending a letter to the Company
notifying it of the unsolicited Offer. Later on March 1st,
the Companys Board met with members of management and the
Companys legal and financial advisors to discuss
Astellas March 1st letter and its intention to
commence an unsolicited tender offer.
On March 2, 2010, Astellas and Purchaser commenced the
Offer.
|
|
|
|
2.
|
Reasons for the Recommendation
.
|
The Board has reviewed the Offer with the assistance of the
Companys management and legal and financial advisors and,
after careful consideration, the Board has unanimously
determined that the Offer is inadequate, substantially
undervalues the Company and is not in the best interests of the
Company and its stockholders.
Accordingly, the Board
recommends that stockholders REJECT THE OFFER and NOT TENDER
their Shares pursuant to the Offer.
In reaching its determination to recommend that stockholders
reject the Offer, the Board considered numerous factors,
including, but not limited to, the following:
The Offer
Does Not Fully Reflect OSIs Fundamental, Intrinsic
Value.
|
|
|
|
|
The OSI Board believes that the Offer substantially undervalues
the Company relative to its fundamental, intrinsic value.
OSIs flagship oncology drug, Tarceva, 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 Company
co-promotes Tarceva in the United States with Genentech, Inc., a
wholly-owned member of the Roche Group, where the Company shares
profits equally, and the Company receives substantial royalties
on sales outside of the United States from its international
collaborator, Roche. 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.
|
|
|
|
The Companys overall financial performance has been
extremely strong. OSIs 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 Companys overall
revenue growth, derived from its share of global Tarceva sales,
as well as from the Companys dipeptyl peptidase IV
inhibitor, or DPIV, patent estate, is projected to remain very
strong. For a reconciliation of non-GAAP net income from
continuing operations to net income from continuing operations
and non-GAAP earnings per share to earnings per share for the
period ended December 31, 2009, see the Companys
website,
www.osip.com,
or Exhibit 99.1 to the
Companys Current Report on
Form 8-K
filed with the SEC on February 23, 2010.
|
|
|
|
In addition to its unique collection of highly attractive
strategic assets, OSI has substantial financial assets, which at
December 31, 2009, consisted of (i) significant DPIV
patent royalties, (ii) approximately $540 million of
cash, investments and marketable securities and
(iii) substantial net operating loss carryforwards, that
together the Company estimates are worth approximately
$1.3 billion. This implies that Astellas Offer values
the Companys strategic assets at only $2.3 billion.
The Board believes that the $2.3 billion value for the
Companys strategic assets implied by Astellas Offer
significantly undervalues the Companys highly desirable
and scarce oncology and diabetes and obesity franchises.
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As discussed in greater detail below, the Board also believes
that fundamental aspects of the Companys intrinsic value
are not reflected in the Astellas Offer, including:
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the Companys highly differentiated oncology and diabetes
and obesity new product and line extension pipeline;
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the scarcity value of OSIs growing, high quality, and
profitable oncology franchise along with its proven track-record
in discovering, developing and commercializing oncology products
and the Companys recognized leadership position in cancer
biology and EMT research; and
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the value of OSIs second profitable and high quality
disease area franchise in diabetes and obesity, which has a
proven track-record of success.
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The Offer
Does Not Appropriately Value the Companys Highly
Differentiated Oncology and Diabetes and Obesity New Product and
Line Extension Pipeline.
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OSIs 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. The OSI Board believes that the Offer is valued nearly
exclusively on the strength of OSIs existing Tarceva
franchise and the Companys DPIV patent estate royalty
stream and financial assets and offers no consideration to
stockholders for the value of the Companys new product
pipeline or label expansion opportunities for Tarceva.
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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 Companys Tarceva related revenues throughout the
patent exclusivity period. In addition to the Tarceva lifecycle
plan, OSI focuses its development resources on advancing high
quality and differentiated development assets. The
Companys leading development candidates are the IGF-1R/IR
inhibitor, OSI-906, and the GPR119 agonist, PSN821. Both of
these products 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. In both cases the Company has invested heavily in a
programmatic approach to drug discovery and development.
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Tarceva Lifecycle Plan:
The Board expects that the
Tarceva franchise will benefit from multiple label expansion
opportunities over the next several years, starting with the
pending FDA PDUFA date for the review of the SATURN study in
support of a NSCLC first-line maintenance indication, which is
expected on or about April 18, 2010. The Board believes,
based on the Companys ongoing dialogue with the FDA, that
Tarceva will receive a label derived from the results of the
SATURN study, which was conducted under the auspices of a
Special Protocol Assessment agreement, or SPA, with the FDA.
Over the next 18 months, the Company also expects to see
interim
and/or
final
results of the Phase III EURTAC study comparing the efficacy of
Tarceva with chemotherapy in first-line NSCLC patients whose
tumors harbor a mutation in the EGFR gene. Another key feature
of the Tarceva lifecycle plan is the OSI-sponsored RADIANT
study, which tests the use of Tarceva for NSCLC patients in the
adjuvant setting and provides a key component of value in the
latter stages of the Tarceva lifecycle plan. The Company also
expects results from a series of other Phase III studies over
the coming years that will demonstrate the add-on benefits of
combining other molecular targeted therapies, or MTTs, in
combination with Tarceva as compared to Tarceva alone. The Board
expects that these studies will demonstrate further utility and
extended duration of therapy for Tarceva use in NSCLC. In
addition, Phase III data validating the potential utility of
Tarceva in the treatment of ovarian cancer and hepatocellular
carcinoma, or HCC, is expected over the next few years.
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OSI-906:
OSI-906 is a highly selective, small
molecule inhibitor of both the Insulin-like Growth Factor
Receptor 1, or IGF-1R, and the Insulin Receptor, or IR, that is
currently undergoing Phase III trials in Adrenocorticoid
Carcinoma, or ACC, and a Phase I/II trial in ovarian cancer.
MTTs targeting IGF-1R signaling have been amongst the most
sought after in oncology R&D. The Company expects, based
upon its in-depth understanding of the cancer biology
surrounding compensatory signaling mechanisms in cancer cells,
that the co-inhibitory properties of OSI-906 in blocking both
IGF-1R and IR signaling will result in superior anti-tumor
activity for OSI-906 compared with competitor IGF-1R specific
antibody products that have undergone clinical evaluation. A
comprehensive development plan is being implemented for OSI-906
that will include the initiation of multiple Phase II and Phase
III programs over the next 12 months, including trials in
NSCLC, breast cancer, HCC and prostate cancer. The Phase III ACC
trial and the HCC program are being pursued along with the
proposed development of companion diagnostics measuring the
IGF-2 ligand as a means to increase the probability of technical
success for these programs by allowing the targeting of those
patients whose tumors overexpress the IGF-2 ligand. Subsequent
studies in colorectal cancer are also planned. OSI is also
undertaking a number of studies intended to demonstrate the
effectiveness of OSI-906 in combination with Tarceva in NSCLC
including a Phase III trial for the first-line treatment of
advanced NSCLC patients whose tumors harbor an EGFR mutation.
The Companys translational research efforts have
identified a compensatory signaling connection between the
IGF-1R/IR/EGFR receptors in NSCLC tumor models and the
combination of Tarceva and OSI-906 has been shown to be
particularly effective against epithelial-like tumors using the
Companys proprietary EMT models. The IGF-1R/OSI-906
development program is protected by an intellectual property
estate comprising 56 issued and over 100 pending patents. The
OSI Board believes that the OSI-906 program has a broad-based
commercial potential that could exceed that of Tarceva.
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PSN821:
The Companys GPR119 agonist, PSN821,
has the potential to be a break-through therapy in the treatment
of type II diabetes. GPR119 agonists provide the possibility of
combining substantial glucose lowering with meaningful weight
loss in an oral agent and represent one of the most exciting new
target areas in the field of type 2 diabetes. Oral GPR119
agonists represent a next generation approach to GLP-1
modulation which is currently addressed clinically by the use of
exogenous GLP-1 peptide analogs (which provide effective glucose
lowering and some weight loss, but are associated with nausea
and vomiting) and DPIV inhibitors (which provide modest glucose
lowering and no weight loss but are oral and well tolerated).
Market research testing a target product profile of
effective glucose lowering and meaningful weight loss in
an oral agent indicates that this class has significant
commercial potential and a premier, oral GPR119 agonist can
reasonably be expected to have blockbuster potential.
Preclinical data strongly supports the dual glycemic
control/weight loss activity of PSN821. The agent is currently
undergoing Phase IIa clinical trials and the clinical program to
date has produced promising early
proof-of-concept
data demonstrating the ability to lower blood glucose in
diabetic patients and, separately, the ability to impact
accepted surrogates of weight loss in the form of standardized
meal intake and visual analog scale measures of appetite in
overweight and obese subjects. The Company has 5 granted and 175
pending patent cases protecting its GPR119 development program.
The program is on-schedule to complete definitive Phase IIb
studies in late 2011/early 2012 which are designed to provide
3-month
HbA1c and weight loss data. The Board believes there is the
potential for a significant increase in value at the time Phase
IIb data is received on PSN821, as well as a subsequent
opportunity likely exploited in collaboration with a
major pharmaceutical industry partner arising from
successful Phase III development and global commercialization.
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The Board believes that the Astellas Offer fails to
appropriately recognize the significant value of the Tarceva
lifecycle plan and the Companys OSI-906 and PSN821
assets.
