Genzyme said today it has applied for FDA approval of clofarabine (Clolar) for patients over age 60 with acute myeloid leukemia, in addition to its existing use for acute lymphoblastic leukemia. The Cambridge,MA-based biotech company (NASDAQ: GENZ) has asked for an expedited six-month review of the new use, which means the treatment could be approved for sale in the U.S. in the first half of 2009. The product, which Genzyme obtained through the $345 million acquisition of Bioenvision last year, has potential to generate peak annual sales of $600 million if it is cleared for multiple forms of leukemia, Genzyme said.

Comments | Reprints | Share:          

This is the week that everybody in the media seems to be gazing back upon 2007, but here at Xconomy, well, we’re not that into the first half of the year. No offense intended to January, February, et al—we just weren’t around yet to cover all the people, companies, and happenings that surely made those first six months of the year a fascinating time in the New England innovation ecosystem. So, in honor of the hemi-anniversary of our June 27 launch (no need to send gifts, a few extra clicks will do), we present the Xconomy Half-Dozen-Stories-of-the-Half-Year Awards.

The “Who Knew?” Story of the Half Year:
Boston: The Hidden Hub of Music and Technology
Wade, a recent transplant from the West Coast with a healthy interest in the intersection of technology and entertainment, began to notice that the Boston-area music-tech scene is a lot more rocking than stereotype would lead you to expect. He spent weeks exploring a fascinating web of companies, all combining music, computing, and the Web, and unearthed a hidden technology cluster. The story was part of the inspiration for Xconomy’s upcoming Battle of the Tech Bands.
Runner Up:
VC Varsity (showcasing the little-known athletic prowess of the area’s private equity circuit)

Home-Team Victory of the Half Year:
iRobot v. Robotic FX
We did our journalistic best to be objective in our coverage of Burlington, MA-based iRobot’s patent-infringement and trade-secrets-violations cases against an Illinois rival and the firm’s founder (a former iRobot employee). But the whole massive shredding/tossing of evidence thing… Well, it makes an impression, doesn’t it? Evidently it did on judges in Massachusetts and Alabama, because they endorsed settlements that put Robotic FX out of business and locked founder Jameel Ahed out of the industry for the next five years.
Runner Up:
Red Sox v. Rockies

Story Tip of the Half Year:
Upheaval at MERL
Don’t want to reveal too much about how this one came in, except to say that in a town like this one, kids’ playdates are shockingly prone to becoming parental networking events.
Runners Up:
IRobot’s Dumpster Diving Detectives (the classic anonymous phone call)
The Inside Story of Eons Layoffs (the classic insider source)
Metcalfe Takes GreenFuel Reins (the semi-classic e-mail tip, but we would have had the story two days earlier if our spies at Lanes and Games had recognized the thin Bob Metcalfe look-alike they thought they were seeing as the real, and newly svelte, Metcalfe)

Comment Catfight of the Half Year:
Sermo Strikes Back
I guess when you write a story about how a bunch of people are really ticked off about something (in this case, about some bloggers exposing a security loophole for Sermo, a popular Cambridge-based social networking site for physicians) it shouldn’t be too surprising that the story itself elicits some debate. But man, those doctors can get ornery! (And by doctors, I’m including the bloggers, too. Because I’m Switzerland, okay everybody?)
Runner Up:
What’s Wrong With Energy Investing? (And what’s wrong with making the simple observation that investing in alternative energy is a necessary, but wholly insufficient way to deal with the energy problem?)

Anticlimax of the Half Year:
Carl Icahn Shakes Up Biogen Idec
The activist investor burst on the scene in August. Biogen was up for sale by October. Pundits and bloggers (ourselves included) speculated about who would buy the pioneering Cambridge biotech, but in December, with no offers on the table, Biogen took itself off the block. Of course, you know the story ain’t over…
Runner Up
Genzyme Buys Bioenvision (a once-fiery shareholder revolt fizzles at the 11th, make that 13th hour)

Google IPO Impersonation of the Half Year:
VMware
Hopkinton, MA’s EMC sold just 10 percent of its Palo Alto-based VMware subsidiary in this offering, but what an offering it was. The stock (NYSE: VMW) debuted at $50—a 72 percent premium over its offering price—and soared to a high of $125.25 within a few months (it’s now down to a mere $86 and change).
Runner Up:
Athenahealth (NASDAQ: ATHN) (The Watertown, MA-based, provider of online billing and other business services for medical practices priced at $18 and debuted at $30.)
Also Ran:
EqualLogic (NASDAQ: DELL) (The Nashua, NH-based maker of network storage ditched a planned IPO in favor of a $1.4 billion cash sale to Dell Computer—evidently the largest all-cash acquisition of a venture-backed company in history.)

