An activist investment fund managed by Ramius, a New York multi-fund hedge fund, pounced on Cypress Bioscience (NASDAQ: CYPB) today, offering to pay almost $160 million in cash to acquire the San Diego biotech. Ramius Value and Opportunity Advisors, a subsidiary of the $7.8-billion Ramius fund group, already owns about 9.9 percent of Cypress, making it one of the company’s largest shareholders.
Shares of Cypress, which closed at $2.50 on Friday, soared this morning by more than 80 cents a share, a gain of more than 30 percent, after Ramius revealed its offer, which includes a letter to the Cypress board that was critical of the biotech’s “significant destruction of shareholder value.” Ramius says its $4-per-share offer represents a 60 percent premium over Friday’s close and a 74 percent premium since Cypress acquired BioLineRx’s BL-1020 drug candidate.
Cypress did not immediately respond to a request for comment. The San Diego biotech has about 37.4 million shares outstanding, and additional, unvested options that also would be part of Ramius’ offer to acquire all shares it doesn’t already own.
The company specializes in developing drugs for unmet medical needs in pain management, physical medicine, and rehabilitation, including such challenging disorders as fibromyalgia and rheumatoid arthritis. Cypress also provides personalized medicine services, including a test that aids in the diagnosis and progress of rheumatoid arthritis.
In the letter sent to Cypress, Ramius partner and managing director Jeffrey C. Smith, makes several specific points:
—Ramius expects the Cypress board to immediately hire a reputable investment bank to evaluate its offer and to formally explore selling the company.
—Ramius is prepared to enter into immediate discussions with the board to structure a transaction that maximizes value for all shareholders
—Ramius says it its willing to consider a structure that would allow Cypress to continue the development of the recently acquired BL-1020 drug candidate, if management can fund the required financing for the Phase IIb trial themselves or from a third party financing source.
—Ramius demands that the Cypress board “cease and desist” from approving any additional acquisitions given the company’s “poor judgment” in making previous, “highly speculative” deals.