Eisai to pay $3.9 billion in cash for MGI Pharma

In one of the state's biggest deals involving a pharmaceutical company in recent memory, a Japanese firm said Monday it plans to purchase Bloomington-based MGI Pharma Inc. for $3.9 billion in cash.

Tokyo-based Eisai Co. Ltd., best known for drugs treating Alzheimer's disease and gastrointestinal disorders, said it will pay $41 a share for MGI Pharma, which largely markets cancer-related drugs.

News of the deal caused shares of MGI Pharma to surge by almost 20 percent, closing at $40 a share, an increase of $6.55 -- a 52-week high.

Eisai is paying a 39 percent premium based on MGI's closing price of $29.55 as of Nov. 28.

The deal rivals the sale of Maplewood-based 3M's pharmaceutical business last year for $2.1 billion. As a small player in the high-stakes pharmaceutical business, MGI Pharma has long been a bit of an outsider in Minnesota's stalwart medical device circles.

CEO Lonnie Moulder said "at this point" MGI Pharma's operations in Minnesota, which employ about 170 people, should remain intact.

MGI Pharma is an attractive acquisition target for a foreign firm like Eisai looking for quick access into the U.S. market, said Brean Murray Carret & Co. analyst Jonathan Aschoff.

In the past year, Eisai has bought two other cancer-oriented companies and is building a $90 million manufacturing and research-and-development facility for oncology drugs in North Carolina.

Moulder says Eisai is a good fit for MGI Pharma. "They have a significant research and discovery organization that has moved a number of cancer compounds into early clinical trials," he said. "So they have a strategy to become a leading oncology company on a global basis, but they don't have many products in later stage development or on the market."

That's where MGI Pharma comes in. The company is best known for its anti-nausea chemotherapy drug, Aloxi, with annual sales of about $250 million.

The company also markets Dacogen, which treats several bone-marrow diseases. Launched in mid-2006, Dacogen logged about $35 million in sales, exceeding company expectations.

Meanwhile, Eisai faces competitive pressures of its own. Its signature drug, Aricept, which is marketed with drug giant Pfizer, slows the progression of Alhzeimer's disease. While the number of people diagnosed with Alzheimer's is growing as the nation's population ages, there are three other drugs now on the market to treat those with the disease and more drugs being developed.

Moulder said talks about "strategic alternatives" have been progressing for the past several months -- well before it was revealed that billionaire shareholder activist Carl Icahn bought a small stake in the company. Icahn often buys stock in companies he believes are undervalued, usually pressuring them to make changes in management, appoint him to their boards or to buy back stock.

The acquisition is subject to regulatory approval. MGI Pharma agreed to pay a break-up fee of $129 million if the deal falls through.

Bear Stearns analyst Vinay Thapar doubts other bidders will emerge to compete for MGI Pharma, since Eisai is paying cash and the premium it is offering is rather hefty.