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Beyond OSI-906 and PSN821, the Company also has additional
agents in clinical development, including:
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OSI-027:
OSI-027s ability to target both mTOR
signaling complexes (TORC1 and TORC2) potentially allows it to
supersede first generation mTOR inhibitors that only block
signaling through the TORC1 complex. The agents mechanism
of action may allow the Company to broadly target EMT mechanisms
by blocking signaling in both epithelial-like and
mesenchymal-like tumors cells. OSI-027 is currently progressing
successfully through Phase I clinical trials and, if successful,
is expected to have a broad-based spectrum of utility (including
major tumor types). The Board believes that OSI-027 represents a
valuable and differentiated pipeline asset, albeit at an earlier
stage of development.
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PSN010:
The Companys second diabetes and
obesity clinical pipeline asset is PSN010, an oral glucokinase
activator, or GKA, discovered and developed by the
Companys diabetes and obesity team. GKAs have the
potential to lower glucose concentrations to a greater extent
than current oral agents for type 2 diabetes. The substantially
greater glucose lowering potential of PSN010 is expected to
represent a substantial commercial opportunity. OSI entered into
a license agreement with Eli Lilly in January 2007, granting Eli
Lilly exclusive rights to its GKA program. Under the terms of
the license agreement, OSI could receive up to $360 million
in potential development and commercial milestones, plus
additional low-double digit percentage royalties, on sales of
any compounds successfully commercialized from the program. Eli
Lilly is currently at the Phase IIb development stage with
PSN010 (LY2599506).
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The Offer
Does Not Recognize the Scarcity Value of OSIs Growing,
High Quality, and Profitable Oncology Franchise Along With Its
Proven Track-Record in Discovering, Developing and
Commercializing Oncology Products and the Companys
Recognized Leadership Position in Cancer Biology and EMT
Research.
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The OSI Board believes that the Companys integrated
oncology franchise, which is currently being consolidated into a
single wholly owned campus in Ardsley, New York, represents a
unique asset in the mid-cap biotechnology arena based on the
following factors:
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A profitable and growing oncology franchise anchored around
Tarceva:
OSI has a profitable and growing oncology business
anchored around Tarceva, a product with global sales in excess
of $1.2 billion annually and anticipated exclusivity in the
major U.S., EU and Japanese markets through
2019-2020.
These long-term projected cash flows provide an extraordinarily
valuable anchoring asset around which to base a long-term
strategy to build a leading oncology franchise.
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An experienced and capable commercial/business
organization:
The Company has built a high quality and
scalable oncology commercial/business organization in the U.S.
that includes experienced leadership, a nationwide sales force
and a widely networked,
state-of-the-art
medical affairs organization. The Companys sales and
medical affairs organizations interface with the vast majority
of key prescribers and Key Opinion Leaders (KOLs) in the
U.S. market. Achieved together with the Companys partner
Genentech, the Tarceva launch remains the most successful
oncology product launch in U.S. history in terms of the number
of patients treated in the first twelve months. Since that time,
the Company has continued to invest in improving the
infrastructure and capabilities of the business team.
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A pipeline approach that drives the development of
differentiated MTTs:
The Company has focused on a strategic
personalized medicine approach to developing only
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the most differentiated oncology assets and invests
significantly in its prioritized drug development programs
providing a framework of cancer biology/EMT knowledge and
expertise, translational research, and diagnostic array
technologies designed to enhance the probability of technical
success of the Companys programs. OSI has utilized its EMT
platform to develop a unique set of gene-transcript based
biomarkers that accurately predicts tumors that are sensitive or
insensitive to a variety of MTTs, including Tarceva, OSI-906 and
OSI-027, and has also developed multi-gene biomarkers, or gene
signatures, that it intends to develop as companion diagnostics
associated with OSI pipeline products. The OSI team believes
that defining drug-response biomarkers early in the development
of OSI pipeline programs affords a uniquely competitive
advantage. The Company is also advancing a series of
pre-clinical programs which target EMT related signaling biology
directly (for example through co-inhibition of the cMet and Ron
axes) and has partnered OSI-930, its c-kit/VEGFR inhibitor with
the Chinese company Simcere for further development. The Board
believes that OSIs programmatic approach to oncology drug
development emphasizes the value of the Companys expansive
cancer biology capabilities.
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Industry leading expertise in EMT:
OSI has
established a leadership position in understanding the biology
of Epithelial-Mesenchymal Transition, or EMT. OSI has
demonstrated the importance of EMT to the therapeutic activity
of Tarceva and other MTTs (including OSI-906 and OSI-027) and
has focused its oncology discovery efforts on exploiting its
understanding of the signaling pathways and drug targets that
drive EMT. The Companys EMT Platform is comprised of
proprietary
in vitro
and
in vivo
tumor models
which undergo EMT and provide a contextual tumor/stromal cell
environment for drug discovery; proprietary bioinformatics and
biomarker discovery systems which are used to delineate response
biomarkers for OSIs clinical assets; and, specialized
assays, biomarkers and tumor models. This EMT platform enables:
(i) the discovery and validation of EMT-related targets as
tumor growth and EMT drivers; (ii) the development of novel
therapies and combinations of therapies against EMT-related
targets; (iii) the delineation of pathways and combination
strategies that address compensatory signaling as an
EMT-associated drug-resistance mechanism; and (iv) the
discovery and development of genomic, protein and
transcript-based drug response biomarkers to support these
programs. The Board believes that OSIs EMT-focused
oncology R&D program is a valuable and uniquely
differentiated technology platform that cannot be readily
reconstituted elsewhere. The Board further believes that these
assets, along with the associated intellectual property, would
be of appreciable value to any potential acquirer committed to
developing a leadership position in oncology.
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A proven track-record of success based on an established high
quality drug discovery infrastructure and know-how:
The
Company has a long-term, established and proven track-record of
success in pioneering technological innovation and in conducting
successful drug discovery, development, registration, and
commercialization projects for oncology products. Tarceva was
discovered as part of the Companys targeted therapy cancer
research collaboration with Pfizer and four other MTTs were
advanced to clinical development from that collaboration. Since
the termination of that alliance in 2000 when OSIs
independent drug discovery programs were initiated, the Company
has advanced three high quality clinical development assets
while simultaneously establishing its EMT, cancer biology and
translational research platforms.
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The Board believes that OSIs oncology organization is
currently the only profitable franchise of its kind in mid-cap
biotech. The oncology organization is built on a long-term
foundation of strong science and that 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. As such, the Board believes that the
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Offer does not provide adequate consideration to stockholders
given the uniqueness and scarcity of OSIs fully integrated
and commercially successful oncology franchise.
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The Offer
Does Not Recognize the Value of OSIs Second Profitable and
High Quality Disease Area Franchise in Diabetes and Obesity,
Which Has a Proven Track-Record of Success.
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Based within one of the United Kingdoms established
biotechnology hubs and occupying a wholly owned,
state-of-the-art
research and development facility, the Companys diabetes
and obesity franchise is a profitable business anchored around
the Companys DPIV patent estate revenue stream which was
acquired from Probiodrug in 2004 as part of a $35 million
assets acquisition. 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.
The Companys estimated average royalty rate for 2010 and
beyond accruing from the DPIV patent estate is likely to be
approximately 2.5% and is estimated to produce greater than
$1 billion of future cash flows.
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The DPIV revenue stream underpins a diabetes and obesity
R&D strategic framework built around an integrated
scientific platform focused on the neuroendocrine control of
body weight and glycemia. The scientific platform is comprised
of technologies providing specific biological readouts
(including tissue expression profiling, neuroendocrine cell line
functionality and
ex vivo
tissue applications) coupled
with proprietary computational platforms utilizing, amongst
others, the SD3 platform acquired from 7TM pharmaceuticals. The
scientific platform is geared towards the identification,
validation and discovery of Designed Multiple Ligands, or DMLs.
These proprietary non-linker based merged
pharmacophore agents derived from this unique platform are
designed to have the ability to overcome the efficacy issues
seen with many single target approaches. Consistent with both
this platform approach and the Companys programmatic
approach to key development programs, a prototypical DML
approach has currently advanced molecules comprising the
features of a dual DPIV Inhibitor and GPR119 agonist into
late-stage candidate seeking efforts.
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Beyond the platform focus of OSIs discovery efforts, the
Companys diabetes and obesity group has a consistent track
record of success over the last several years having advanced
five drug candidates into clinical development, which included
GPR119 agonists, GKAs, Serotonin Noradrenalin Receptor
inhibitors and glycogen phosphorylase inhibitors. In addition, a
dual adenosine A1/A2b receptor inhibitor, with potential utility
in non-alcoholic fatty liver disease, is currently in late-stage
preclinical evaluation. Each of these drug candidates was
discovered and developed entirely in-house. The Board believes
that the Astellas Offer assigns minimal, if any, value to the
Companys profitable and successful diabetes and obesity
franchise.
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Despite
the Growth of the Company, Astellas Offer is Lower Than
the Price Range in its Previous Inadequate Nonbinding Indication
of Interest.
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Since February 2009, when Astellas first submitted a conditional
nonbinding indication of interest to acquire the Company, OSI
has had stronger financial performance, revenue and net income
growth, an increased net cash position and advances in its
pipeline. Other positive trends and developments in OSIs
business since the submission of Astellas prior nonbinding
indication of interest, include:
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the continued momentum of global Tarceva sales and the positive
recent clinical results relating to Tarceva, particularly in the
context of first line NSCLC maintenance for patients with EGFR
mutation;
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developments supporting the multiple future label and market
expansion opportunities inherent in the Tarceva lifecycle plan,
including the first line NSCLC maintenance label expansion
expected for Tarceva;
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the approval of OSIs application to reissue the patent for
Tarceva, which will help the Company manage generic challenges
to the Tarceva patent estate, and the anticipated grant of
pediatric patent term extensions for Tarceva that extend the
Companys U.S. patent for erlotinib to May 2019; and
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developments demonstrating the strength and long-term value
creation potential of OSIs research and development
pipelines in oncology and diabetes and obesity, including the
initiation of Phase III trials for OSI-906 in ACC and the
demonstration of preliminary
proof-of-concept
data for PSN821 in man as a dual glucose lowering and weight
loss inducing agent.