Comments (1) | Reprints | Share:          

Bioenvision shareholders have voted to approve Genzyme’s takeover offer, paving the way for the controversial merger to move forward, the two companies announced late this afternoon. If it closes as planned, the deal—which passed after months of dispute that saw the shareholder vote extended several times—will win Cambridge-based Genzyme (NASDAQ: GENZ) worldwide rights to the leukemia drug clofarabine.

It was a hard-fought victory for both Genzyme and Bioenvision’s senior management, which had unanimously backed Genzyme’s $5.60-per-share offer for the firm—a price that would quickly become the subject of much angst and debate. “We are very pleased that Bioenvision shareholders voted to support this merger,” said Mark J. Enyedy, president of Genzyme Oncology, in the release. “We are deeply committed to furthering the clinical development of clofarabine and making it available on a global basis so that patients around the world with these very difficult forms of cancer will have access to the therapy.”

The vote could also be seen as something of a vindication for Genzyme, which held fast to its offering price even after Bioenvision shareholders initially—and roundly—rejected the deal in July. At the time Genzyme, via a tender offer, was only able to garner about 22 percent of Bioenvision stock, and almost all of that came from Bioenvision’s senior management and directors. How Genzyme was able over the last few months to come back from that seemingly resounding defeat is unclear, but apparently enough shareholders were either tired of the fight or finally convinced by Genzyme’s arguments that it was paying a fair price for the stock.

Either way, the deal cast a strong spotlight on Genzyme, unfolding as it did like the business version of a soap opera. It first made headlines in early June, when Adam Shay, an individual Bioenvision stockholder, put up a website called rejectgenzymetenderoffer.com to make the case against the Genzyme takeover. The main issue for Shay and many other stockholders was that the $5.60 per share price seemed to dramatically undervalue the potential of Bioenvision and clofarabine, which some analysts expect to achieve sales of up to $1 billion per year. Indeed, several analysts had set a roughly $9 one-year price target for Bioenvision.

Shay was joined in his opposition by SCO Capital, then Bioenvision’s largest minority shareholder, with roughly 13 percent of the stock. After an initial tender offer failed to garner a majority of Bioenvision’s shares, Genzyme extended the offer—only to lose shares during the extension period as some stockholders changed their minds. When the dust settled the company only had about 22 percent of the stock; it needed 50 percent plus one share for its bid to go through.

Suffice it to say things got even wilder from there. Later in July, SCO Capital filed a letter with the SEC claiming it had rights to two Bioenvision board seats. The filing also called for a senior management overhaul and revocation of Genzyme’s existing sub-license to clofarabine in the U.S. and Canada. Genzyme fired back and said it would block any attempts to put SCO representatives on the board. About a week later, Genzyme subpoenaed Shay. The clearly upset North Carolina resident stopped his blogging on the deal, posting a final note on his website lambasting Genzyme. “I never realized the extent to which they are willing to go to quash dissension…” he wrote. “At the end of the day it doesn’t come down to how much money you have. It comes down to right and wrong and how that all sorts out with the man upstairs.”

And that wasn’t all. A number of individual and class-action lawsuits have been filed against both Bioenvision and Genzyme related to the deal. And one of the Bioenvision executives who sold his shares ($1.7 million worth) himself filed suit in New York State court seeking $108 million. According to the Boston Herald, he alleged that Bioenvision breached his employment agreement and had failed to pay him for his role in facilitating the deal.

Still not done. A special meeting for Bioenvision shareholders to vote on the issue was held on October 4. With the vote close—47 percent of shareholders had indicated their support for the merger—Bioenvision management adjourned the meeting for one day. The next day came, and management announced the voting had closed but it needed more time for the inspector of elections to tally the results. An answer was promised by October 10, but, you guessed it…not done yet. The night before the promised results, Bioenvision and Genzyme petitioned the Delaware Court of Chancery for permission to reopen the polls until October 22. It turned out Bioenvision had closed the voting the previous week thinking it had enough support to complete the deal, when in fact it was short by 239,000 votes—and had inadvertently shut out a large shareholder who had wanted to vote in favor of the merger. The court agreed. Today’s October 22. And this time, it looks as though (we’re hesitant to pronounce anything as final in this saga—and attempts to reach SCO Capital officials for their reaction were unsuccessful) the merger has been approved. According to the press release, the final tally saw 56 percent of Bioenvision shares voting in favor of the merger.

And let’s give Genzyme credit. Throughout the trials and tribulations it has held fast to its offer. “We believed $5.60 per share was a full and fair price for the company then, and we believe that to be the case now,” Enyedy wrote to the Bioenvision board late last month. Apparently other people ultimately believed it, too.

