Staff Writer
After hitting a 52-week low, shares in Tercica Inc. soared 100 percent on news that Ipsen SA plans to buy the company for $663 million.
The purchase is one of three that Paris-based Ipsen announced. It also said it is acquiring Apokyn, a treatment for Parkinson's disease, from Vernalis plc for $17.5 million.
Ipsen also said it will acquire all of the assets of Octagen Corp., of Bala Cynwyd, Pa., related to a recombinant porcine coagulation Factor VIII for hemophilia A inhibitor patients, which the companies are partnered in. Ipsen will make an up-front payment of $10.5 million to Octagen and future milestone payments of up to $26 million plus royalties on sales.
But the Tercica deal was the crown jewel. Under the deal, Ipsen will acquire all the shares of Tercica common stock that Ipsen does not currently own at a price of $9 per share in cash, a premium of 104 percent to Tercica's closing price Wednesday. Ipsen already owns about 25 percent of the company.
Tercica's board of directors unanimously approved the deal on the recommendation of a special independent committee which determined that the $9 share price was a "fair value," Fredrik Wiklund, senior director of investor relations and corporate development, told BioWorld Today.
The $9 per share offer is in the same as Tercica's March 2004 initial public offering price, said Matthew Osborne, senior vice president of equity research for the Brisbane, Calif.-based company.
The proposed merger represents a good deal for both companies, Osborne said. It allows Ipsen to fan out its presence in the U.S, while Tercica will see an immediate return in cash, he said.
Christopher Raymond, an analyst with Robert W. Baird & Co, agreed that Tercica shareholders would be getting "a great deal." However, companies with an ex-U.S. partner benefit most in these situations, he wrote in a research note.
Further, Raymond said, "It is our belief that this deal provides yet another example of a European takeover of a US biotech company."
He speculated that the next take-out candidates might include BioMarin Pharmaceutical Inc. of Novato, Calif., and Human Genome Sciences Inc., of Rockville, Md.
Once completed, the three transactions would allow Ipsen to directly market its specialist care products in the world's largest pharmaceutical market, with three global products in its portfolio: Somatuline Depot, Increlex and, upon FDA approval, Dysport.
Ipsen and Tercica have been cross-licensing each other's products under a 2006 agreement. Ipsen is the European partner for Increlex, used to treat severe primary IGF-1 deficiency. Ipsen has granted Tercica exclusive rights to sell Somatuline for acromegaly in the U.S.
Combining Ipsen and Tercica "provides the opportunity to create a leading global endocrinology company," John A. Scarlett, CEO of Tercica, said in a statement.
Ipsen said it will finance the transaction through a combination of existing internal financial resources and bank loan financing.
Ipsen already owns about 25 percent of Tercica, but its stake would increase to about 42.7 percent under the deal, now that Ipsen has agreed to exercise its outstanding Tercica warrant and convert its outstanding Tercica convertible notes promptly following the merger agreement.
Tercica shareholders holding a majority of the outstanding Tercica common stock still must approve the merger.
Shares in Tercica (NASDAQ:TRCA) rose $4.39 Thursday, closing at $8.80.