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Despite this growth and positive performance, in the 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.
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Revenue multiples paid in recent oncology transactions were
substantially higher than the revenue multiple implied by
Astellas $52.00 per Share Offer. The forward year revenue
multiple paid by Takeda Pharmaceutical Company Limited for
Millennium Pharmaceuticals, Inc. was 13.5x, and the forward year
revenue multiple paid by Eli Lilly and Company for ImClone
Systems Incorporated was 7.8x. The revenue multiple implied by
Astellas Offer for OSI is 6.3x, based on Wall Street
estimates of OSIs projected 2010 revenue, and the multiple
implied by Astellas Offer for the Companys strategic
assets is 5.75x, based on an estimated value of the
Companys financial assets of approximately
$1.3 billion. In addition, OSI has very high margin revenue
that is composed of Tarceva profit share in the United States,
Tarceva royalties from outside the United States and DPIV patent
estate royalties. Oncology companies have historically commanded
higher implied multiples than biotechnology companies and
substantially higher multiples than pharmaceutical companies.
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The Offer
Values OSI at a Price Below Current Trading Levels.
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The market price of OSI common stock has remained above the
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 this Statement, was $57.68 and
the
10-day
trailing average closing price per Share on the NASDAQ Global
Select Market since the
March 1
st
announcement of Astellas intention to commence the Offer
was $56.92 per Share.
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The Offer
is Highly Conditional and Creates Substantial Uncertainty as to
Whether Astellas Would be Required to Consummate the
Offer.
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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 effect of these conditions is that
the Companys stockholders cannot be assured that Astellas
would consummate the Offer even if OSIs Board of Directors
recommended that stockholders accept the Offer and the Company
satisfied all the conditions within its control. The Offer is
subject to the satisfaction of each of the following conditions,
in addition to numerous other conditions listed in its tender
offer materials:
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Material Adverse Effect, or MAE, Condition.
There
has not been any event, condition, circumstance, change or
effect that, in Astellas reasonable judgment, is or may be
materially adverse with respect to the (a) value of the
Company, its subsidiaries or its Shares to Astellas or
(b) the business, assets, condition (financial or
otherwise), results of operations or prospects of the Company.
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Market MAE Condition.
There has not been
(a) any general suspension in trading in securities on any
national securities exchange, (b) any decline in the Dow
Jones Industrial Average, S&P or NASDAQ by an amount in
excess of 15% measured from the close of business on
March 1, 2010, (c) any change in the general
political, market or economic conditions in the United States or
abroad that, in Astellas reasonable judgment, could have a
material adverse effect on the business, assets, liabilities,
condition (financial or otherwise), results of operations or
prospects of the Company, or in the trading or value of the
Shares, (d) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States
or Japan, (e) in Astellas reasonable judgment, any
material adverse change (or development or threatened
development involving a prospective material adverse change) in
U.S., Japanese or any other currency exchange rates or a
suspension of, or a limitation on, the markets therefor,
(f) the commencement of a war, armed hostilities or other
international or national calamity directly or indirectly
involving the United States or Japan or any attack on, outbreak
or act of terrorism involving the United States or Japan,
(g) any limitation (whether or not mandatory) by any
governmental authority on, or any other event that, in
Astellas reasonable judgment, may adversely affect, the
extension of credit by banks or other financial institutions or
(h) in the case of any of the foregoing existing on
March 2, 2010, a material acceleration or worsening thereof
in Astellas reasonable judgment.
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No Impairment Condition.
Astellas has not become
aware of, as a result of the Offer or the consummation of the
Proposed Merger, (a) any material contractual right of the
Company that will be adversely affected or (b) any
covenant, term or condition in any agreement or license, that in
Astellas reasonable judgment, has or may have material
adverse significance with respect to the value of the Company or
the Shares to Astellas.
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Litigation Condition.
No litigation has been
publicly announced, instituted or is pending, and the Company
has not received written notice of any persons intent to
commence various types of litigation, including litigation that,
in the reasonable judgment of Astellas, is likely to delay or
otherwise, directly or indirectly, to restrain or prohibit or
make more costly the Offer, the acceptance for payment of any of
the Shares or the consummation of the Proposed Merger or any
other business combination involving the Company or litigation
that, in the reasonable judgment of Astellas, has or may have
material adverse significance with respect to the value of the
Company, the value of the Shares to Astellas, Parent and the
Purchaser or materially adversely affecting the business,
assets, liabilities, condition, capitalization, operations,
licenses, franchises, revenues, results of operations or
prospects of the Company.
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Highly Conditional Offer.
The effect of these, and
other numerous conditions, is that the Companys
stockholders cannot be assured that Astellas will be required to
consummate its Offer. A number of the conditions are broad, are
of questionable relevance and are solely for the benefit of the
Purchaser, Parent and Astellas. Compliance with some of these
conditions could restrict the Companys ability to manage
its business in the ordinary course and may not be capable of
being satisfied in the event that the Company continues to
operate its business consistent with past practice. The
litigation condition is sufficiently broad that Astellas may
argue that the litigation currently pending against the Company
as described in Item 8 under the heading
Litigation may have already triggered the failure of
this condition. Although the MAE condition and no impairment
condition might be capable of being satisfied, they are drafted
in extremely broad and general terms and Astellas has the sole
discretion to decide whether those conditions, as well as all
other conditions, have been met. Accordingly, even assuming that
the numerous other conditions to the Offer could be satisfied,
these conditions create significant uncertainty regarding
whether Astellas would be required to consummate the Offer given
that any number of otherwise insignificant events or
circumstances could be deemed by Astellas to cause the condition
not to be satisfied. Uncertainty as to the likelihood of
consummation of the
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Offer is of particular concern because pursuing a transaction
would likely disrupt the Companys business by causing
uncertainty in current and potential employees, physicians and
their patients, suppliers and other constituencies important to
the Companys success.
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The Offer
Is Financially Inadequate.
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The OSI Board has received separate oral opinions, confirmed by
delivery of written opinions, dated March 12, 2010, from
the Companys financial advisors, 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, Parent,
Purchaser and their respective affiliates). Please see the full
text of each financial advisors written opinion, which are
included as Annex A and Annex B, respectively, to this
Statement. 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.
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The OSI
Board of Directors has Instructed OSIs Management, with
the Assistance of OSIs Financial Advisors, to Contact
Other Parties.
In its efforts to maximize value for OSI stockholders, the
Company has been actively exploring potential strategic
transactions with third parties. The Company has been engaged in
preliminary discussions with a number of other parties,
including major pharmaceutical companies, regarding potential
transactions that could provide significant long- or short-term
value to OSI stockholders. At the Boards meeting on
March 12, 2010, the Board instructed OSI management, with
the assistance of the Companys 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 a proposed transaction, whether any transaction
that may be proposed as a result of such process would be
acceptable to the Company and its Board or whether any such
proposed transaction will be announced or consummated. While the
OSI Board has not made any decision to sell the Company, the OSI
Board believes that the Offer must be evaluated against the
Companys well established long-term strategy for
stockholder value creation and the prospect of other potential
transactions which, if consummated, could yield greater long- or
short-term value to stockholders than the Offer. Given that the
Board believes that premature disclosure would jeopardize the
Companys ability to continue negotiations with respect to
such a transaction, the Board has instructed management not to
disclose the parties, nature or terms of any potential
transaction, unless and until an agreement in principle or
definitive agreement is signed, except as otherwise required by
law.
Even
Though OSI Offered Astellas Access to Confidential Due Diligence
Information, Astellas Chose to Bypass Due Diligence and
Commenced the Unsolicited Offer.
In his February 22, 2010 letter to Mr. Nogimori,
Dr. Goddard, at the direction of the OSI Board, offered to
provide Astellas with certain non-public information that the
Company believed was fundamental to understanding the value of
OSI. Despite the fact that in its prior nonbinding indication of
interest Astellas had always insisted on a period of
approximately two months to complete its due diligence
investigation of OSI, Astellas never responded to
Dr. Goddards February
22
nd
letter, nor did Astellas make any effort to negotiate the terms
of the nondisclosure agreement included with
Dr. Goddards letter. Rather, on March 1, 2010,
Astellas publicly announced its intention to commence
21
the unsolicited Offer. The Company remains willing to share
confidential information with Astellas, as with other interested
parties, subject to it entering into an appropriate
nondisclosure agreement with the Company.
ACCORDINGLY, BASED ON THE FOREGOING, THE OSI BOARD
UNANIMOUSLY RECOMMENDS THAT HOLDERS OF SHARES REJECT THE
OFFER AND NOT TENDER THEIR SHARES PURSUANT TO THE OFFER.
The Board reserves the right to revise this recommendation in
the event of changed circumstances, if any. Any such change in
the recommendation of the Board will be communicated to
stockholders as promptly as practicable in the event that such a
determination is reached.
The foregoing discussion of the material factors considered by
the Board is not intended to be exhaustive. In view of the
variety of factors considered in connection with its evaluation
of the Offer, the Board did not find it practicable to, and did
not, quantify or otherwise assign relative weights to the
factors summarized above in reaching its recommendation. In
addition, individual members of the Board may have assigned
different weights to different factors. After weighing all of
these considerations, the Board unanimously rejected the terms
of the Offer and recommended that holders of the Shares not
tender their Shares pursuant to the Offer.
(c) Intent
to Tender.
