Cypress Bioscience, After Months of Give and Take, Agrees to a $255M Buyout

12/15/10Follow @bvbigelow

After months of rejected offers and dueling media statements, Cypress Bioscience (NASDAQ: CYPB) says today it has agreed to a buyout-and-merger deal that will combine the San Diego drug development company with Royalty Pharma, a New York firm that holds a revenue-generating portfolio of drug royalty interests.

Ramius V&O Acquisition, an affiliate of the $7.8 billion Ramius hedge fund group, upped its offer to acquire all outstanding shares of Cypress that it does not already own for $6.50 a share—or about $255 million on a fully diluted basis. The sweetened price represented an 8.3 percent increase over its previous offer, and was unanimously approved by the Cypress board, according to a statement.

The offer that Cypress finally accepted was about 63 percent higher than the original unsolicited buyout proposal at $4 a share that Ramius made in mid-July, and about 160 percent higher than the Cypress’ share price on July 16, the last trading day before the Ramius offer was publicly disclosed.

“Royalty Pharma has proven to be an extremely valuable partner in our acquisition of Cypress,” Ramius Partner and Managing Director Jeffrey Smith says in the statement. “Their expertise in investing in and acquiring royalty interests has allowed us to structure a unique and efficient transaction that we believe clearly maximizes value for all stockholders.”

“We are excited to add the Savella royalty to our diversified portfolio of leading biopharmaceutical royalties and look forward to working with Cypress management to enhance the value of the company’s pipeline assets,” says Royalty Pharma CEO Pablo Legorreta in the same statement. “As the leading investor in biopharmaceutical royalties, we have a long history of working in partnerships with biotech companies and their management teams.”

Cypress acquired the exclusive rights to milnacipran (Savella) for any purpose in the United States and Canada in 2003 from Pierre Fabre, the French specialty drugmaker. Milnacipran was first approved in France for the treatment of depression. Cypress went on later, in January 2009, to win FDA clearance along with Forest Laboratories to start selling the drug for the treatment of fibromyalgia. Cypress announced in August that it was ending its commercial business, including milnacipran, as part of a reorganization. But the company retained its rights to milnacipran.

Daniel Petree, the lead independent director at Cypress, says the board spent more than two months conducting a comprehensive evaluation of the company’s strategic alternatives. “After thorough and extensive analysis with our financial advisors, Cypress’ Board unanimously concluded that this transaction with Ramius and Royalty Pharma provides significant cash value to our stockholders and is in the best interests of our stockholders, customers and employees.”

Bruce V. Bigelow is the editor of Xconomy San Diego. You can e-mail him at bbigelow@xconomy.com or call (619) 669-8788 Follow @bvbigelow

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