[Corrected 9/16/10, 2:00 pm. See below.] San Diego’s Cypress Bioscience (NASDAQ: CYPB), which has been stubbornly refusing to negotiate or even meet with a private equity firm over an unsolicited buyout offer, says it will review the fund’s increased offer “consistent with its fiduciary duties.”
Ramius Value and Opportunity Advisors, a subsidiary of the $7.8 billion Ramius fund group in New York, says in a statement today that it is taking its increased offer of $4.25 a share directly to Cypress shareholders, “given the board’s continuing refusal to negotiate with us.”
Cypress, which responded within hours in a statement, says, “stockholders are advised to take no action at this time pending the review of the tender offer by the Cypress Board of Directors.”
The activist investment fund, which holds about 10 percent of Cypress shares, initially offered to buy Cypress at $4 a share in July in an unsolicited bid that was valued at nearly $160 million for all outstanding shares. The sweetened offer would put the overall value of the deal at about $164 million for all outstanding shares (Ramius obviously would not acquire the shares it already owns).
[Corrects terms of milnacipran deal] Cypress spurned the Ramius offer in August, saying it “grossly undervalues Cypress’ current business and future prospects.” In an additional defiant move, Cypress also announced that it was withdrawing from its commercial business and “discontinuing” its rights to co-promote milnacipran (Savella), its drug for fibromyalgia (pain in the muscles, ligaments, and tendons) with Forest Laboratories. Forest is paying Cypress $2 million to “facilitate” the end of Cypress’ role, and Cypress says it is retaining its royalty on sales and other rights. As part of that move, Cypress laid off 123 people, or 86 percent of its workforce.
In a later announcement, Cypress said it had acquired a potential treatment for the core symptoms of autism from Bothell, WA-based Marina Biotech (NASDAQ: MRNA) and an electronic nicotine delivery device from Alexza Pharmaceutical (NASDAQ: ALXA) of Mountain View, CA, developed to help smokers quit smoking.
Since then, two other institutional investors have joined the brewing proxy battle by issuing open letters that were sharply critical of the biotech’s management and board. Collectively, the three shareholder groups hold more than 20 percent of Cypress shares, which represents another pressure point on Cypress.
Arcadia Capital Advisors of Great Neck, NY, which owns less than a 5 percent stake in Cypress, asserted in its letter that by failing to investigate higher offers, the Cypress board “was not fulfilling its fiduciary duty to protect and enhance shareholder value.”
And the RA Capital Healthcare Fund, part of Boston-based RA Capital Management (founded by Richard Aldrich of Sirtris Pharmaceuticals and Altus Pharmaceuticals), followed a few days later with a lengthy and potent letter that underscored, point-by-point, how Cypress has misinterpreted both shareholder sentiment and the value of its recently acquired products.
In its statement today, Cypress says it plans to consult its financial and legal advisors and announce its response within 10 business days. Jefferies & Company and Perella Weinberg Partners are serving as financial advisors, and the Cooley law firm and Potter Anderson & Corroon are serving as its legal advisors.