To the Companys knowledge, after making reasonable
inquiry, none of the Companys executive officers or
directors currently intends to tender Shares into the Offer, or
sell any Shares held of record or beneficially owned by them. As
of the date of this Statement, none of the Companys
subsidiaries held of record or beneficially owned any Shares.
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Item 5.
|
Persons/Assets,
Retained, Employed, Compensated or Used
|
The Company has retained Centerview Partners and Lazard as the
Companys financial advisors in connection with the Offer
and related matters. The Company has agreed to pay Centerview
Partners a customary fee for its services, portions of which are
payable upon its engagement and during the course thereof, a
portion of which is payable in the event the Company remains
independent and a significant portion of which is payable upon
consummation of a sale of OSI, either as a result of the Offer
or otherwise, based on the consideration payable in any such
sale. The Company also has agreed to pay Lazard a customary fee
for its services, portions of which are payable during the
course of its engagement, a portion of which is payable in
connection with the delivery of its opinion regarding the Offer
price, a portion of which is payable upon any withdrawal of the
Offer and a substantial portion of which is contingent upon the
consummation of a sale of OSI, including as a result of the
Offer or otherwise, based on the consideration payable in any
such sale. In addition, the Company has agreed to reimburse
Centerview Partners and Lazard for all reasonable expenses
incurred by them, including fees and expenses of legal counsel,
and to indemnify Centerview Partners, Lazard and related parties
against certain liabilities arising out of such engagements,
including certain liabilities under U.S. federal securities
laws.
The Company has also hired MacKenzie Partners, Inc.
(MacKenzie Partners) to assist it in connection with
the Companys communications with its stockholders with
respect to the Offer. The Company has agreed to pay customary
compensation to MacKenzie Partners for such services. In
addition, the Company has agreed to reimburse MacKenzie Partners
for its reasonable
out-of-pocket
expenses and to indemnify it and certain related persons against
certain liabilities relating to or arising out of its engagement.
The Company has retained Joele Frank, Wilkinson Brimmer Katcher
(Joele Frank) as its public relations advisor in
connection with the Offer. The Company has agreed to pay Joele
Frank customary compensation for such services. In addition, the
Company has agreed to reimburse Joele Frank
22
for its
out-of-pocket
expenses and to indemnify it against certain liabilities
relating to or arising out of its engagement.
Except for MacKenzie Partners as set forth above, neither the
Company nor any person acting on its behalf has or currently
intends to employ, retain or compensate any person to make
solicitations or recommendations to the Companys
stockholders with respect to the Offer.
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Item 6.
|
Interest
in Securities of the Subject Company.
|
Other than in the ordinary course of business in connection with
the Companys employee benefit plans, no transactions with
respect to the Shares have been effected by the Company or, to
the knowledge of the Company, by any of its executive officers,
directors, affiliates or subsidiaries during the past
60 days, except for the following transactions:
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Number
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Price Per
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|
|
|
Name of Person
|
|
|
Transaction Date
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of Shares
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Share
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Nature of Transaction
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Joseph Klein
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1/21/10
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1,000
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$34.00
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Acquisition of Shares pursuant to Companys 10b5-1 trading
plan adopted on November 25, 2009
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1/25/10
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1,000
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$34.00
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Acquisition of Shares pursuant to Companys 10b5-1 trading
plan adopted on November 25, 2009
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2/1/10
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1,000
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$34.00
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Acquisition of Shares pursuant to Companys 10b5-1 trading
plan adopted on November 25, 2009
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Colin Goddard
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3/1/10
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66,000
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$23.25
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Acquisition in connection with exercise of options (scheduled to
expire June 2010) pursuant to Companys 10b5-1 trading plan
adopted on November 7, 2009
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3/1/10
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66,000
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$55.17(1)
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Disposition pursuant to the Companys 10b5-1 trading plan
adopted on November 7, 2009
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Linda E. Amper
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3/1/10
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7,370
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$38.01
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Acquisition in connection with exercise of options (scheduled to
expire June 2012) pursuant to Companys 10b5-1 trading plan
adopted on November 24, 2008
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3/1/10
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8,499
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$23.83
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Acquisition in connection with exercise of options (scheduled to
expire November 2012) pursuant to Companys 10b5-1 trading
plan adopted on November 24, 2008
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3/1/10
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15,869
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$55.20(1)
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Disposition pursuant to the Companys 10b5-1 trading plan
adopted on November 24, 2008
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23
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Gabriel Leung
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3/1/10
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24,761
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$23.85
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Acquisition in connection with exercise of options (scheduled to
expire May 2013) pursuant to Companys 10b5-1 trading plan
adopted on November 21, 2008
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3/1/10
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18,472
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$30.74
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Acquisition in connection with exercise of options (scheduled to
expire June 2013) pursuant to Companys 10b5-1 trading plan
adopted on November 21, 2008
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3/1/10
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43,233
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$55.37(1)
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Disposition pursuant to the Companys 10b5-1 trading plan
adopted on November 21, 2008
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Anker Lundemose
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3/1/10
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15,200
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$35.10
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Acquisition in connection with exercise of options (scheduled to
expire February 2014) pursuant to Companys 10b5-1 trading
plan adopted on November 3, 2009
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3/1/10
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13,000
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$29.77
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Acquisition in connection with exercise of options (scheduled to
expire June 2013) pursuant to Companys 10b5-1 trading plan
adopted on November 3, 2009
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3/1/10
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29,200
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$55.20(1)
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Disposition pursuant to the Companys 10b5-1 trading plan
adopted on November 3, 2009
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Barbara A. Wood
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3/1/10
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20,000
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$35.875
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Acquisition in connection with exercise of options (scheduled to
expire April 2011) pursuant to Companys 10b5-1 trading
plan adopted on November 20, 2008
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3/1/10
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20,000
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$55.11(1)
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Disposition pursuant to the Companys 10b5-1 trading plan
adopted on November 20, 2008
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(1)
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Price per Share represents the
weighted average sale price with respect to such transaction.
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Item 7.
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Purposes
of the Transaction and Plans or Proposals
|
For the reasons discussed in Item 4 Reasons for
the Recommendation, the Board has unanimously concluded
that the Offer is inadequate, significantly undervalues the
Company and is not in the best interests of the Company and its
stockholders. Accordingly, and for the reasons described in more
detail in Item 4, the Board unanimously recommends that
holders of Shares reject the Offer and not tender their Shares
pursuant to the Offer.
In its efforts to maximize value for OSI stockholders, the
Company has been actively exploring potential strategic
transactions with third parties. The Company has been engaged in
preliminary discussions with a number of other parties,
including major pharmaceutical companies, regarding potential
transactions that could provide significant long- or short-term
value to OSI shareholders. At the Boards meeting on
March 12, 2010, the Board instructed OSI management, with
the assistance of the Companys 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
24
in a due diligence review of certain OSI confidential
information, subject to their entering into an appropriate
nondisclosure agreement with the Company.
Accordingly, the Board may engage in negotiations in response to
the Offer that could have one of the effects specified in the
paragraph below. The Company has determined that disclosure with
respect to the parties to, and the possible terms of, any
transactions or proposals of the type referred to in the
preceding paragraph might jeopardize the discussions or
negotiations that the Company may conduct. Therefore, the
Company does not intend to disclose such negotiations in the
future unless an agreement in principle has been reached or
except where otherwise required by law.
Except as described above and as otherwise set forth in this
Statement, the Company does not have any knowledge of any
negotiations being undertaken or engaged in by the Company in
response to the Offer that relate to or would result in
(a) a tender offer for or other acquisition of the
Companys Shares by the Astellas, any subsidiary of the
Astellas, or any other person; (b) any extraordinary
transaction, such as a merger, reorganization, or liquidation,
involving the Company or any subsidiary of the Company;
(c) any purchase, sale, or transfer of a material amount of
assets of the Company or any subsidiary of the Company; or
(d) any material change in the present dividend rate or
policy, indebtedness, or capitalization of the Company. Except
as described above, to the knowledge of the Company, there are
no transactions, resolutions of the Board, agreements in
principle, or signed contracts in response to the Offer that
relate to one or more of the events referred to in this
paragraph.
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Item 8.
|
Additional
Information
|
State
Anti-Takeover Laws Delaware
As a Delaware corporation, the Company is subject to DGCL
Section 203. Under DGCL Section 203, certain
business combinations between a Delaware corporation
whose stock is publicly traded or held of record by more than
2,000 stockholders and an interested stockholder are
prohibited for a three-year period following the date that such
a stockholder became an interested stockholder, unless
(i) the corporation has elected in its original certificate
of incorporation not to be governed by DGCL Section 203,
(ii) the transaction in which the stockholder became an
interested stockholder or the business combination was approved
by the board of directors of the corporation before the other
party to the business combination became an interested
stockholder, (iii) upon consummation of the transaction
that made it an interested stockholder, the interested
stockholder owned at least 85% of the voting stock of the
corporation outstanding at the commencement of the transaction
(excluding voting stock owned by directors who are also officers
or held in employee benefit plans in which the employees do not
have a confidential right to tender or vote stock held by the
plan) or (iv) the business combination was approved by the
board of directors of the corporation and ratified by
66
2
/
3
%
of the outstanding voting stock which the interested stockholder
did not own. The term business combination is
defined generally to include mergers or consolidations between a
Delaware corporation and an interested stockholder,
transactions with an interested stockholder
involving the assets or stock of the corporation or its majority
owned subsidiaries and transactions which increase an
interested stockholders percentage ownership
of stock. The term interested stockholder is defined
generally as a stockholder who, together with affiliates and
associates, owns (or, within three years prior, did own) 15% or
more of a Delaware corporations outstanding voting stock.
It is a condition to the Offer that Purchaser is satisfied, in
its reasonable judgment, that the provisions of DGCL
Section 203 do not apply to the Offer.
