Facet Investors Urged to Deny Offer

In line with expectations, Facet Biotech Corporation’s (FACT) board of directors unanimously recommended that its stockholders should reject the unsolicited conditional tender offer from Biogen Idec Inc. (BIIB), which is seeking to acquire all the outstanding shares of Facet Biotech common stock for $14.50 per share in cash. The board has determined that the offer is inadequate and not in the best interests of the company’s stockholders. 

As a reminder, Biogen launched a hostile bid in September to acquire Facet for $14.50 per share by taking its offer directly to Facet’s shareholders. The deal is valued at approximately $356 million. Biogen had initially approached Facet with an offer of $15 per share on Aug 17, 2009. However, Facet did not accept the offer as the company doubted its benefit for 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. 

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 aimed at 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). 

The acquisition of Facet would help Biogen boost its pipeline. Moreover, the company 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. 

The tender offer will expire at 12:00 midnight, ET, on Oct 19, 2009. With Facet currently trading at $17.39, we think Biogen’s current offer price will not find many takers. The proposed acquisition of Facet is the second major deal announced by Biogen in 2009. Earlier this year, the company signed a licensing deal with Acorda Therapeutics (ACOR) for a multiple sclerosis candidate. We currently have a Neutral rating on Biogen.

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