3rd UPDATE: Biogen Idec Offers $356 Million For Facet Biotech
05 September 2009 - 5:48AM
Dow Jones News
Biogen Idec Inc. (BIIB) went public with a $356 million
unsolicited offer Friday for drug developer Facet Biotech Corp.
(FACT), after claiming that the smaller company shunned earlier
attempts to reach a deal.
The $14.50-a-share offer for the Redwood City, Calif., company
brings a 64% premium to Thursday's closing price. But despite the
price, Facet is a cash-rich biotechnology company and it seems
ready to resist the overtures from Biogen.
Wall Street seems to expect an increased offer, based on Facet's
recent shares price of $15.87, up 79%, after being halted for news
earlier Friday. Biogen shares rose 2.1% to $50.97.
In a statement, Facet Biotech said its board will promptly
respond to Biogen's offer and urged shareholders to await its
response. The company confirmed that the board had rejected
Biogen's previous offer after consulting with financial and legal
advisers.
Notably, the offer by Biogen, a Cambridge, Mass., biotechnology
company, is close to the amount of cash that Facet holds on its
balance sheet, which may make it hesitate to agree such a deal.
"That is not going to get a deal done," said BMO Capital Markets
analyst Jason Zhang, who has a $14 price target on the company,
based mostly on its cash holdings.
"Our belief is that the price we are offering ascribes
appropriate value," said Biogen spokeswoman Jennifer Neiman.
In an August letter to Biogen Chief Executive James Mullen
rejecting the initial bid, Facet's Faheem Hasnain said that the
offer places "negligible value" on the company when considering its
cash holdings.
Hasnain stressed that the two companies recently advanced
daclizumab into late-stage trials, and it has multiple products in
clinical trials, along with protein-engineering technologies.
Sanford Bernstein analyst Geoffrey Porges noted that Hasnain is
formerly the head of Biogen's oncology and rheumatology business
unit, and led Biogen's involvement for Biogen's collaboration with
PDL prior to the Facet spinoff.
Aside from the cash holdings and clinical programs, Biogen said
it factored Facet's obligations under a lease agreement and its
recent collaboration with Trubion Pharmaceuticals Inc. (TRBN) that
could pay out up to $176.5 million in milestone payments.
In April, Facet disclosed that it had "significant lease and
other obligations" in responding to activist shareholders who had
pushed for the liquidation of the company, citing its large cash
reserves.
Facet was spun off from PDL BioPharma Inc. (PDLI) in December in
order to separate the company's biotech assets from its
royalty-producing assets. PDL is essentially a shell company that
produces revenue from its patent portfolio and license
agreements.
After the spin-off, Facet had $405 million in cash in order to
fund its operations for a number of years while it attempts to
develop its pipeline. It has projected spending $110 million in
2009, and as of June 30 had $371.1 million.
That amounts to $15.12 a share in cash, based on its 24.5
million shares outstanding. Under the company's collaboration deal
with Trubion Pharmaceuticals, Facet will pay $20 million upfront
and make a $10 million investment in Trubion.
Zhang declined to estimate how much Biogen might have to pay to
close the deal for Facet, but said he believes a tie-up makes sense
because of the companies' previous relationship.
The two companies have worked together since 2005 on treatments
for multiple sclerosis and solid tumors.
According to Biogen, it first expressed interest in Facet in
mid-August, offering $15 a share and urging it to not undertake any
material transactions.
Biogen contends that Facet rejected its offer and subsequently
signed the deal with Trubion.
Biogen said it believes that the Trubion agreement "reduces the
value of Facet, as apparently do Facet's investors," citing a 22%
drop in its stock price since the deal. It also pointed to the deal
in explaining its lowered $14.50-a-share offer.
"Completion of the deal is far from certain at this point given
its unsolicited nature," Porges wrote in a note to clients, noting
that Facet's Trubion deal could be interpreted as an attempt to
deter an acquisition.
-Thomas Gryta, Dow Jones Newswires; 212-416-2169;
thomas.gryta@dowjones.com