State
Anti-Takeover Laws-Other
A number of states have adopted laws and regulations that
purport to apply to attempts to acquire corporations that are
incorporated in such states, or whose business operations have
substantial economic effects in such states, or which have
substantial assets, security holders, employees, principal
executive offices or principal places of business in such
states. Purchaser has stated, in the section entitled
Certain Legal Matters; Regulatory Approvals in its
Offer to Purchase, that it has not attempted to comply with
state takeover statutes in connection with the Offer. In the
event that it is asserted that one or more state
25
takeover statutes apply to the Offer, and it is not determined
by an appropriate court that such statute or statutes do not
apply or are invalid as applied to the Offer, as applicable,
Purchaser may be required to file certain documents with, or
receive approvals from, the relevant state authorities, and
according to the Offer to Purchase, Purchaser might be unable to
accept for payment or pay for Shares tendered pursuant to the
Offer or be delayed in consummating the Offer. In such case,
according to the Offer to Purchase, Purchaser may not be
obligated to accept for payment, or pay for, any Shares tendered
in the Offer.
Appraisal
Rights
Holders of the Shares do not have appraisal rights in connection
with the Offer because such holders are entitled to receive cash
in exchange for any Shares tendered by them in the Offer.
However, if a merger of the Company is consummated in which
stockholders receive cash consideration for their Shares,
stockholders who have neither voted in favor of the merger nor
consented thereto in writing, who timely submit a demand for
appraisal in accordance with Section 262 of the DGCL and
who otherwise comply with the applicable statutory procedures
under the DGCL will be entitled to receive a judicial
determination of the fair value of the Shares (exclusive of any
element of value arising from the accomplishment or expectation
of such merger) and to receive payment of such fair value in
cash (all such Shares, the Dissenting Shares). Any
such judicial determination of the fair value of the Dissenting
Shares could be based upon considerations other than or in
addition to the price paid in the Offer and the market value of
the Shares. The value so determined could be higher or lower
than, or the same as, the price per Share paid pursuant to the
Offer or the consideration paid in such a merger. Investment
banking opinions as to the adequacy or fairness from a financial
point of view of the consideration payable in a sale
transaction, such as the Offer or the Proposed Merger, are not
opinions as to fair value under Section 262 of the DGCL.
Moreover, Astellas, Parent and Purchaser could argue in an
appraisal proceeding that, for purposes of such a proceeding,
the fair value of the Dissenting Shares is less than the price
paid in the Offer. In the event that any holder of Shares who
demands appraisal under Section 262 of the DGCL fails to
perfect, or effectively withdraws or loses his rights to
appraisal as provided in the DGCL, the Shares of such
stockholder will be converted into the right to receive the
Offer price. Failure to follow the steps required by
Section 262 of the DGCL for perfecting appraisal rights may
result in the loss of such rights.
The foregoing summary of the rights of stockholders seeking
appraisal rights under Delaware law does not purport to be a
complete statement of the procedures to be followed by
stockholders desiring to exercise any appraisal rights available
thereunder and is qualified in its entirety by reference to
Section 262 of the DGCL. The perfection of appraisal rights
requires strict adherence to the applicable provisions of the
DGCL. If a stockholder withdraws or loses his right to
appraisal, such stockholder will only be entitled to receive the
price per Share paid in the Offer.
Rights
Agreement
The Company is a party to the Rights Agreement, the purpose of
which is to protect the Companys stockholders against
unsolicited attempts to acquire control of the Company that do
not offer a fair price to its stockholders as determined by the
OSI Board. On September 27, 2000, the OSI Board declared a
dividend distribution of one Series SRPA Junior
Participating Preferred Stock Purchase Right on each outstanding
share of Common Stock. The Company distributed Rights to all
shareholders of record at the close of business on
September 27, 2000, the record date. The Rights entitle the
holder to buy one one-thousandth of a share of Series SRPA
Junior Participating Preferred Stock (the Preferred
Stock) upon a triggering event as discussed below. The
Rights are not exercisable until the Distribution
Date, which is the earlier of (i) the date which is
10 days (or such later date as the OSI Board may determine)
after the commencement of, or first public announcement of an
intention to make, a tender or exchange offer by any person the
consummation of which would result in such person becoming an
Acquiring Person (defined below) or (ii) the date of the
first public announcement that a person has acquired, or
obtained the right to acquire, otherwise than pursuant to a
Permitted Offer (as defined below), beneficial ownership of
17.5% or more of the outstanding shares of Common Stock. A
person
26
whose acquisition of shares of Common Stock causes a
Distribution Date to occur pursuant to the foregoing
clause (ii) is an Acquiring Person. The Rights
will expire at the close of business on August 31, 2010,
unless earlier redeemed by the Company as described below.
In the event that any person becomes an Acquiring Person
(otherwise than pursuant to a Permitted Offer), the Rights will
be modified automatically so that each holder of a Right will
thereafter have, in lieu of the right to purchase shares of
Preferred Stock, the right (the Flip-In Right) to
receive upon exercise of the Right the number of shares of
Common Stock which, immediately before such Acquiring Person
became an Acquiring Person, had a market value equal to twice
the amount of the exercise price of the Right. Notwithstanding
the foregoing, after such person shall have become an Acquiring
Person, all Rights that are, or under certain circumstances
specified in the Rights Agreement were, beneficially owned by
any Acquiring Person or any affiliate or associate thereof will
be null and void. A Permitted Offer is a tender or
exchange offer which is for all outstanding shares of Common
Stock at a price and on terms which the OSI Board determines to
be adequate and in the best interests of the Company, its
stockholders and other relevant constituencies, other than such
Acquiring Person, its affiliates and associates.
In the event that, at any time after a person has become an
Acquiring Person, (i) the Company is acquired in a merger
or other business combination in which the holders of all of the
outstanding shares of Common Stock immediately prior to the
consummation of the transaction are not the holders of all of
the surviving corporations voting power or (ii) more
than 50% of the Companys assets or earning power is sold
or transferred, in either case with or to an Acquiring Person or
any affiliate or associate thereof or any other person in which
such Acquiring Person, affiliate or associate has an interest or
any person acting on behalf of or in concert with such Acquiring
Person (or, if in such transaction all holders of shares of
Common Stock are not treated alike, any other person), then each
holder of a Right (except Rights which previously have become
null and void as set forth above) shall thereafter have the
right (the Flip-Over Right) to receive, upon
exercise of the Right, shares of Common Stock of the acquiring
company having a value equal to twice the amount of the exercise
price of the Right. Each such holder of a Right will continue to
have a Flip-Over Right whether or not such holder exercises or
surrenders the Flip-In Right, and such holder will have a
successive Flip-Over Right on each occurrence of a transaction
specified in the first sentence of this paragraph.
At any time before a person becomes an Acquiring Person, the
Company may redeem the Rights in whole, but not in part, at a
price of $.001 per Right (the
Redemption Price). Immediately upon the action
of the OSI Board ordering redemption of the Rights, the right to
exercise the Rights will terminate and the only right of the
holders of Rights will be to receive the Redemption Price.
Each share of Preferred Stock will have 1,000 votes, voting
together with the Common Stock. In the event of any merger,
consolidation or other transaction in which shares of Common
Stock are exchanged for or converted into other stock or
securities, cash or other property, each share of Preferred
Stock will be entitled to receive 1,000 times the amount
received per share of Common Stock.
On March 10, 2010, the OSI Board determined, as permitted
by the Rights Agreement, to postpone the Distribution Date until
such later date as the OSI Board shall determine.
The foregoing summary description of the Rights Agreement does
not purport to be complete and is qualified in its entirety by
reference to the Rights Agreement, including Terms of
Series SRP Junior Participating Preferred Stock
(Exhibit A thereto), Summary of Rights to Purchase
Preferred Stock (Exhibit B thereto) and Form of Right
Certificate (Exhibit C thereto), a copy of which was
previously filed as Exhibits 1, 2, 3 and 4 to the
Companys Registration Statement on
Form 8-A
filed on September 27, 2000, and is incorporated herein by
reference.
Antitrust
Under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the HSR
Act) and the rules that have been promulgated thereunder
by the Federal Trade Commission (the FTC) and the
Antitrust Division of the Department of Justice
(DOJ), certain acquisition transactions may not be
27
consummated unless certain information has been furnished to the
DOJ and the FTC and certain waiting period requirements have
been satisfied. The purchase of Shares pursuant to the Offer is
subject to such requirements.
Under the provisions of the HSR Act applicable to the purchase
of Shares pursuant to the Offer, such purchase may not be made
until the expiration of a 15-calendar day waiting period
following the required filing of a Notification Report Form
under the HSR Act by Purchaser.
As a result, the waiting period applicable to the purchase of
Shares pursuant to the Offer will expire at 11:59 p.m., New
York City time, 15-calendar days following Purchasers HSR
filing, unless early termination of the waiting period is
granted by the FTC and the DOJ or Astellas receives a request
for additional information or documentary material prior
thereto. If such a request is made to Astellas, the waiting
period will be extended until 11:59 p.m., New York City
time, 10 calendar days after Astellas substantial
compliance with such request unless terminated earlier by the
FTC and the DOJ. If such a request is issued, the purchase of
and payment for Shares pursuant to the Offer will be deferred
until the additional waiting period expires or is terminated.
Thereafter, such waiting period can be extended only by court
order or by Astellas voluntary agreement.