Comments (1) | Reprints | Share:          

Am I the only one here who’s having disturbing flashbacks to November 2000? Remember those long weeks when otherwise rational people were driven to distraction trying to find an answer to the once seemingly simple question of who won the vote? We’ve been following Genzyme’s troubled bid to acquire New York-based Bioenvision for months now (see this story for a recent summary) and, though I’m the first to admit the stakes aren’t as high as those of a presidential election, I’d really just like to know who won.

Well, looks like that’s not going to happen today, or even next week. When last we heard from the two companies, on Friday, Bioenvision had closed voting on the proposed merger and adjourned a special meeting of its shareholders until today when, a spokesperson for the firm assured me, the results would be announced. But last night Bioenvision and Genzyme jointly petitioned the Delaware Court of Chancery for permission to reopen the polls until October 22 and, according to a shareholder who attended today’s meeting, Bioenvision says the court this morning granted the request.

So what’s the issue? Not hanging chads, at least not according to the court filing, but rather a mini comedy of errors that ultimately led to Bioenvision closing the vote at 11:29 a.m. on Friday thinking it had the majority needed to seal the deal, when in fact it was short by 239,000 votes, or 0.43 percent of its shares. At 12:11 p.m. Broadridge—which was charged with processing the proxies and votes by institutional investors—transmitted another shareholder’s proxy to the American Stock Transfer and Trust Company (AST), which was serving as the inspector of elections. Instructions for that vote—of 3.1 million shares in favor of the merger—were originally communicated to Broadridge at approximately 11:15 a.m., according to the filing, but Broadridge initially refused them. And since the votes ultimately arrived after the polls were closed they weren’t counted. For more on this chapter of the saga, see the court filing here. (Trust me, it’s an good read.)

“This whole process has really not served shareholder interest,” says Steven Rouhandeh, chairman of SCO Financial Group, one of the minority shareholders that has vehemently opposed the merger. “They keep taking a swing and a miss, right? Those votes came in after the deadline. So, we’ll see.”

For sanity’s sake, let’s hope it’s not December by the time we do.

Comments (1) | Reprints | Share:          

A special meeting of Bioenvision shareholders, continued from yesterday, was adjourned once again this afternoon with no final word on whether or not the shareholders had approved Genzyme’s bid to acquire the New York-based biotech.

The meeting was originally convened yesterday so that Bioenvision (NASDAQ: BIVN) shareholders could vote on Cambridge-based Genzyme’s (NASDAQ: GENZ) much-debated $5.60-per-share offer for the firm. When yesterday’s meeting was adjourned, about 47 percent of the shares had been voted in support of the merger (a simple majority is needed to approve the deal, and shares that aren’t voted are counted as nos) and Bioenvision CEO Christopher Wood announced that voting would be held open until today.

Attendees at today’s meeting were told that while the voting is now closed, the inspector of elections needs additional time to count the votes. “We’ll just have to wait and see what happens,” said Steven Rouhandeh, chairman of SCO Financial Group, which has been a vocal opponent of the merger. Rouhandeh points out that this is essentially the fourth time shareholders have voted on the deal, referring to Genzyme’s original tender offer (which failed to garner a majority of Bioenvision shares), an extension of the offer (ditto), yesterday’s voting deadline (ditto), and today’s finally completed vote. “Our view is that this process has gone on long enough, and it should come to some kind of closure,” Rouhandeh says.

Perhaps that closure will come next Wednesday at 11 am, when the shareholder meeting reconvenes. A Bioenvision spokesperson says that a final tally could come even sooner, but that if not, the verdict would be announced at Wednesday’s meeting.

Comments | Reprints | Share:          

With the vote on Genzyme’s takeover bid seemingly far closer than expected, shareholders of New York-based Bioenvision adjourned a special meeting today, the company announced this afternoon. The session will resume tomorrow with the outcome apparently too close to call.

At issue is Cambridge-based Genzyme’s (NASDAQ: GENZ) $5.60-per-share offering price for Bioenvision (NASDAQ: BIVN). That price was, in effect, rejected earlier this summer when shareholders only tendered about 22 percent of outstanding shares under Genzyme’s initial tender offer, and almost all of the shares tendered at that point were from the Bioenvision board members. At today’s session, though, according to the announcement, holders of about 47 percent of “the company’s issued and outstanding shares of common stock and preferred stock” had indicated their support of the merger. A simply majority vote is needed for the merger to go through.

