Following CV Therapeutics' refusal to accept its $16 per share purchase bid, Astellas is trying to turn up the pressure on CVT with a two-pronged approach involving both a tender offer for outstanding shares and a lawsuit in Delaware Chancery Court.

On Feb. 27, Tokyo-based Astellas announced it had issued a tender offer for all 64.2 million CVT shares at $16 per share, totaling $1.03 billion which Astellas intends to pay in cash.

CVT issued a statement Feb. 27 advising its stockholders not to take action in response to the Astellas tender.

Meanwhile, Astellas also filed a lawsuit against CVT and its board seeking declaratory and injunctive relief against a "poison pill" and a "standstill" agreement that stand in the way of a deal.

Astellas made a public offer Jan. 27 to acquire CVT at $16 a share, which was a 41 percent premium over the closing price on Jan. 26 (¹ [See Deal]). The stock price has hovered in the $16 dollar range since, with industry analysts predicting Astellas would need to raise its bid to land the Palo Alto, Calif. firm.

CVT formally declined the bid on Feb. 20, saying it significantly undervalued the company. Astellas first made the bid privately in November and CVT CEO Louis Lange said the offer was inadequate then and had become even more so by January (² Also see "CV Therapeutics Again Declines Astellas $16 Per Share Purchase Offer" - Pink Sheet, 20 February, 2009.).

The two companies have been partnered since 2000 on Lexiscan (regadenoson), an injectable imaging agent for cardiac stress testing which cleared FDA in April 2008. Astellas markets the drug in the U.S., paying CVT a 10 percent sales royalty. The 2000 deal CVT signed with Astellas' predecessor Fujisawa included a standstill agreement saying the deal could be terminated if Fujisawa or any of its affiliates acquired stock in CVT beyond that specified in the Lexiscan deal.

Poison pill extended in January

CVT also has a shareholder rights agreement that would dilute its stock significantly if any entity acquired 15 percent or more of its stock. This poison pill had been due to expire at the beginning of February, but on Jan. 28, the day after Astellas' public offer, the CVT board extended the provision through Feb. 1, 2010.

An industry merger and acquisition attorney told "The Pink Sheet" DAILY that Astellas' case for an injunction against the poison pill might hinge on whether the Delaware court deemed the provision a "morning-after pill" -one adopted to prevent a specific takeover threat.

CVT is "essentially breathing new life" into an expiring shareholder rights clause "at a time when there's a threat at the gates," the attorney said. That move, he said, will likely "be subject to enhanced scrutiny ... to see whether this deal protection is coercive or preclusive [to shareholder rights and] whether it's reasonable."

"In most cases in Delaware, courts are pretty comfortable with the concept of a pill and have permitted them to occur," even in the face of an imminent threat, the attorney added.

It is unclear why Astellas thinks it may have ground to ask for the standstill agreement to be voided. If the pharma's case fails, it could be deemed in breach of the Lexiscan contract, meaning CVT could take back full rights to the drug. Although CVT only earned $5.4 million in Lexiscan royalties last year, a failure by Astellas could make CVT more attractive for other bidders since CVT would now have full rights to both of its marketed products.

Astellas' goal for friendly negotiation

All along, Astellas has said its ultimate goal is to negotiate a merger with CVT on friendly terms. The company said its tender, which would expire March 27 unless extended, would be contingent on its acquiring a majority of CVT shares, with the CVT board waiving both its shareholder rights plan and the standstill agreement.

An industry observer told "The Pink Sheet" DAILY that the tender basically is a ploy to demonstrate to CVT that its shareholders may want it to negotiate with Astellas. Presumably, Astellas has not increased its offer in order to maintain a bargaining position if merger negotiations ensue. With more than $5 billion cash on hand at the end of 2008, the pharma certainly has the funds needed to complete the deal.

"We believe our offer provides CV Therapeutics' stockholders with immediate cash value that exceeds what the company could reasonably expect to deliver on its own, particularly given current uncertain market conditions and execution risks inherent in CV Therapeutics' standalone strategy," Astellas said in a release.

In a Feb. 27 note on the tender, Cowen and Company analyst Eric Schmidt wrote that it is unlikely to succeed, given all the hurdles in its path. Calling Astellas' action "public posturing," he predicted a sale in the $18 to $20 range would eventually occur.

Astellas has said it wants to acquire CVT and its cardiology portfolio, including angina drug Ranexa (ranolazine prolonged-release) to boost its own U.S. presence. Ranexa sales increased 64 percent in 2008 from 2007, but only 4 percent from the third quarter 2008 to the fourth quarter despite an expanded label adding first-line therapy and a claim that the drug can lower hemoglobin A1c levels in diabetes patients. Astellas contends its U.S. commercial operation would better enable Ranexa to reach its sales potential (³ Also see "Astellas Looks To Increase U.S. Presence With Bid For CV Therapeutics" - Pink Sheet, 27 January, 2009.).

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

Astellas Turns Up Heat On Bid To Acquire CV Therapeutics

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