Astellas indicated in its Schedule TO that, as permitted
under the HSR Act, it expects to request early termination of
the initial waiting period applicable to the Offer. There can be
no assurance, however, that the 15-calendar day HSR Act waiting
period will be terminated early. Shares will not be accepted for
payment or paid for pursuant to the Offer until the expiration
or earlier termination of the applicable waiting period under
the HSR Act. Subject to certain circumstances described in the
Offer, any extension of the waiting period will not give rise to
any withdrawal rights not otherwise provided for by applicable
law. If Purchasers acquisition of Shares is delayed
pursuant to a formal request by the DOJ or the FTC for
additional information and documentary material pursuant to the
HSR Act, the Offer may, but need not, be extended.
The DOJ and the FTC frequently scrutinize the legality under the
antitrust laws of transactions such as Purchasers
acquisition of Shares pursuant to the Offer. At any time before
or after the consummation of any such transactions, the DOJ or
the FTC could take such action under the antitrust laws as it
deems necessary or desirable in the public interest, including
seeking to enjoin the purchase of Shares pursuant to the Offer
or seeking actions under the antitrust laws to enjoin
consummation of the Offer. Private parties who may be adversely
affected by the proposed transaction and individual states may
also bring legal actions under the antitrust laws. There can be
no assurance that a challenge to the Offer on antitrust grounds
will not be made, or if such a challenge is made, what the
result will be.
Litigation
On March 1, 2010, Parent filed a lawsuit against the
Company and each of the members of the OSI Board (the
Director Defendants) in the Delaware Court of
Chancery captioned
Astellas US Holding, Inc. v. OSI
Pharmaceuticals, Inc., et al.
The complaint alleges that the
Director Defendants breached and are breaching their fiduciary
duties by failing to adequately consider the Offer.
Specifically, the lawsuit alleges that the Director Defendants
did not undertake sufficient investigation of Parents
acquisition proposals and refused to engage in a meaningful
dialogue with Parent concerning those proposals. The lawsuit
further alleges that the Director Defendants took these actions
in order to protect their positions with OSI. The complaint
seeks declaratory and injunctive relief to prevent the Director
Defendants from using the Rights Agreement and Section 203
of the DGCL to preclude or deter the Offer.
Subsequently, three purported stockholders of the Company filed
suits against the Director Defendants captioned
Chazen v. OSI Pharmaceuticals, Inc., et al.
, filed
March 5, 2010,
Louisiana Municipal Police Employee
Retirement System v. Ingram et al.
, filed March 8,
2010, and
Southeastern Pennsylvania Transportation
Authority v. Ingram et al.
, filed March 12, 2010.
The
Chazen
and
Southeastern Pennsylvania
Transportation Authority
suits also named OSI as a
defendant, but do not
28
expressly state any claim against the Company. The stockholder
suits make similar allegations to Parents suit and seek
similar declaratory and injunctive relief. In addition, the
stockholder suits seek monetary damages. On March 10, 2010,
the plaintiff in the Chazen suit filed a Motion for Expedited
Trial on the Merits requesting a trial within 90 days. A
hearing was held on March 12, 2010 in which the Delaware
Court of Chancery deferred consideration of the motion and
ordered that status reports be submitted on March 19, 2010.
The Company believes the claims asserted are without merit and
intends to vigorously defend against these suits.
CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
This Solicitation/Recommendation Statement on
Schedule 14D-9
contains forward-looking statements (as defined in
Section 21E of the Exchange Act) that involve risks and
uncertainties that could cause actual results to differ
materially from projected results. Accordingly, investors should
not place undue reliance on forward-looking statements as a
prediction of actual results. The forward-looking statements may
include projections and estimates concerning the timing and
success of specific projects and the Companys future
production, revenues, income and capital spending. When this
Statement uses the words believe,
intend, expect, may,
should, anticipate, could,
estimate, plan, predict,
project, or their negatives, or other similar
expressions, the statements which include those words are
usually forward-looking statements. When strategy that involves
risks or uncertainties is described, forward-looking statements
are being made. The forward-looking statements in this
Solicitation/Recommendation Statement on
Schedule 14D-9
speak only as of the date of this Solicitation/Recommendation
Statement on
Schedule 14D-9;
the Company disclaims any obligation to update these statements
unless required by securities law, and the Company cautions you
not to rely on them unduly. The Company based these
forward-looking statements on its current expectations and
assumptions about future events. While the Companys
management considers these expectations and assumptions to be
reasonable, they are inherently subject to significant business,
economic, competitive, regulatory and other risks,
contingencies, and uncertainties, most of which are difficult to
predict and many of which are beyond the Companys control.
These risks, contingencies and uncertainties relate to, among
other matters, the following:
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risks and uncertainties associated with the Offer;
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the outcome of any litigation related to the Offer or any other
offer or proposal;
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the Boards recommendation to the stockholders concerning
the Offer or any other offer or proposal;
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OSIs and its collaborators abilities to effectively
market and sell Tarceva and to expand the approved indications
for Tarceva;
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OSIs ability to protect its intellectual property rights;
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safety concerns regarding Tarceva;
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competition to Tarceva and OSIs drug candidates from other
biotechnology and pharmaceutical companies;
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the completion of clinical trials;
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the effects of FDA and other governmental regulation, including
pricing controls; and
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OSIs ability to successfully develop and commercialize
drug candidates.
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These and other factors are discussed on the Companys
Annual Report on
Form 10-K
for the fiscal year ended December 31, 2009, under
Managements Discussion and Analysis of Financial
Condition and Results of Operations and elsewhere in such
Form 10-K.
Additional information concerning factors that could cause
results to differ materially from those in the forward-looking
statements are contained in the Companys filings with the
United States Securities and Exchange Commission and especially
in the sections therein entitled Risk Factors,
including, but not limited to, the Companys Annual Report
on
Form 10-K,
for the fiscal year ended December 31, 2009.
29
The following exhibits are filed with this Statement:
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Exhibit
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No.
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Description
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(a)(1)
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Letter to the Companys stockholders dated March 15,
2010.
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(a)(2)
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Press Release issued by the Company on March 15, 2010.
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(a)(3)
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Letter to Companys employees dated March 15, 2010.
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(a)(4)
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Employee Frequently Asked Questions Information distributed on
March 15, 2010.
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(a)(5)
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Slide presentation dated March 2010 to be used in
connection with investor meetings.
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(e)(1)
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Excerpts from the Companys Definitive Proxy Statement on
Schedule 14A, filed by the Company on April 29, 2009
(file
no. 005-37954),
and incorporated herein by reference.
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(e)(2)
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License Agreement, dated as of December 25, 2003, between
Fujisawa Pharmaceutical Co., Ltd. and the Company.
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(e)(3)
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1997 Incentive and Non-Qualified Stock Option Plan, filed by the
Company as an exhibit to the registration statement on
Form S-8,
filed on November 4, 1997 (file
no. 333-39509),
and incorporated herein by reference.
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(e)(4)
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1999 Incentive and Non-Qualified Stock Option Plan, as amended,
filed by the Company as an exhibit to the
Form 10-Q
for the quarter ended September 30, 2006 (file
no. 000-15190),
and incorporated herein by reference.
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(e)(5)
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Amended and Restated Stock Incentive Plan, as amended, filed by
the Company as an exhibit to the
Form 10-Q
for the quarter ended September 30, 2007 (file
no. 000-15190),
and incorporated herein by reference.
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(e)(6)
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Employment Agreement, dated June 14, 2006, by and between
OSI Pharmaceuticals, Inc. and Colin Goddard, Ph.D., as
amended on June 21, 2006, filed by the Company as an
exhibit to the
Form 8-K
filed on June 22, 2006 (file
no. 000-15190),
and incorporated herein by reference.
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(e)(7)
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Amendment to Employment Agreement, dated December 18, 2008,
by and between OSI Pharmaceuticals, Inc. and Colin
Goddard, Ph.D., filed by the Company as an exhibit to the
Form 10-K
for the fiscal year ended December 31, 2008 (file
no. 000-15190),
and incorporated herein by reference.
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(e)(8)
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Employment Agreement, dated December 16, 2008, by and
between OSI Pharmaceuticals, Inc. and Pierre Legault, filed by
the Company as an exhibit to the
Form 8-K
filed on December 16, 2008 (file
no. 000-15190),
and incorporated herein by reference.
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(e)(9)
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Employment Agreement, dated May 16, 2003, by and between
OSI Pharmaceuticals, Inc. and Gabriel Leung, filed by the
Company as an exhibit to the
Form 10-K
for the fiscal year ended September 30, 2003 (file
no. 000-15190),
and incorporated herein by reference.
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(e)(10)
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Addendum to Employment Agreement, dated January 5, 2004, by
and between OSI Pharmaceuticals, Inc. and Gabriel Leung, filed
by the Company as an exhibit to the
Form 10-QT
for the transition period ended December 31, 2004 (file
no. 000-15190),
and incorporated herein by reference.
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30
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(e)(11)
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Amendment to Employment Agreement, dated December 18, 2008,
by and between OSI Pharmaceuticals, Inc. and Gabriel Leung,
filed by the Company as an exhibit to the
Form 10-K
for the fiscal year ended December 31, 2008 (file
no. 000-15190),
and incorporated herein by reference.
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(e)(12)
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Service Contract, dated September 20, 2005, by and between
OSI Pharmaceuticals, Inc. and Dr. Anker Lundemose, filed by
the Company as an exhibit to the
Form 8-K
filed on September 26, 2005 (file
no. 000-15190),
and incorporated herein by reference.
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(e)(13)
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Letter Agreement, dated November 15, 2001, by and between
OSI Pharmaceuticals, Inc. and Mr. Robert L. Simon filed by
the Company as an exhibit to the
Form 10-Q
for the quarter ended March 31, 2005 (file
no. 000-15190),
and incorporated herein by reference.