Throughout the process, New York investment firm SCO Capital Partners, which holds about 13 percent of Bioenvision stock, has led the fight against the bid, most recently reiterating its stance on Monday. SCO said it believes Genzyme’s offer far undervalues Bioenvision and has pressed for a shakeup of the firm’s management. In July, SCO filed a letter with the SEC announcing its intention to remove two Bioenvision board members and replace them with SCO representatives. SCO also is also seeking to terminate Genzyme’s current rights to Bioenvision’s leukemia drug clofarabine.

The Associated Press reported today that Institutional Shareholder Services, a proxy advisory company owned by Riskmetrics Group, had also advised investors to reject the bid. ISS identified an offer in the $8 to $12 range as a more suitable bid for Bioenvision, according to the AP account.

Steven Rouhandeh, chairman of SCO Financial Group, was not happy with the way things went, but he was hopeful the merger would not go through. Rouhandeh said he attended the meeting and that Bioenvision’s CEO, Christopher Wood, stood up and made an announcement of the vote so far, and then adjourned the meeting. “I felt like a reporter. I tried to shout out a question. They said they weren’t taking any questions,” Rouhandeh told me this afternoon. “When will management heed the will of shareholders and call it a day?” Rouhandeh said. “You’ve gotten three no votes. How many times do we have to vote?”

Rouhandeh would not offer a prediction for the final outcome. “It shouldn’t go through and it hasn’t gone through, and we continue to hope it won’t go through because we don’t think it is in the best long-term interest of shareholders.”

Genzyme, for its part, has held fast to its offer throughout the process, which began in May. In a letter to the Bioenvision board last week, Genzyme President Mark J. Enyedy wrote that the company wanted to end any speculation that his company would raise its offer. “We believed $5.60 per share was a full and fair price for the company then, and we believe that to be the case now,” Enyedy wrote. He said the company was prepared to proceed as “an active and constructive” minority shareholder.

Bioenvision stock closed trading today at $5.43, up 18 cents. Genzyme closed up $0.07 at $67.85.

Comments | Reprints | Share:          

With shareholders of New York-based Bioenvision (NASDAQ: BIVN) set to vote in one week on a controversial proposed merger with Genzyme (NASDAQ: GENZ), the Cambridge, MA-based biotech giant reiterated today that it would not raise its offer for shares of the New York firm.

In a letter to the Bioenvision board, Genzyme President Mark J. Enyedy wrote that the company wanted to put an end to any speculation that the offer would be raised above the $5.60 per share price set in a merger agreement hammered out in May. “We believed $5.60 per share was a full and fair price for the company then, and we believe that to be the case now,” Enyedy wrote.

The fairness of the price has been the subject of much discussion and debate since the deal was first announced. Various individual and institutional Bioenvision shareholders have campaigned against the deal, on the argument that it severely undervalues the firm, have called for Bioenvision board to be revamped, and have argued that Genzyme’s current rights to Bioenvision’s leukemia drug clofarabine—the big prize in the would-be merger—should be revoked. Meanwhile, a number of class-action and individual lawsuits have been brought against both Genzyme and Bioenvision related to the deal.

In today’s letter, Enyedy outlined Genzyme’s arguments in favor of the $5.60 price. Among them:
—The price represents a 44 percent premium over average for Bioenvision in the 60 days leading up to the May agreement. (Critics have countered that the price at that time was artificially depressed, due to a recent sale of some 8 million shares to finance clinical trials of clofarabine.)
—Bioenvision has no other acquisition offers on the table.
—Should it remain an independent company, Bioenvision faces challenges including uncertainty that it will obtain projected regulatory approvals for clofarabine, the need to raise significant capital to support operations until the company becomes profitable, and the potential that the pending litigation could drain the firm’s financial and human resources.

Genzyme says it plans to stick with Bioenvision whether or not shareholders approve the merger. “Should Genzyme not garner the majority support from shareholders for this merger,” the company said in a press release, “it is committed to playing an active and constructive role as a significant long-term shareholder of Bioenvision.”

Shares of Bioenvision closed today at $5.26, down from yesterday’s close of $5.43.

Comments | Reprints | Share:          

New York-based Bioenvision today reported a big jump in revenues, and the leading minority shareholder opposed to the company’s proposed merger with Genzyme pointed to this surge as an indication Genzyme’s offer price far undervalues the company—and filed a letter with the SEC that showcases his strategy to block the deal.

Steven Rouhandeh, chairman of SCO Capital, a New York merchant bank, has long taken the lead in objecting to Genzyme’s $5.60 per share offer for Bioenvision. A special vote on the matter is scheduled for October 4, but shareholders already soundly rejected the terms earlier this summer by declining to tender shares under Genzyme’s offer—and Rouhandeh said today things aren’t going to change at the formal vote. Instead, he wants to move forward with plans to remove two Bioenvision board members and replace them with SCO representatives. He also wants to terminate Genzyme’s rights to Bioenvision’s leukemia drug clofarabine. All this is detailed in today’s SEC filing.

