Hedge fund Sarissa opposes Astex sale to Otsuka

October 2, 2013

Oct 2 (Reuters) - Hedge fund Sarissa Capital, a large shareholder of Astex Pharmaceuticals Inc, opposed the sale of the biotechnology company to Japan's Otsuka Holdings Co .

Sarissa, founded by activist investor Alex Denner, a former associate of billionaire Carl Icahn, said Otsuka's $886 million, or $8.50 per share, offer undervalued Astex.

Shares of the U.S. company were trading at $8.64 on the Nasdaq on Wednesday, indicating that investors expect a higher bid.

Otsuka, whose mainstay schizophrenia treatment is facing patents expiration, agreed last month to buy Astex to tap into its cancer drug pipeline.

Brean Capital analyst Gene Mack said in a note dated Sept. 5 that Astex should have rejected an offer below $13 per share as it did not reflect the royalties from its drug Dacogen and its portfolio of drugs partnered with companies including Novartis AG.

Sarissa questioned the timing of a deal that comes before the release of key data from a cancer drug, codenamed SGI110, expected as early as December.

The firm, which disclosed a 5 percent stake in Astex, raised concerns over Otsuka's expectation of offering greater compensation opportunities and incentives to the U.S. company's senior management.

In an open letter to Astex shareholders, Sarissa said it believed that Astex did not contact all potential bidders and it was reaching out to companies it believed had been left out of the bidding.

Astex did not respond to requests seeking comment.