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(e)(14)
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Amended Letter Agreement, dated September 20, 2005, by and
between OSI Pharmaceuticals, Inc. and Robert L. Simon, filed by
the Company as an exhibit to the
Form 8-K
filed on September 26, 2005 (file
no. 000-15190),
and incorporated herein by reference.
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(e)(15)
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Amendment to Letter Agreement, dated December 18, 2008, by
and between OSI Pharmaceuticals, Inc. and Robert L. Simon, filed
by the Company as an exhibit to the
Form 10-K
for the fiscal year ended December 31, 2008 (file
no. 000-15190),
and incorporated herein by reference.
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(e)(16)
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Change in Control Arrangement, dated October 4, 2001, as amended
and restated on December 4, 2007, by and between OSI
Pharmaceuticals, Inc. and Linda E. Amper, filed by the Company
as an exhibit to the
Form 10-K
for the fiscal year ended December 31, 2007 (file
no. 000-15190),
and incorporated herein by reference.
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(e)(17)
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Amendment to Change in Control Arrangement, dated
December 18, 2008, by and between OSI Pharmaceuticals, Inc.
and Linda E. Amper, filed by the Company as an exhibit to the
Form 10-K
for the fiscal year ended December 31, 2008 (file
no. 000-15190),
and incorporated herein by reference.
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(e)(18)
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Change of Control Arrangement, dated on October 4, 2001, as
amended on September 20, 2005, by and between OSI
Pharmaceuticals, Inc. and Barbara A. Wood, Esq. filed by
the Company as an exhibit to the
Form 8-K
filed on September 26, 2005 (file
no. 000-15190),
and incorporated herein by reference.
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(e)(19)
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Amendment to Change of Control Arrangement, dated
December 18, 2008, by and between OSI Pharmaceuticals, Inc.
and Barbara A. Wood, Esq., filed by the Company as an
exhibit to the
Form 10-K
for the fiscal year ended December 31, 2008 (file
no. 000-15190),
and incorporated herein by reference.
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(e)(20)
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Employment Agreement, dated March 2, 2005, between
Prosidion Limited and Dr. Jonathan Rachman, filed by the
Company as an exhibit to the
Form 10-K
for the fiscal year ended December 31, 2009 (file
no. 000-15190),
and incorporated herein by reference.
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(e)(21)
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Stock Option Agreement, dated January 22, 2010, between the
Company and Dr. Jonathan Rachman, filed by the Company as
an exhibit to the
Form 10-K
for the fiscal year ended December 31, 2009 (file
no. 000-15190),
and incorporated herein by reference.
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31
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(e)(22)
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Restricted Stock Unit Agreement, dated January 22, 2010,
between the Company and Dr. Jonathan Rachman, filed by the
Company as an exhibit to the
Form 10-K
for the fiscal year ended December 31, 2009 (file
no. 000-15190),
and incorporated herein by reference.
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(e)(23)
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Restated Certificate of Incorporation of OSI Pharmaceuticals,
Inc., filed by the Company as an exhibit to the
Form 10-K
for the fiscal year ended September 30, 2001 (file
no. 000-15190),
and incorporated herein by reference.
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(e)(24)
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Letter to Dr. Colin Goddard from Mr. Masafumi Nogimori
dated February 2, 2009.
|
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(e)(25)
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Letter to Mr. Masafumi Nogimori from Dr. Colin Goddard
dated February 5, 2009.
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(e)(26)
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Letter to Mr. Masafumi Nogimori from Dr. Colin Goddard
dated February 19, 2009.
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(e)(27)
|
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Letter to Mr. Masafumi Nogimori from Dr. Colin Goddard
dated February 22, 2010.
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32
SIGNATURE
After reasonable inquiry and to the best of my knowledge and
belief, I certify that the information set forth in this
statement is true, complete and correct.
OSI PHARMACEUTICALS, INC.
Name: Barbara A. Wood
Title: Senior Vice President, General
Counsel and Secretary
Dated: March 15, 2010
Annex A
[LETTERHEAD
OF CENTERVIEW PARTNERS LLC]
March 12,
2010
Board of Directors
OSI Pharmaceuticals, Inc.
41 Pinelawn Road
Melville, New York 11747
Members of the Board:
You have asked us to advise you with respect to the adequacy,
from a financial point of view, of the consideration proposed to
be paid in the Offer (as defined below) to the holders of shares
of the common stock, par value $0.01 per share, of OSI
Pharmaceuticals, Inc. (OSI and, such common stock,
OSI Common Stock), other than Astellas Pharma Inc.
(Astellas), Astellas US Holding, Inc., a wholly
owned subsidiary of Astellas (Astellas Holding),
Ruby Acquisition, Inc., a wholly owned subsidiary of Astellas
Holding (Offeror), and their respective affiliates
(collectively, the Astellas Parties). Subject to the
satisfaction of certain conditions as set forth in the offer to
purchase and related letter of transmittal, each attached as
exhibits to the Tender Offer Statement on Schedule TO filed
on March 2, 2010, as amended to date, by Astellas, Astellas
Holding and Offeror with respect to the Offer (collectively, the
Offer Documents), Offeror has commenced an offer to
purchase all outstanding shares of OSI Common Stock at a price
of $52.00 per share in cash (the Consideration and,
such offer, the Offer) and, subsequent to completion
of the Offer, Astellas intends to cause the Offeror or another
of its subsidiaries to consummate a merger with OSI in which
each outstanding share of OSI Common Stock not previously
tendered in the Offer would be converted into the right to
receive the Consideration (the Merger and, together
with the Offer, the Transaction). The terms and
conditions of the Transaction are set forth in more detail in
the Offer Documents.
In connection with rendering our opinion, we have reviewed,
among other things, the Offer Documents and drafts of the
Solicitation/Recommendation Statement on
Schedule 14D-9
to be filed by OSI relating to the Offer (the
Schedule 14D-9).
We also have reviewed and analyzed certain publicly available
business and financial information relating to OSI, including
OSIs audited financial statements as of and for the year
ended December 31, 2009, certain publicly available
research analysts estimates, and certain internal
financial and operating information relating to OSI, including
financial forecasts, analyses and projections prepared by or on
behalf of OSI and provided to us for purposes of our analysis,
and we have met with management of OSI to review and discuss
such information and, among other matters, OSIs business,
operations, assets, financial condition and future prospects.
We also have reviewed and considered certain financial and stock
market data relating to OSI, and we have compared that data with
similar data for certain other companies, the securities of
which are publicly traded, that we believe may be relevant or
comparable in certain respects to OSI or one or more of its
businesses or assets, and we have reviewed and considered the
financial terms of certain business combinations in the
biotechnology and specialty pharmaceuticals industries. We
further have reviewed historical stock prices and trading
volumes of OSI Common Stock. In addition, we have performed such
other financial studies, analyses, and investigations and
reviewed such other information as we considered appropriate for
purposes of this opinion.
In our review and analysis and in formulating our opinion, we
have assumed and relied upon the accuracy and completeness of
all of the historical financial and other information provided
to or discussed with us or publicly available, and we have not
assumed any responsibility for independent verification of any
of such information. We also have assumed that the internal
projections, forecasts and analyses relating to
Board of Directors
OSI Pharmaceuticals, Inc.
March 12, 2010
Page 2
OSI were reasonably prepared in good faith and on bases
reflecting the best currently available judgments and estimates
of OSIs management. We express no opinion with respect to
any projections, forecasts, analyses and estimates reviewed by
us or the assumptions upon which they are based. We also have
relied, with OSIs consent, on the assessments of
OSIs management as to the validity of, and risks
associated with, the products, product candidates and technology
of OSI (including, without limitation, the timing and
probability of successful development, testing and marketing of
such products, product candidates and technology, approval
thereof by appropriate governmental authorities and the validity
and life of patents relating thereto). In addition, we have not
reviewed any of the books and records of OSI, or assumed any
responsibility for conducting a physical inspection of the
properties or facilities of OSI or for making or obtaining an
independent valuation or appraisal of the assets or liabilities
(contingent or otherwise) of OSI or concerning the solvency or
fair value of OSI and no such independent valuation or appraisal
was provided to us. We have assumed that the Transaction, if
consummated, would be completed as described in the Offer
Documents. We also have assumed, with OSIs consent, that
the
Schedule 14D-9,
when filed, will conform to the last draft reviewed by us in all
material respects. In addition, we have assumed, with OSIs
consent, that obtaining the necessary governmental, regulatory
or third party approvals and consents for the Transaction would
not have an adverse effect on OSI or the Transaction. We do not
express any opinion as to any tax or other consequences that
might result from the Transaction, nor does our opinion address
any legal, tax, regulatory or accounting matters, as to which we
understand that OSI obtained such advice as it deemed necessary
from qualified professionals.
Centerview Partners LLC (Centerview) is acting as
financial advisor to OSI in connection with the Transaction. OSI
has agreed to pay us certain fees for our services, portions of
which are payable during the course of our engagement, a portion
of which is payable in the event OSI remains independent and a
significant portion of which is payable upon consummation of a
sale of OSI, either as a result of the Transaction or otherwise.
In addition, OSI has agreed to reimburse our expenses and
indemnify us against certain liabilities arising out of our
engagement. We may provide investment banking and other
financial services to OSI, Astellas or their respective
affiliates in the future, for which we may receive compensation.
Centerview has not been engaged to act as an agent or a
fiduciary of OSI, any of its affiliates or its stockholders. In
the ordinary course of our business, Centerview or its
affiliates may, from time to time, make a market in, have a long
or short position in, buy and sell or otherwise effect
transactions for customer accounts and for our own accounts in
securities or loans of, or perform investment banking,
commercial lending or other services for, OSI, Astellas and
other entities which are or may be involved in the Transaction.
The issuance of this opinion was approved by an authorized
internal committee.