The crux of the issue has been the valuation of Bioenvision. In today’s quarterly and year-end report, Bioenvision relayed that revenues for the fourth quarter that ended June 30 had risen to roughly $6.75 million from $1.8 million a year earlier. Year-end revenue totals, meanwhile, were $19.1 million for fiscal 2007, compared to $5.3 million for 2006. The performance was significantly above analyst expectations. Bioenvision’s losses widened during the period, but Rouhandeh says the overall trend was good.

“It was very upbeat,” Rouhandeh says of the Bioenvision earnings report. “The company only looks better than it did four months ago [about when the tender offer was proposed],” he says. Sales are so strong, and the biotech sector in general is looking so good, Rouhandeh adds, the company might do far better to remain on its own than to try and come to better terms with Genzyme. “As a standalone company, it looks very strong,” he says.

“The reason we invest in some of these companies is to play for the home run, and I think we’re on the cusp of that. Selling it now is selling it prematurely.”

Comments | Reprints | Share:          

Shareholders of New York-based Bioenvision (NASDAQ: BIVN) have yet to vote on Genzyme’s (NASDAQ: GENZ) much-maligned $5.60-per-share offer for the firm, but one of them is making its intentions clear now. In a scathing letter to the Bioenvision board dated yesterday, Hedge fund Elliott Associates wrote that it is “extremely dissatisfied with the proposed Genzyme transaction” and will not vote for it.

In the letter, Elliott said that it and its sister fund, Elliott International, own approximately 6.7 percent of Bioenvision’s common stock. In fact, a recent SEC filing shows that Elliott has been squirreling away Bioenvision shares throughout the summer—with significant purchases after Genzyme announced its takeover bid.

Elliott has a reputation for activist fund management, and has previously locked horns with the likes of Procter and Gamble to the benefit of small investors. That should offer some encouragement to the common stockholders who have argued all along that the $5.60 price tag isn’t fair; a majority refused to tender shares under Genzyme’s original offer, which closed on July 10. Indeed, the “outrageously low valuation at which Genzyme is attempting to appropriate Bioenvision” is one of the key objections raised in Elliott’s letter to the Bioenvision board, which cites price targets for the firm ranging up to $13.

The hedge fund also points to apparent conflicts of interest at play in the deal, given that “directors associated with Perseus-Soros, the Company’s largest shareholder and an eager seller of stock, were intimately involved in the sale process.” The letter continues: “In our opinion, it would not be an exaggeration to state that this sale process had a greater resemblance to a ‘fire sale’ than an auction. With substantial cash in the bank, a growing revenue stream, a currently approved and highly promising product, and positive catalysts around the corner, the (unconflicted) Board members had absolutely no need to rush to sell the Company, let alone to hurriedly accept such an inadequate offer.”

Elliott made clear, however that it was not opposed to the idea of a Bioenvision sale to Genzyme “at a fair valuation.” All in all, its sentiments mirror those expressed by another large minority shareholder, New York’s SCO Capital, which has also filed several letters with the SEC registering its opposition to Genzyme’s bid. Its latest filing, in July, called for revocation of Genzyme’s North American rights to the Bioenvision leukemia drug clofarabine.

Comments (2) | Reprints | Share:          

For anyone who’s been following Genzyme’s attempted merger with New York-based biotech firm Bioenvision (NASDAQ: BIVN), one phrase likely comes to mind: What a mess.

Here’s a quick summary of what we’ve covered so far (the related posts list at right pretty much has everything): Individual shareholder protest. Merger rejected. CEO and other execs cash out. Board members resign. At least five class action lawsuits. Bid to end Genzyme’s license to Bioenvision’s leukemia drug.

And all this in only about two months. Then comes word today that one of the execs who cashed out (to the tune of $1.7 million), former Bioenvision executive vice president and general counsel David Luci, has filed suit in New York State court seeking $108 million. According to a small item in the Boston Herald, Luci alleges that Bioenvision breached his employment agreement and has failed to pay him for his role in facilitating the attempted sale of the company to Genzyme (we note that Cambridge-based Genzyme (NASDAQ: GENZ) was only able to amass about 22 percent of Bioenvision stock).

“Wow. It does seem like a mess,” concurs Ren Benjamin, an analyst who follows Bioenvision for New York investment house Rodman & Renshaw, when we told him about the Luci lawsuit.

