OSI's Last Stand

OSI Pharmaceuticals Inc. has made two strategic decisions in the last five years that investors didn't like. As a result, it would not be surprising if they refuse to back the company's independence following last week's hostile bid by Astellas Pharma Inc. to buy the company for $52 a share, or $3.5 billion.

The problem for OSI is that it has failed in its efforts to buy near-term revenues and it has no near-term drivers from its internal pipeline. Indeed, according to SEC documents released last week by Astellas, during talks between the two companies in 2009, OSI CEO Colin Goddard said "he believed OSI would realize its intrinsic value within two years."

Given the right price, investors are unlikely to see any reason to wait.

Thus the two remaining questions are how much Astellas will have to increase the offer to get the deal done, and whether OSI partner Roche will play the white knight.

Macugen debacle

OSI has tried to buy pipeline at least three times in the past decade.

In 2001, the company boughtGilead Science Inc.'s cancer portfolio for $130 million in cash and $43 million in stock. OSI received three compounds in development for solid tumors: OSI-211 was a liposomal lurtotecan topoisomerase I inhibitor in Phase II trials; OSI-7836 was a nucleoside analog in Phase I testing; and OSI-7904L was a liposomal thymidylate synthase inhibitor in preclinical development.

In 2004, OSI stopped development of OSI-7836 because

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