In connection with our engagement and prior to the date hereof,
we were not authorized to, and we did not, solicit indications
of interest from Astellas or other third parties regarding a
potential transaction with OSI. We also were not requested to
consider, and our opinion does not address, the relative merits
of the Transaction as compared to any strategic alternatives
that may be available to OSI or the underlying business decision
of OSI with respect to the Offer. This opinion addresses only
the adequacy from a financial point of view, as of the date
hereof, of the Consideration proposed to be paid to the holders
of OSI Common Stock (other than the Astellas Parties) pursuant
to the Offer and no view or opinion is expressed as to any other
terms or any aspects or implications of the Transaction,
including, without limitation, the form or structure of the
Transaction. We express no opinion as to the fairness of the
amount or nature of, or any other aspects relating to, the
compensation to any officers, directors or employees of any
parties to the Transaction, or class of such persons, relative
to the Consideration or otherwise. We also are not expressing
any opinion as to the prices at which the OSI Common Stock will
trade at any time. Our opinion is necessarily based
Board of Directors
OSI Pharmaceuticals, Inc.
March 12, 2010
Page 3
on economic, monetary, market and other conditions as in effect
on, and the information made available to us as of, the date
hereof and we assume no responsibility for updating, revising or
reaffirming this opinion based on circumstances, developments or
events occurring after the date hereof.
It is understood that our advisory services and the opinion
expressed herein are provided for the information and benefit of
the Board of Directors of OSI (solely in its capacity as such)
in connection with its evaluation of the Offer. This opinion is
not intended to and does not constitute a recommendation as to
whether or not any holders of OSI Common Stock should tender
such OSI Common Stock in the Offer or how to vote or act with
respect to the Transaction or any other matter.
Based upon and subject to the foregoing, including the various
assumptions and limitations set forth herein, it is our opinion
that, as of the date hereof, the Consideration proposed to be
paid in the Offer to the holders of OSI Common Stock (other than
the Astellas Parties) is inadequate to such holders from a
financial point of view.
Very truly yours,
/s/ Centerview
Partners LLC
Centerview Partners LLC
Annex B
[LETTERHEAD
OF LAZARD FRÈRES & CO. LLC]
March 12,
2010
The Board of Directors
OSI Pharmaceuticals, Inc.
41 Pinelawn Road
Melville, New York 11747
Dear Members of the Board:
We understand that Astellas Pharma Inc., a corporation formed
under the laws of Japan (Astellas), Astellas US
Holding, Inc., a Delaware corporation and wholly owned
subsidiary of Astellas (Astellas Holding), and Ruby
Acquisition, Inc., a Delaware corporation and wholly owned
subsidiary of Astellas Holding (Offeror), have
commenced an offer to acquire OSI Pharmaceuticals, Inc., a
Delaware corporation (OSI). Subject to the terms and
conditions set forth in the Offer Documents (as defined below),
Offeror has commenced a tender offer (the Offer) to
purchase all outstanding shares of the common stock, par value
$0.01 per share, of OSI (OSI Common Stock) at a
purchase price of $52.00 per share in cash (the
Consideration) and, subsequent to the consummation
of the Offer, Astellas intends to cause Offeror or another of
its subsidiaries to be merged with OSI (the Merger
and, together with the Offer, the Transaction)
pursuant to which each outstanding share of OSI Common Stock not
previously tendered would be converted into the right to receive
the Consideration. The terms and conditions of the Transaction
are more fully set forth in the Offer Documents.
You have requested our opinion as of the date hereof as to the
adequacy, from a financial point of view, to holders of OSI
Common Stock (other than Astellas, Astellas Holding, Offeror and
their respective affiliates (collectively, the Astellas
Parties)) of the Consideration proposed to be paid to such
holders in the Offer.
In connection with this opinion, we have:
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(i)
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Reviewed the financial terms and conditions of the Transaction
as set forth in the offer to purchase and related letter of
transmittal, each attached as exhibits to the Tender Offer
Statement on Schedule TO filed on March 2, 2010, as amended to
date, by Astellas, Astellas Holding and Offeror with respect to
the Offer (collectively, the Offer Documents), and
drafts of the Solicitation/Recommendation Statement on Schedule
14D-9 of OSI relating to the Offer (the Schedule
14D-9);
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(ii)
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Reviewed certain publicly available historical business and
other financial information relating to OSI, including certain
publicly available financial forecasts;
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(iii)
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Reviewed various financial forecasts and other data and
information provided to us by the management of OSI relating to
the business of OSI;
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(iv)
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Held discussions with members of the senior management of OSI
with respect to the business and prospects of OSI;
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(v)
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Reviewed public information with respect to certain other
companies in lines of business we believe to be generally
relevant in evaluating the business of OSI;
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(vi)
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Reviewed the financial terms of certain business combinations
involving companies in lines of business we believe to be
generally relevant in evaluating the business of OSI;
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(vii)
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Reviewed historical stock prices and trading volumes of OSI
Common Stock; and
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(viii)
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Conducted such other financial studies, analyses and
investigations as we deemed appropriate.
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The Board of Directors
OSI Pharmaceuticals, Inc.
March 12, 2010
Page 2
We have assumed and relied upon the accuracy and completeness of
the foregoing information, without independent verification of
such information. We have not conducted any independent
valuation or appraisal of any of the assets or liabilities
(contingent or otherwise) of OSI or concerning the solvency or
fair value of OSI, and we have not been furnished with any such
valuation or appraisal. With respect to the financial forecasts
relating to OSI utilized in our analyses, we have assumed, with
the consent of OSI, that they have been reasonably prepared on
bases reflecting the best currently available estimates and
judgments as to the future financial performance of OSI. We
assume no responsibility for and express no view as to any such
forecasts or the assumptions on which they are based. We also
have relied, with the consent of OSI, on the assessments of the
management of OSI as to the validity of, and risks associated
with, the products, product candidates and technology of OSI
(including, without limitation, the timing and probability of
successful development, testing and marketing of such products,
product candidates and technology, approval thereof by
appropriate governmental authorities and the validity and life
of patents relating thereto).
Further, our opinion is necessarily based on economic, monetary,
market and other conditions as in effect on, and the information
made available to us as of, the date hereof. We assume no
responsibility for updating or revising our opinion based on
circumstances or events occurring after the date hereof. We do
not express any opinion as to the price at which shares of OSI
Common Stock may trade at any time.
In rendering our opinion, we have assumed, with the consent of
OSI, that the Transaction, if consummated, would be completed on
the terms described in the Offer Documents. We also have
assumed, with the consent of OSI, that the
Schedule 14D-9,
when filed, will conform to the last draft reviewed by us in all
material respects. We further have assumed, with the consent of
OSI, that obtaining the necessary governmental, regulatory or
third party approvals and consents for the Transaction would not
have an adverse effect on OSI or the Transaction. We do not
express any opinion as to any tax or other consequences that
might result from the Transaction, nor does our opinion address
any legal, tax, regulatory or accounting matters, as to which we
understand that OSI obtained such advice as it deemed necessary
from qualified professionals. We express no view or opinion as
to any terms or other aspects or implications of the Transaction
(other than the Consideration to the extent expressly specified
herein), including, without limitation, the form or structure of
the Transaction. In addition, we express no view or opinion as
to the fairness of the amount or nature of, or any other aspects
relating to, the compensation to any officers, directors or
employees of any parties to the Transaction, or class of such
persons, relative to the Consideration or otherwise.
Lazard Frères & Co. LLC (Lazard) is
acting as financial advisor to OSI in connection with the
Transaction and will receive a fee for such services, portions
of which are payable during the course of our engagement, a
portion of which is payable in connection with this opinion, a
portion of which is payable upon any withdrawal of the Offer and
a substantial portion of which is contingent upon the
consummation of a sale of OSI, including as a result of the
Transaction or otherwise. In addition, we in the past have
provided and in the future may provide investment banking
services to OSI, Astellas and their respective affiliates
unrelated to the Transaction, for which we have received and may
receive compensation, including having acted as financial
advisor to Astellas in connection with its proposed acquisition
of CV Therapeutics, Inc. in 2009. In the ordinary course of
their respective businesses, Lazard, LFCM Holdings LLC (an
entity indirectly owned in large part by managing directors of
Lazard) and our respective affiliates may actively trade
securities of OSI, Astellas and their respective affiliates for
their own accounts and for the accounts of their customers and,
accordingly, may at any time hold a
The Board of Directors
OSI Pharmaceuticals, Inc.
March 12, 2010
Page 3
long or short position in such securities. The issuance of this
opinion was approved by the Opinion Committee of Lazard.
In connection with our engagement and prior to the date hereof,
we were not authorized to, and we did not, solicit indications
of interest from Astellas or other third parties regarding a
potential transaction with OSI. We also were not requested to
consider, and our opinion does not address, the relative merits
of the Transaction as compared to any other transaction or
business strategy in which OSI might engage or the merits of the
underlying decision by OSI with respect to the Offer.
Our engagement and the opinion expressed herein are for the
benefit of the Board of Directors of OSI (solely in its capacity
as such) and our opinion is rendered to the Board of Directors
of OSI in connection with its evaluation of the Offer. Our
opinion is not intended to and does not constitute a
recommendation to any stockholder as to whether such stockholder
should tender shares of OSI Common Stock in the Offer or how
such stockholder should vote or act with respect to the
Transaction or any matter relating thereto.
Based on and subject to the foregoing, we are of the opinion
that, as of the date hereof, the Consideration proposed to be
paid in the Offer to holders of OSI Common Stock (other than the
Astellas Parties) is inadequate, from a financial point of view,
to such holders.
Very truly yours,
LAZARD FRÈRES & CO. LLC
Managing Director