Less than a month after Astellas made public its bid to purchase CV Therapeutics for $16 a share for a total price of nearly $1 billion, CVT turned down the offer Feb. 20 as "significantly undervaluing" the biotech and not serving the best interests of the company or its stockholders.

The two companies have been partners since 2000, when Astellas' predecessor Fujisawa inked a deal with the biotech for its injectable imaging agent Lexiscan (regadenoson), which is used to stimulate exercise in cardiac patients for stress testing.

When Astellas unveiled its formal offer Jan. 27, it revealed that it had been in discussions with CVT regarding a possible acquisition for much of the previous year. In November, it privately offered to buy the Palo Alto, Calif.-based company for $16 a share; at the time, the offer price represented a 60 percent premium over CVT's average share price of the prior 60 days. Since the Japanese pharma disclosed its desire to purchase CVT, the biotech' stock price has risen, trading in the $15-$16 range (¹ Also see "Astellas Looks To Increase U.S. Presence With Bid For CV Therapeutics" - Pink Sheet, 27 January, 2009.).

"We thought that bid in November was not even close to adequate and I think with all the progress we've made [it] became even less adequate," said Louis Lange, CVT's Chairman and CEO during the firm's 2008 financial call Feb. 20.

Astellas' options limited by "standstill" provision

Astellas' next step is unclear, since it has held firm to its $16 per share offer. Despite having more than $5 billion to spend, unless the pharma increases its offer, its hands might be tied. That's because the 2000 partnership agreement for Lexiscan, signed by Fujisawa before its 2004 merger with Yamanouchi creating Astellas, includes a "standstill" provision.

According to SEC documents, Astellas and its affiliates are restricted from purchasing common stock until one year after the Lexiscan agreement expires or is terminated. The legal language therefore makes it difficult for Astellas to approach CVT's shareholders independently.

What's more, hostile takeover bids are a rare beast in the pharmaceutical industry--and even rarer in Japanese business circles where consensus building is the preferred modus operandum. The still-unfolding Roche/Genentech drama notwithstanding, it's widely believed that a pharma/biotech company's most valuable asset is its employees, and they are likely to leave en-masse if a hostile takeover ensues.

Another pitfall of hostile bids is illustrated by Genzyme's tortured but eventually successful bid to acquire Canadian stem-cell play AnorMED in 2006. Genzyme began its effort with a $380 million offer for the biotech, but quickly was trumped by a friendly $515 million offer from Millennium. The resulting bidding war left Genzyme the winner, but at a price of $580 million, an increase in its per-share bid from $8.55 to $13.50 (² Also see "Genzyme Breaks a Biotech Taboo: The Hostile Bid For AnorMED" - In Vivo, 1 November, 2006.).

Astellas, which has fallen behind its Japanese competitors in acquisitions, launched Lexiscan in the U.S. last year under a deal that provides CVT with a 10 percent sales royalty. CVT earned $5.4 million in royalties last year thanks to that partnership.

But Astellas wants to increase its U.S. presence, and anchor that business with CVT's Ranexa (ranolazine prolonged-release tablets). First approved for second-line angina therapy, Ranexa obtained an expanded label from FDA last year for first-line treatment, as well as a claim that the drug offers benefits to diabetes patients by lowering hemoglobin A1c levels slightly.

Ranexa sales stagnant during fourth quarter

Despite the expanded label, Ranexa's sales growth has not met industry expectations, although CVT attempted to paint an optimistic picture of the drug's performance. After posting U.S. sales of $30.3 million during the third quarter, CVT reported fourth-quarter sales of $31.5 million, a 4 percent increase. In a Feb. 20 note, Leerink Swann analyst Joseph Schwartz said $35.1 million in sales had been expected for the quarter.

Those sales totals lend credence to Astellas' argument that its U.S. commercial capabilities could help Ranexa achieve its sales potential. CVT noted, however, that annual net sales of $109.3 million were a 64 percent increase over the 2007 total. Moreover, according to IMS Health data, total prescriptions have grown by a weekly average of 12 percent, excluding holiday weeks, since the label expansion.

CVT projects Ranexa sales to exceed $200 million in 2009, but would need to continue the 64 percent year-over-year sales growth achieved in 2008 to hit that mark, Leerink's Schwartz wrote.

Meanwhile, Lange predicts Lexiscan is poised to capture a majority of the cardiac imaging market share this year, while expanding the market for pharmacologic imaging agents due to the product's convenience, tolerability and safety. Eventually, CVT thinks Lexiscan could produce $500 million worldwide annually.

Unclear if CVT has received or sought other bids

CVT declined to say during the call whether it has received any other expressions of interest since Astellas' public bid in January. The company says it has its own strategic plan in place to enhance shareholder value. However, the firm would not rule out the possibility of other partnerships or transactions.

"We are in a great position because our core business is very solid, we don't need to raise money, all the revenue streams are growing," Lange said. "We're very open to conversations with other companies or other parties, [if] it could help us."

Asked if there are ongoing discussions with Astellas, CFO Daniel Spiegelman reiterated that CVT is open to "any kind of reasonable transaction that would improve shareholder value."

CVT's stock ended the day at $15.52 per share on Feb. 20, up 3.3 percent. In its Feb. 18 Biotechnology Balance Sheet Report, Rodman & Renshaw said CVT enjoyed a 43.5 percent increase in market cap to $950.6 million during the previous three months, third among all medium-to-large cap biotechs, and a 71.3 percent increase over the previous 12 months, fifth industry-wide.

Astellas did not respond to requests to comment for this story.

-Joseph Haas (j.haas@elsevier.com)

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