By Michael Erman

(Reuters) -Bristol-Myers Squibb on Sunday said it will acquire cancer drugmaker Mirati Therapeutics (NASDAQ:) for up to $5.8 billion, diversifying its oncology business and adding drugs it hopes can help offset expected lost revenue from patent expirations later this decade.

Bristol will pick up Mirati’s portfolio drugs that target the genetic drivers of specific cancers including its lung cancer drug, Krazati, which was approved in December.

A second compound – MRTX1719 – which could be used in some types of lung cancer was also attractive to the company, Bristol executives said in an interview.

“We think this really helps strategically complement our oncology portfolio but also, from a financial standpoint, it helps out commercially in the back half of the decade,” said Adam Lenkowsky, Bristol’s Chief Commercialization Officer.

The company said that it will buy Mirati for $58 per share in cash, or around $4.8 billion. Mirati has around $1.1 billion in cash on hand, so “we’re paying essentially $3.7 billion enterprise value…we think with that we’ve gotten a very attractive deal,” Lenkowsky said.

Mirati stockholders will also receive one non-tradeable contingent value right for each Mirati share held, potentially worth $12.00 per share in cash, representing an additional $1 billion of value opportunity, the company said

Bristol will finance the transaction with a combination of cash and debt, the company said in a statement.

The U.S. Food and Drug Administration in December approved the drug to treat adults with advanced lung cancer.

“With multiple targeted oncology assets including Krazati, Mirati is another important step forward in our efforts to grow our diversified oncology portfolio and further strengthen Bristol Myers (NYSE:) Squibb’s pipeline for the latter half of the decade and beyond,” said Chris Boerner, Bristol’s incoming CEO and current chief operating officer, in a statement.

The New York-based company has been pressured by declining demand for two of its top drugs, the blood cancer treatment Revlimid and blood thinner Eliquis, which face generic competition.

Bristol is buying Mirati at a time when the shares are considerably cheaper than they were. Mirati’s shares touched a 52-week high of $101.3 apiece on Nov. 28 and are now trading at $60.2.

The transaction is expected to be dilutive to Bristol’s non-GAAP earnings per share by approximately 35 cents per share in the first 12 months after the transaction closes, the statement added.

In April, Bristol said CEO Giovanni Caforio would step down in November and be succeeded by Boerner.

Last year, Bristol acquired drug developer Turning Point Therapeutics (NASDAQ:) for $4.1 billion in cash to help bolster its arsenal of cancer drugs.