We tried unsuccessfully this morning to find out more about the lawsuit. Benjamin, though, provided some good perspective about the takeover—and how the mess might be cleared up over time. First, he says, “I don’t want to call it a failed takeover, but it is one that is a little bit in limbo.” He notes that Genzyme already has North American rights to the leukemia drug, clofarabine, so it makes perfect sense for the company to want to take over Bioenvision and acquire the drug’s worldwide rights. He was only surprised at the $5.60 per share offer. (Many analysts set a one-year target price for Bioenvision stock of closer to $9 a share). “We just didn’t expect it at this low a valuation,” Benjamin says.

Predicting an outcome to the current stalemate is harder since Bioenvision’s key managers, including CEO Christopher Wood, sold all of their personal shares to Genzyme as part of the takeover bid, Benjamin says. “So the question is how is that going to continue to move forward…how are the shareholder interests and management interests going to stay in alignment?”

With a lot of clouds hovering over this case, Benjamin feels it will be a while before things are resolved. Still, he says, “I’m going to guess that the stock price is going to stay around where it is right now [$5.43 as we write this], which is around where Genzyme had placed their takeout bid.”

Bioenvision shareholders, he notes, are obviously hoping Genzyme will come back with a higher offer (which, in light of a proposed special shareholder vote on the merger, we speculated about earlier this week). But Benjamin says the Cambridge company can probably bide its time about buying up more Bioenvision shares, if indeed it decides to continue pursuing a takeover at all.

“They can sort of let everything continue the way it’s going and wait for Bioenvision to continue to execute,” he says. It’s a bit of a double-edged sword, though. “If they execute well, they’ll be buying the rest of the company at a higher price,” Benjamin says. If Bioenvision doesn’t execute well, then Genzyme might get the company at a lower price, he adds.

But if things aren’t looking good, we wonder, will Genzyme still want Bioenvision at all?

Comments (1) | Reprints | Share:          

Things seem to be moving again with Genzyme’s so-far-stymied attempts to take over New York-based Bioenvision (NASDAQ: BIVN). A little after four in the afternoon on Friday, Bioenvision’s lawyers made an SEC filing calling for a meeting to vote on the proposed merger. The document, which did not specify a date for the special session, included the following bold-faced notice to shareholders:

Your vote is important. We cannot complete the Merger unless, among other things, the holders of a majority of the Bioenvision common stock and preferred stock…vote to approve the Merger Agreement. Failure to submit a signed proxy card or to vote by telephone, via the internet or in person at the Special Meeting will have the same effect as a vote “AGAINST” the approval of the Merger Agreement.

Unless something new is afoot, Bioenvision is not likely to get much response. A quick recap: Genzyme (NASDAQ: GENZ) made a $5.60 per share tender offer to Bioenvision common stockholders last May, seeking to gain control of a majority of the company’s common stock. While backed by the entire Bioenvision board, the offer was opposed by minority shareholders led by SCO Capital of New York, who felt it significantly undervalued the company. When the tender offer closed and the dust cleared in July, Genzyme had only managed to gain control of about 22 percent of Bioenvision stock—almost all of it from the Bioenvision board, several of whom cashed out for big bucks.

That left the key players in a cat-and-mouse game, or maybe it’s a game of chicken. Genzyme has vowed to press ahead, still hoping to win stockholder approval of the deal—but SCO Capital has vowed to resist. Meanwhile, at least five class action lawsuits related to the attempted takeover have been brought against Bioenvision and Genzyme.

Everyone has been mum on the subject for the last month or so. The long silence makes it tough to get a great read on this. But here’s what we know:

— On July 11, SCO filed a letter with the SEC saying it has the rights to two board seats—and that it intends to exercise those rights. It also called for terminating Genzyme’s rights to Bioenvision’s leukemia drug, clofarabine. Genzyme countered that it has assurances SCO does not have board rights. To our knowledge, no action has yet been taken by SCO to pursue the board seats.

— SCO Capital president Jeff Davis has noted in the past that Genzyme never contacted his company to try to work out a compromise.

— Genzyme in recent weeks settled a long-standing lawsuit on an unrelated matter, possibly indicating its desire to clear its slate and focus on the company’s core business of drug development.

So, putting all this together, it’s not hard to speculate that something might be going on with the Bioenvision case. Have the two sides been talking? Tough call. It is highly doubtful that Genzyme is going to get the shareholder votes it needs without upping its offer— the company would have to be doing a corporate impression of an ostrich to believe otherwise given the overriding defeat it suffered the first time around.

If Genzyme is interested in getting on with the business of developing drugs—and not pursuing an ill-fated takeover offer—it would make sense for the company to be trying to reach a compromise with SCO and other large shareholders.

