Biogen Maintains Facet Offer

Yesterday, Biogen Idec (BIIB - Analyst Report) reiterated its intention to acquire its development partner, Facet Biotech (FACT) for $14.50 per share, even though Facet turned down the offer saying it was not in the best interests of its shareholders. The offer price represents a 64% premium to Facet’s closing price on September 3, 2009. The deal is valued at approximately $356 million.

Biogen had initially approached Facet with an offer of $15 per share on August 17, 2009. However, Facet did not accept the offer as the company believed that the offer price was not in the best interests of its shareholders. Soon thereafter, Facet entered into a collaboration with Trubion Pharmaceuticals (TRBN), a move that was criticized by Biogen.

According to Biogen, the Trubion deal led to a reduction in Facet’s value with the company’s stock price reducing by 22% since the announcement of the deal. Based on Facet’s reduced value, Biogen came back with a reduced offer price of $14.50 per share, which was again rejected by Facet.

Biogen and Facet have been working together since 2005 on the development of daclizumab for the treatment of relapsing multiple sclerosis and volociximab (M200) for the treatment of solid tumors. In addition to these two candidates, Facet has three other candidates in its pipeline, one of which is being developed in collaboration with Bristol-Myers Squibb (BMY - Analyst Report).

The acquisition of Facet would help Biogen boost its pipeline. Moreover, Biogen would not be required to make any milestone payments related to the development of daclizumab and volociximab. Under the terms of the collaborative agreement, Biogen is required to make certain development and commercialization milestone payments upon the achievement of certain program objectives totaling up to $660 million over the life of the agreement.

We were not surprised to see Facet reject the offer price of $14.50. Facet exited the second quarter of 2009 with approximately $371 million in cash, cash equivalents, marketable securities and restricted cash. With the deal valued at approximately $356 million, we believe that Biogen will have to raise its offer price. Facet shares jumped 74% when Biogen’s offer was announced on Sept. 4.

Biogen stated it does not need financing or shareholder approval for the deal. This is the second major deal announced by Biogen in 2009. Earlier this year, the company signed a licensing deal with Acorda Therapeutics (ACOR - Snapshot Report) for a multiple sclerosis candidate. We currently have a Neutral rating on Biogen.

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