Elliott 'Extremely Dissatisfied' With Genzyme Bid for Bioenvision; Believes Offer Significantly Undervalues Company
06 September 2007 - 11:49PM
PR Newswire (US)
Major Shareholder Will NOT Vote for Merger; Says 'Shareholders Have
Already Spoken' by Rejecting Tender Offer at $5.60 per Share NEW
YORK, Sept. 6 /PRNewswire-FirstCall/ -- Elliott Associates, L.P.
(together with funds under common management), a major shareholder
of Bioenvision (NASDAQ:BIVN), today said the following letter has
been sent to the Board of Directors: September 5, 2007 The Board of
Directors Bioenvision, Inc. 345 Park Avenue, 41st Floor New York,
NY 10154 Dear Members of the Board of Directors: I write to you on
behalf of Elliott Associates, L.P. and Elliott International, L.P.
(together, "Elliott" or "we"), which collectively own approximately
6.7% of the common stock of Bioenvision, Inc. (the "Company" or
"Bioenvision"). Elliott is extremely dissatisfied with the proposed
Genzyme transaction, in which Bioenvision shareholders are to
receive $5.60 per Company share (the "Genzyme Transaction"),
because we strongly believe this transaction significantly
undervalues Bioenvision. We believe this outcome was the result of
a hurried and flawed sale process, apparent conflicts-of- interest
on the part of the Board, and a miscalculation by the Company that
shareholders would prefer a sale at any price rather than to wait
for the significant value to which we are entitled. Elliott will
NOT vote for the Genzyme Transaction. It is clear to us that other
stockholders share our view as Genzyme's tender offer attracted
virtually no support apart from that of the shareholders who
orchestrated the transaction. While we agree that a sale of
Bioenvision may ultimately be the best course of action, it is our
firm view that remaining a stand-alone entity is far preferable to
the currently proposed $5.60 per share offer. We feel compelled to
point out to the Board some of the serious issues that other
shareholders, equity research analysts and informed parties have
raised regarding: i) the faulty process undertaken in selling the
Company; ii) the outrageously low valuation at which Genzyme is
attempting to appropriate Bioenvision; and iii) the lack of support
for Genzyme's offer by the owners of the Company. Flawed Sale
Process We believe the process undertaken by the Board in the sale
of Bioenvision fell short of your fiduciary obligation to maximize
shareholder value. Given the facts that Bioenvision had received a
(dilutive) infusion of capital less than two months prior to
agreeing to sell the Company and that directors associated with
Perseus-Soros, the Company's largest shareholder and an eager
seller of stock, were intimately involved in the sale process, we
would have assumed that the sale process would have reflected a
vastly higher duty of care. The recent capital raise provided the
Company with liquidity and the Board involvement of a large,
motivated seller of stock provided the Board with even greater
reason, beyond its fiduciary obligations, to conduct a robust
process to negate even the slightest appearance of a conflict-of-
interest. In our opinion, it would not be an exaggeration to state
that this sale process had a greater resemblance to a "fire sale"
than an auction. With substantial cash in the bank, a growing
revenue stream, a currently approved and highly promising product,
and positive catalysts around the corner, the (unconflicted) Board
members had absolutely no need to rush to sell the Company, let
alone to hurriedly accept such an inadequate offer. Vastly
Inadequate Valuation Some of the facts that we have considered, and
that the Board should have contemplated, in evaluating the $345
million, or $5.60 per share, proposal are as follows: i) In a
September 2006 corporate investor presentation, Bioenvision
presented a slide entitled, "Evoltra - Global Blockbuster
Potential" (Evoltra is the brand name for clofarabine) showing an
estimated total market potential for clofarabine of $1.3 billion,
excluding the potential to treat solid tumors and autoimmune
diseases. ii) Genzyme's view of clofarabine, as discussed on the
May 29, 2007 conference call with investors, is that it will reach
$600 million of revenue. Note that this view selectively
incorporates only the pediatric ALL, adult AML and MDS indications
and was supplied by the acquirer who just announced a very
favorable purchase price for this revenue stream. iii) The lion's
share of equity research price targets were far higher than the
$5.60 per share Genzyme offer price. UBS, the bank providing the
"fairness opinion" to the Board, had a $13 price target (132%
higher than the Genzyme Transaction). AG Edwards had a $9 price
target (61% higher than the Genzyme Transaction). Rodman and
Renshaw had a $12 price target (114% higher than the Genzyme
Transaction). CIBC had an $8 price target (43% higher than the
Genzyme Transaction). Oppenheimer had an $11 price target (96%
higher than the Genzyme Transaction). In fact, of all the coverage
on the Street, we could only find one price target below the $5.60
per share offered by Genzyme (Fortis Bank). Furthermore, in
evaluating clofarabine, Elliott retained expert life science
consultants to complete their own, independent projections. Our
consultants conceded that while the current application to the EMEA
would likely require additional data (which has now been affirmed),
they found clofarabine to be a novel compound with "several
potential advantages" over current treatment options. Most
importantly, they conservatively estimated that in only two
indications (pediatric ALL and elderly AML), clofarabine's market
potential is in excess of $420 million (this compares to
Bioenvision's estimate for these two markets of $600 million) and
that additional indications would yield additional revenue
opportunities. The Board could have commissioned these independent
projections just as easily as Elliott. Given these facts,
exacerbated by the complete lack of a need to sell the Company, we
are simply astonished by the valuation agreed to by the Board. And
we aren't alone. The Board can read the published equity research
reports commenting on the valuation but, most importantly, by
refusing to tender their shares, shareholders have already spoken.
Lack of Support for the Current Offer If shareholders were
interested in receiving $5.60 per share, they would have tendered
back in June. The fact that nearly no one - apart from insiders -
did so should have sent a very clear message - $5.60 per share is
insufficient consideration. Looking over your concentrated
shareholder base, it seems that Elliott is in the company of a
number of well-informed and independent investors who have reached
the same conclusion. As such, we see no reason whatsoever why the
outcome will be any different in the upcoming shareholder vote.
Given the price that shares have recently been trading, anyone
desirous of receiving $5.60 has likely sold their shares in the
market. Investors with greater return expectations will likely
continue to hold the stock and vote against the Genzyme
Transaction. Certainly, we are among those with far greater return
expectations. To be clear, we are not opposed to the concept of a
sale of the Company and, in fact, believe that Bioenvision is a
strong complement to Genzyme. Our issue isn't the decision to sell;
it is the price at which the Board proposes to give away the
Company. At a fair valuation, the Board would receive our support.
We remain confident in Bioenvision's prospects and available to
discuss our thoughts on the situation with the Board. Sincerely,
sig/ Jesse A. Cohn Senior Technology Analyst About Elliott
Associates, L.P. Elliott Associates, L.P. and its sister fund,
Elliott International, L.P. have more than $8 billion of capital
under management as of July 1, 2007. Founded in 1977, Elliott
Associates is one of the oldest hedge funds under continuous
management. The Elliott funds' investors include large
institutions, high-net-worth individuals and families, and
employees of the firm. (i) Bioenvision's share of this revenue,
approximately 50%, is a multiple of the $345 million purchase price
in the Genzyme Transaction, which ignores the fact that biotech
companies typically trade at high multiples of future revenue.
Additionally, the $1.3 billion revenue figure doesn't incorporate
all indications. (ii) Even assuming this severely discounted and
incomplete revenue estimate, the $345 million valuation is
inadequate. DATASOURCE: Elliott Associates, L.P. CONTACT: Scott
Tagliarino, +1-212-974-6000, or cell, +1-917-922-2364, for Elliott
Associates, L.P.
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