Comments | Reprints | Share:          

Faced by a wide-ranging subpoena from Genzyme (GENZ), individual Bioenvision shareholder Adam Shay, whose website and blog helped galvanize opposition to the Cambridge company’s merger plans with New York-based Bioenvison (BIVN), has stopped his commentary and will no longer update his site.

Shay’s site, www.rejectgenzymetenderoffer.com, will apparently remain live, at least for the time being. We have not been able to track down Shay. But a from-the-heart last post by the North Carolina resident, clearly upset over Genzyme’s tactics, lays out the situation. Here are some excerpts:

“Genzyme is known for hardball negotiating tactics when acquiring small biotech companies. However, I never realized the extent to which they are willing to go to quash dissension. Someone had the entry on Wikipedia about the attempted Genzyme takeover of Bioenvision removed. They are now trying to get a court deposition and subpoena served on myself. For what purpose I do not know—I am just an individual shareholder that has been blogging on publicly available information…

“At the end of the day it doesn’t come down to how much money you have. It comes down to right and wrong and how that all sorts out with the man upstairs. Communicating that Bioenvision is prepared to go it alone by raising additional funds and then selling out at an artificially deflated price is one of the many wrongs that has taken place during this past year…

“For all my supporters and fellow shareholders I say stand strong. Stand up for what you believe in, regardless of how tough the odds might seem. Success is always achievable when you truly believe in your cause and yourself.”

Uh, Genzyme, good tactic. That will definitely help your public image. Genzyme’s wide-ranging request—some might say fishing expedition or intimidation effort—seeks all Shay’s documents and communications regarding the tender offer, which was soundly rejected by shareholders. This includes Shay’s interactions with Bioenvison, SCO Capital, the leading minority shareholder opposed to the deal, and all members of the media. That would be us, too—since we’ve had a fair amount of interaction with Shay.

The subpoena was filed on July 12, but apparently first revealed this week by blogger Ed Silverman of Pharmalot. Pharmalot has also posted a copy of the subpoena.

The information sought from Shay involves a lawsuit—filed against Genzyme, Bioenvision, and Bioenvision board members, among others—to which Shay is not a party. Silverman speculated that Genzyme was trying to see if there was a connection between Shay and SCO Capital, something Shay has denied. We reached SCO president Jeffrey Davis on vacation yesterday. “We’re not connected with Shay, we’re not connected with anybody,” he told us.

Genzyme has said it will continue pressing for the merger, and will take its case to shareholders later in the year. A spokesman who was looking into the Shay matter this morning did not get back to us before we posted.

This is not the only lawsuit related to the attempted takeover. As far as we can tell, at least five class action suits have been brought against Bioenvision and Genzyme in this matter, including several filed in the last two weeks. You can find two here and here and press releases about the latest three here, here, and here.

On another front, SCO has made waves recently by asserting its claims to two Bioenvision board spots, calling for a management overhaul, and seeking to revoke Genzyme’s rights to the leukemia drug clofarabine. Genzyme countered that it has assurances from Bioenvision that SCO has no board rights.

Davis, who previously served on the Bioenvision board but stepped down in 2004, said yesterday that SCO’s rights to the director seats pre-date Genzyme’s involvement in the matter. “When I resigned from the board we reserved all our rights to put those people back on the board,” he says. “They never came to use when they announced this merger and asked us to wave those rights or anything like that. So our view is we still have those rights.”

Davis is clearly frustrated with Bioenvision, which he says has not returned SCO’s phone calls. “I find it incredible that the Bioenvision board of directors has their largest common shareholder [actually, now the second-largest shareholder, after Genzyme] calling them and they don’t return the call.”

Comments (1) | Reprints | Share:          

Christopher Wood, where are you? We’ve been covering the saga, I think that word can safely be used, of Genzyme’s attempted merger with New York biotech firm Bioenvision. There’s been a lot of back and forth between two of the major players, Genzyme and minority Bioenvision shareholder SCO Capital, which opposed the deal.

There’s one major player that has hardly been heard from at all: Bioenvision itself. Other than a recent press release stating two of its board members had resigned, we haven’t heard a peep from the company or Wood, its CEO and Chairman. We’ve sent e-mails to Wood and other board members (now former board members) and left voice messages for the contact on the press release—but have heard nothing in response. I’m not the only one frustrated with Bioenvision’s silence. Says individual shareholder Adam Shay, who runs the www.rejectgenzymetenderoffer.com site, “They’ve kind of been hiding behind a wall,” with a lack of “any kind of public interaction or analyst interaction.”

How, you might ask, can a company that has seen two board members resign offer no indication of what it is planning to do with those seats? How can it remain so silent in the face of the whole drama? The lack of communication from Bioenvision has almost certainly added to the confusion surrounding the matter.

