Japanese pharmaceutical giant Takeda has agreed to buy US drugmaker Ariad Pharmaceuticals for $5.2bn (£4.3bn).
Ariad specialises in making medicines for patients with rare forms of leukemia and other rare cancers.
The takeover was approved by the boards of both companies but still needs the green light from US regulators.
Takeda’s offer is valued at more than 75% above Ariad’s closing share price on Friday – but some analysts says a rival bid cannot be ruled out.
Cancer drugs are appealing to large pharmaceutical firms, who are prepared to pay high prices for companies with promising products in the pipeline.
This was demonstrated in August, when San Francisco-based Medivation was bought by Pfizer Inc for $14bn.
Takeda is looking for new drugs to help its future sales, with top-selling blood cancer drug Velcade likely to come up against competition from lower-priced generics this year. Patents on some of its other key products expire in 2020, meaning others can replicate the medicines.
Analysis: Karishma Vaswani, Asia business correspondent
With the Ariad deal, Takeda gets access to the leukemia drug – Iclusig – and a new lung cancer treatment drug, Brigatinib – which is expected to be approved by the US FDA by April.
Both of these drugs will give the Japanese company a bigger foothold in the US market, and allow it to sell these drugs in Asia. Commercial cancer treatments are highly sought after by drugmakers but the pricing of these drugs is also highly sensitive.
Ariad came under fire from US politicians including Bernie Sanders for raising the price of Iclusig four times in one year.
Takeda has paid a massive premium for Ariad. It will be under scrutiny in the US if it raises prices of its drugs to help it claw back what its spent.