Why Astex Pharmaceuticals Shares Rocketed Higher

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Astex Pharmaceuticals (NASDAQ: ASTX  ) , a biopharmaceutical company focused on small molecule therapies for the treatment of cancer, jumped as much as 41% after a report from Japan's Nikkei newspaper announced that Otsuka Holdings will purchase Astex.

So what: According to information from Japan's Nikkei newspaper, Otsuka, looking to bolster its cancer drug development pipeline, will pay $900 million for Astex, which would amount to about $9.48 per share if true and would represent a premium of 42% over yesterday's close. Neither company has commented on the proposed buyout, according to various news sources.

Now what: If this report from Nikkei's newspaper proves accurate, then I feel that Otsuka is getting a steal in nabbing Astex for $900 million. For starters, Astex comes with a debt-free balance sheet ripe with $133 million in cash. Secondly, Astex already has an FDA-approved drug on the market in Dacogen for the treatment of myelodysplastic syndrome. Third, Astex is loaded with partnerships, including many of the biggest names in the pharmaceutical industry. And last, but certainly not least, Astex recently delivered positive top-line results from SGI-110, its experimental acute myeloid leukemia drug that delivered an overall complete remission rate of 25% in a 67-patient mid-stage trial. Now we'll just wait for some word from the companies themselves.

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  • Report this Comment On September 05, 2013, at 9:23 AM, CoraSchlesinger wrote:

    Sean, what do you think of Brean Capital's opin that the stock should be valued at $13? Is the $90M y negotiable?

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