We think it’s time for Wood to step up with a full accounting of what has happened, and what he sees ahead—and then to step down. Wood, in case you missed it, sold his Bioenvision shares to Genzyme for a cool $9 million. He has no stake left in the company, as far as we can tell. His own shareholders roundly rejected the merger deal he supported.

So, what credibility does he have left?

Comments | Reprints | Share:          

We’ve covered at length the attempted sale of Bioenvision to Genzyme led by its board of directors and management—a move soundly rejected earlier this week by other shareholders. In the end, Genzyme captured 22 percent of the New York-based biotech’s common stock, far short of the 50 percent it needed to force a merger. As far as we can tell, Bioenvision’s directors and managers controlled virtually all the shares tendered to Genzyme, selling at what seems to be a bargain price of $5.60 per share.

The biggest seller, according to the SEC filings available so far, is the Perseus-Soros Biopharmaceutical Fund affiliated with billionaire George Soros (two of Bioenvision’s six board members are advisers for the fund). Here’s the current sales tally. The numbers in parentheses refer to common stock shares ultimately sold. In the case of Perseus-Soros, they include some preferred shares converted into common stock at a rate of two common shares for each preferred share.

Perseus-Soros Biopharmaceutical Fund—$18,900,246 (3,375,044 shares sold)

Chris Wood, Bioenvision Chairman and CEO—$9,262,573.60 (1,654,031 shares sold)

David Luci, Bioenvision Executive VP and General Counsel—$1,736,862.40 (310,154 shares sold)

Nelson Thomas Scott, Bioenvision Director—$447,748 (79,955 shares sold)

Robert Sterling, Bioenvision VP, Business Development—$85,260 (15,225 shares sold)

You can find all the details here. We can’t yet identify the profit made by each of these groups or individuals, since we haven’t figured out their cost basis.

With at least four members of the Bioenvision board, including the company’s CEO, apparently left without a stake in the firm, one might ask why they should stick around. SCO Capital, a large minority shareholders opposed to the deal, has already called for a management and directorship overhaul.

Comments (1) | Reprints | Share:          

It was just business—good business. Or so it seemed last week, when Genzyme announced its $350 million acquisition of New York-based Bioenvision. In fact, it seemed like a good deal for both parties. Under the terms of the arrangement, Genzyme (GENZ) agreed to acquire Bioenvison (BIVN) for $5.60 a share. That marked a 50% premium over Bioenvision’s 20-day trading average. For Genzyme, the premium seemed a reasonable price to pay to get its hands on a potentially valuable leukemia drug, clofarabine, to which Bioenvision has the rights.

But then came the news, reported today in the Boston Globe by Stephen Heuser, that a band of disgruntled Bioenvision shareholders have put up a website called rejectgenzymetenderoffer.com. On the site, they challenge the sale, calling it a “lowball offer that does not come close to reflecting Bioenvision’s share of future Clofarabine sales!” The Globe article sets out the critics’ argument that the the sale will benefit a group of inside shareholders whose ranks include none other than billionaire investor George Soros.

What seemed like a good deal has now become more questionable. According to the shareholder website and the article, Bioenvision stock has been depressed since the company was forced to sell some 8 million shares—at $3.75 apiece—earlier this year to bankroll clinical trials of clofarabine. Since then, the stock has rebounded a bit. But the buyout price of $5.60 per share was still well below where Bioenvision had traded for the past few years. More importantly, the site claims, it was well below the $9 target share price many analysts had set for Bioenvision stock for the next year. That jump was expected, the site says, because several analysts expect clofarabine, which is awaiting approval by the EMEA, to achieve peak annual sales of $1 billion.

The upset shareholders also point out that holders of Bioenvision preferred stock will get $11.20 per share under the terms of the sale. And that group of course includes Soros and company. What’s more, two members of the six-member Bioenvision board that approved the deal are investment advisors for the Perseus-Soros fund.

The critics charge that board members are hawking Bioenvision cheap to ensure an easy sell that benefits preferred shareholders at the expense of common stockholders. And that’s where it gets really interesting, possibly sordid—and dangerous for Genzyme.

The upset stockholders hold only 2 percent of Bioenvision stock and therefore aren’t in position to vote down the deal. But Genzyme better make sure not only are its hands clean in all this, which they seem to be, but that the deal itself is clean. Otherwise, it better walk away fast or change the terms of its offer to better benefit common-stock shareholders. Top companies like Genzyme just can’t be associated with insider maneuverings.

Genzyme must remember, some deals that seem too good to be true really are true. But that doesn’t mean they are good.

Comments (1) | Reprints | Share: