BioWorld Today Contributing Writer
Ramius V&O Acquisition LLC and Royalty Pharma, of New York, will acquire Cypress Bioscience Inc., of San Diego, in an all-cash transaction worth approximately $255 million.
Ramius amended a previous offer to an increased price of $6.50 per share, a premium of 63 percent over its previous proposal of $4 per share. The transaction may close as early as Dec. 30.
Cypress stock (NASDAQ:CYPB) closed Wednesday at $6.45, an increase of 70 cents, or 12.2 percent.
In addition, law firm Weiss and Lurie, of New York and Los Angeles, announced that it is investigating possible breaches of fiduciary duty on the part of the Cypress board of directors in accepting Ramius' offer.
Ramius, which previously owned 9.9 percent of Cypress's outstanding common stock, launched a hostile takeover campaign in July. It offered $4 per share, a 60 percent premium over the July 16 closing price and a 74 percent premium over the average closing price since Cypress' acquisition of BioLineRx Ltd.'s BL-1020 for schizophrenia, renamed CYP-1020. (See BioWorld Today, July 20, 2010.)
Ramius already holds 3,815,000 out of a total of 38,588, 190 shares issued and outstanding as of Nov. 5. A difference of 34,773,190 can be acquired by Ramius under the tender offer expiring at midnight Dec. 17.
In its original offer, Ramius said that it would consider an acquisition structure that would leave Cypress in possession of CYP-1020, if it could fund the planned Phase IIb trial alone or with separate third-party financing.
Ramius and other investors disagreed with Cypress' purchase of development and commercialization rights to CYP-1020 in June for $30 million up front and $335 million in milestones, as well as a 2008 deal with Proprius Pharmaceuticals Inc. Cypress stock plummeted 37.8 percent as investors voted with their wallets on the acquisition of CYP-1020. (See BioWorld Today, June 22, 2010.)
The takeover bid followed a demand from Ramius partner and managing director, Jeffrey C. Smith, to "cease and desist from approving any further acquisitions and any other further material transactions" that might prevent shareholders from receiving a return on their investment.
Cypress rejected Ramius' offer of $4 per share as "grossly" undervalued and against the interests of the other shareholders.
A lengthy back-and-forth commenced as Ramius gradually ratcheted its offer upward, offering $4.25 in September, $5.50 on Dec. 13, and finally $6.50.
Meanwhile, Cypress undertook a housecleaning. In September, it discontinued its copromotion rights with Forest Laboratories Inc. for Savella, a successful fibromyalgia therapy. And in October it unloaded its diagnostics business for $8 million up front, plus milestones and 10 percent royalties on product sales to Exagen Diagnostics Inc. The company also cut its work force by 86 percent at that time. Cypress retained its rights to royalties on the sales of Savella and a right to reactivate its copromotion agreement with Forest. Guidance for revenues from Savella was $100 million for 2011.
Shareholder activism, or an outright takeover by investors is a rare, but not unheard of occurrence in the field of biotechnology, where there is often a tension between long-term development of assets and short-term profitability.
VaxGen Inc.'s proposed mergers with Raven Biotechnologies Inc. and Oxigene Inc. were torpedoed by activist investors who wanted the company to liquidate instead. (See BioWorld Today, Feb. 5, 2010.)
Several other companies have had similar struggles. Investors in Progen Pharmaceuticals Ltd. voted down a merger with Avexa Ltd. Deerfield Management objected to NitroMed Inc.'s proposed reverse merger with Archemix Corp. Biotechnology Value Fund pushed Avigen Inc. to quit seeking strategic alternatives, and RA Capital Healthcare Fund LP took a similar stance with Northstar Neuroscience Inc.
In April 2009, Apro Bio Pharmaceutical Corp. was acquired by Across America Financial Services Inc., in conjunction with a financing round of $1.87 million led by an institutional investor.