Nov. 27 (Bloomberg) -- Astellas Pharma Inc., Japan's second- largest drugmaker, agreed to buy Agensys Inc. for as much as $537 million in cash, creating a U.S.-based biotechnology unit with at least seven potential cancer treatments.

The offer includes as much as $150 million tied to Santa Monica, California-based Agensys' products reaching development goals, Astellas said today. Tokyo-based Astellas will get technology to create therapies using antibodies, the fastest- growing area in pharmaceuticals.

``It will add new technology for research and help Astellas discover antibody drugs'' that may be ready for sale within 10 to 20 years, said Yo Mizuno, an equities analyst at Daiwa Institute of Research Ltd. in Tokyo, who has a ``neutral'' rating on Astellas shares.

The global market for cancer therapies will double to 3.4 trillion yen ($31 billion) by 2015, from 1.7 trillion in 2005, Astellas estimates. The drugmaker is searching for new treatments that will buffer revenue once the patent on the immunosuppressant Prograf, its best-selling product, expires next year.

The acquisition, the drugmaker's biggest since it was formed by the April 2005 merger of Yamanouchi Pharmaceutical Co. and Fujisawa Pharmaceutical Co., was announced after markets in Japan closed. Astellas fell 80 yen, or 1.6 percent, to 4,860 yen on the Tokyo Stock Exchange and has slid 10 percent this year.

Takeda Pharmaceutical Co., Japan's largest drugmaker, and fourth-ranked Eisai Co. spent $500 million in March buying biotechnology assets, almost five times as much as all Japanese companies paid in the two previous years for biotech.

Faster Growth

Biotechnology products, based on proteins produced in living cells, are attractive because sales are growing at about 14 times the pace of traditional chemical compounds and they offer new ways to tackle deadly diseases such as cancer.

Closely held Agensys is headed by Donald B. Rice, who earlier this year resigned from the board of Amgen Inc., the world's biggest biotechnology company. Agensys was founded a decade ago by Rice and cancer doctors from the University of California, Los Angeles, as UroGenysys, according to the Astellas statement. Its name was changed in 2001.

Agensys investors include Bear Stearns Health Innoventures, Alta Partners and HBM Bioventures. The U.S. company brought in $41.3 million earlier this year in fundraising led by Duquesne Capital Management and JAFCO Co.

Antibodies

Agensys, which has about 100 employees, has identified potential treatments targeting 14 cancer types. Most use antibodies, which are created as part of the immune system's response to infections.

The acquisition ``will speed drug candidates to the first stage of patient studies'' with better quality, Astellas vice president Toshinari Tamura said in a telephone conference today.

Laboratory-produced versions have been developed to mute overactive immune systems, seen in diseases such as rheumatoid arthritis and Crohn's disease. Genentech Inc.'s cancer drugs Herceptin and Avastin are examples of antibody-based therapies.

The monoclonal antibody market may increase 14 percent annually from 2006 to 2012, outstripping the 0.6 percent growth rate for traditional chemical compounds, market research company Datamonitor Plc said in a report last month.

Astellas was advised by Montgomery & Co. and JPMorgan Chase & Co. was Agensys' adviser.

To contact the reporter on this story: Kanoko Matsuyama in Tokyo at at kmatsuyama2@bloomberg.net

Last Updated: November 27, 2007 06:26 EST