UPDATE: Astellas Begins $3.5 Billion Tender Offer For OSI Pharma

Astellas Pharma Inc. (ALPMY, 4503.TO) officially launched its cash tender offer Monday for all shares of OSI Pharmaceuticals Inc. (OSIP) at $52 a share in cash, or $3.5 billion total.

The Tokyo-based company unveiled plans to take its bid directly to shareholders on Monday after disclosing that it has been attempting to reach a deal with the Melville, N.Y-based drug maker for the past 13 months. OSI shares closed 8% above the offer price Monday, at $56.25 suggesting Wall Street expects a higher offer might be needed to buy the maker of the cancer drug Tarceva.

Although OSI has rejected Astellas' earlier approach, its board hasn't responded to the tender offer and has advised shareholder to take no action.

Astellas, Japan's second-biggest pharmaceutical company by sales, also filed a lawsuit against OSI and its directors to stop them from getting in the way of the tender offer, including applying OSI's shareholder rights plan, a so-called poison pill, arguing that any such move would be "inconsistent with the directors' fiduciary duties."

A spokeswoman from OSI said the company has no comment on the lawsuit or the board's review of the tender offer. Shares of OSI recently traded up 12 cents to $56.57.

The offer is conditioned on a majority of OSI shares being tendered and that OSI's board must redeem or invalidate the shareholder rights plan. Astellas has said it is open to speaking with OSI to reach a "negotiated transaction," but that the Japanese company also intends to nominate directors at OSI's upcoming annual meeting.

The tender offer, scheduled to expire March 31, represents a 40% premium over Friday's closing price of $37.02.

OSI's sole marketed product is Tarceva, which it sells with Swiss drug giant Roche Holding AG (RHHBY, ROG.VX). The pill, used to treat advanced forms of lung and pancreatic cancer, had worldwide sales of $1.2 billion in 2009. OSI evenly splits U.S. profits from the drug with Roche, but receives royalties on sales outside of the U.S.

-By Thomas Gryta, Dow Jones Newswires; 212-416-2169; [e-mail]