Biogen Makes $356 Million Offer For Facet; Higher Bid Seen
The $14.50-a-share cash offer represented a 64 percent premium over Facets closing price yesterday, and sent the shares soaring by 74 percent in Nasdaq trading. Facet, on Aug. 25, turned down an offer of $15 a share and struck a partnership with Trubion Pharmaceuticals Inc., Cambridge, Massachusetts- based Biogen said today in a statement.
Biogen and Facet, based in Redwood City, California, have been jointly developing the drugs daclizumab for multiple sclerosis and volociximab for cancer since 2005, Biogen said. Facet, which has no products on the market, has come under pressure from investors to cut costs, boost its share price and sell itself.
“We expect the deal price to increase before Facet accepts,” said Ian Somaiya, an analyst with Thomas Weisel, in a note to clients today. Facets $278 million in cash equivalents and $86.5 million in long-term investments, coupled with the companys lack of longer-term debt give it enough cash to operate until 2012, Somaiya said in the note. That level of liquidity, plus milestones anticipated from Biogen, makes a higher offer likely, he said.
Shares of Facet jumped $6.56, or 74 percent, to $15.38, at 4 p.m. New York time in Nasdaq Stock Market composite trading, the biggest one-day gain since Facet began trading in December. Biogen shares rose $1.10, or 2.2 percent, to $51.01.
Biogen Letter
Biogen said today its Chief Executive Officer James Mullen made an initial offer to Facets board in an Aug. 21 letter after conveying interest in an acquisition to Facet CEO Faheem Hasnain on Aug. 17. A week later Facet agreed to develop a leukemia drug, TRU-016, with Seattle-based Trubion.
“We are deeply disappointed Facet chose to announce a collaboration with Trubion on the day you and I were scheduled to discuss Biogen Idecs all-cash proposal to acquire Facet, which you rejected,” Mullen wrote today in a letter to Hasnain.
Facet said Biogens $15 offer was “not in the best interests of stockholders,” in a statement today. In a letter to Biogen, Hasnain said Facet is “receptive to opportunities to further enhance stockholder value.”
Investor Pressures
Facet has come under pressure from investors to cut spending and boost its share price. Last March, a group led by Roderick Wong, a New York investor who until January managed the health care fund at Davidson Kempner Capital Management, called for a sale of the company. Wong also proposed a dissident slate of five directors for Facets annual shareholders meeting and urged that the company pay a cash dividend of as much as $15 a share.
Wong, in a March 30 statement, criticized Facets “rapid, cash-depleting business plan.”
The Trubion deal “reduces the value of Facet,” Biogen said in its statement. Facet shares before today had dropped 22 percent since closing at $11.29 on Aug. 27, the day before the Trubion agreement was announced.
Facet began trading as the result of its spinoff last December from PDL BioPharma Inc. and is focused on developing cancer drugs.
Hard to Get
Facets rejection of Biogens offer and its statement today “confirms this is more of a garden variety hard-to-get routine,” said Robert Chapman, a Facet investor who was among the proposed slate of dissident directors. He is also founder of hedge-fund Chapman Capital in Manhattan Beach, California. “Obviously, both Facet and Biogen must feel very confident about prospects for the cancer and multiple sclerosis drugs,” he said in a telephone interview.
Biogens bid “is minimal, and we expect negotiations to continue,” wrote Joel Sendek, an analyst at Lazard Capital Markets, in a note to investors.
Leerink Swann & Co., a Boston-based investment bank, is providing financial advice to Biogen, while Wachtell Lipton Rosen & Katz is the legal counsel.
Biogens biggest products are the MS drugs Avonex and Tysabri. Biogen also markets the cancer drug Rituxan, for non- Hodgkins lymphoma, with Swiss drugmaker Roche Holding AG.