Here’s one solution to a suitor’s unsolicited buyout offer: Make yourself ugly, at least to that suitor.
San Diego’s Cypress Bioscience (NASDAQ: CYPB) got a $160 million cash buyout offer last month from Ramius Value and Opportunity Advisors, part of the New York-based, $7.8-billion Ramius hedge fund group.
Ramius, which had accumulated a 10 percent ownership stake in Cypress, made its offer on July 19. The San Diego biotech had little to say at the time, except that its board was reviewing the matter.
Cypress responded this week with two announcements. In the first, Cypress says it is withdrawing from its commercial business, including a deal with Forest Laboratories to sell milnacipran, its fibromyalgia drug marketed as Savella. Forest agreed to pay Cypress $2 million to discontinue its role in promoting milnacipran, although Cypress says it retained royalty and other rights. As part of the move, Cypress says it also is laying off 123 people, or 86 percent of its workforce. In the statement, Cypress CEO Jay Kranzler says the biotech has been contemplating its “withdrawal from the commercial market” for some time as part of the company’s “renewed strategic focus on CNS drug development.”
In a second statement yesterday, Cypress says its board has unanimously rejected the buyout. Cypress says Ramius’ offer to buy all the stock it doesn’t already own at $4 a share “grossly undervalues Cypress’ current business and future prospects and consequently is not in the best interests of Cypress’ other stockholders.”
It’s worth noting that in its statement, Cypress already has recast itself as “a pharmaceutical company engaged in the development of innovative drugs to treat central nervous system disorders.” The company also says it is being advised by Jefferies & Company, Inc. and Perella Weinberg Partners, with legal counsel from the Cooley law firm.
While Cypress says it will continue to fill orders for its Avise line of personalized medicine services, the company will either sell or discontinue the business by the end of September.
The company estimates that exiting its commercial business will decrease its operating costs by about $10 million a year, although operating results for the rest of this year will be adversely affected by as much as $4.5 million in severance payments and other charges.
Ramius, predictably, denounces the move, questions the sale of the fibromyalgia drug to Forest, and demands to review documents related to the marketing agreement.
In a statement issued yesterday, Ramius Partner Managing Director Jeffrey C. Smith, says, “This is just another prime example of the Board failing to exercise its fiduciary responsibility to represent the best interest of all shareholders. Rather than rushing to dispose of the Co-Promote, the Board should have considered its potential strategic value to an acquirer and determined how best to maximize its value.”
Smith concludes by calling on Cypress to “halt all extraordinary transactions.” A spokesman for Ramius declined to comment today, but hinted there is more news to come.