Biogen Bids For Facet

Biogen Idec is moving aggressively to secure its position in the business of developing multiple sclerosis (MS) drugs.

After several weeks of behind-the-scenes drama, the Cambridge, Mass.-based biotech firm publicly made a hostile bid worth $385 million for Facet Biotech, its long-standing development partner for two drug candidates, the monoclonal antibodies daclizumab and volociximab. The move appears prompted by daclizumab’s encouraging results in treating MS. In early August, the companies decided to push daclizumab into Phase III trials.

In mid-August, Biogen sent Facet’s board of directors an unsolicited offer to buy the company for $400 million, or $15.00 per share. The offer was good only if Facet didn’t sign any deals during negotiations. Facet rejected the proposal on Aug. 25; three days later, it announced a drug development collaboration with Trubion Pharmaceuticals.

Biogen countered publicly on Sept. 4 with a lower offer of $14.50 per share. It noted that the Trubion deal caused Facet’s stock price to fall by 20%.

Facet and Biogen traded sharp words last week as each tried to make its case to shareholders. “It does not appear to be a coincidence that Biogen Idec made its acquisition proposal within weeks of our joint decision to begin a Phase III trial … and at a time when the significance of this positive development has not been fully appreciated by the investment community,” Facet CEO Faheem Hasnain said in the company’s rejection of the Biogen proposal.

Indeed, analysts believe Biogen must up the ante to win Facet. BMO Capital Markets stock analyst Jason Zhang points out that after subtracting Facet’s $288 million in net cash and a $30 million milestone payment due from Biogen when daclizumab’s Phase III trials begin, the offer is worth only about $65 million. Throw in upcoming milestone payments from Bristol-Myers Squibb, Facet’s partner for a cancer drug in Phase I trials, and the offer starts to look even less attractive. Zhang thinks Biogen must pay at least $20.00 per share, or roughly $530 million, to seal the deal.

Meanwhile, Biogen seems to have won its battle over the future of the MS treatment Tysabri, which it comarkets with Elan.

When Johnson & Johnson agreed in July to pay $1 billion for an 18% stake in Elan and ownership of Elan’s Alzheimer’s drug program, it received the option to buy out Biogen’s rights to Tysabri should Biogen ever be acquired. Biogen countered that J&J’s option violated its collaboration with Elan, and if not fixed within 60 days, the breach would revert full ownership of Tysabri to Biogen.

Elan subsequently sued Biogen to keep its partnership alive. Early this month, a Manhattan federal court judge ruled that Elan breached its contract with Biogen and gave Elan until Sept. 26, the end of the 60-day period, to remedy the situation.