Last week wasn’t exactly good times for Genzyme. Two of its clinical trials reported poor results, and on Friday the stock fell some 6 percent on the bad news. At 12:01 a.m. tomorrow morning, when the company’s extended tender offer for New York-based Bioenvision expires, the company’s stockholders aren’t likely to find anything to cheer about there, either. Word is the offer will again fall dismally short of its target. In fact, all last week’s bad news for Genzyme might be good news for disgruntled Bioenvision shareholders. They believe bedraggled Genzyme is so anxious to secure some sort of victory that it will have no choice but to up its takeover offer significantly above the current tender price of $5.60.
As we’ve reported previously, Genzyme is seeking to acquire Bioenvision largely to gain control of the New York firm’s leukemia drug clofarabine, which is currently awaiting approval by the EMEA—and which some analysts expect to achieve sales of up to $1 billion per year. But when Genzyme’s tender offer for Bioenvision originally expired a week ago, Genzyme had received tenders for only 20 percent of the Bioenvision common stock, far short of its 50 percent goal. Genzyme then waived the 50 percent condition and extended the offer until 12:01 tomorrow morning, hoping conditions would change. All indications are it was a false hope. Bioenvision’s stock closed today at $5.96 a share. “Why sell at $5.60 when you can trade on the market for almost six bucks,” says Jeffrey Davis, president of New York asset-management group SCO Capital. SCO owns about 13 percent of Bioenvision common stock and has led the fight against the deal.
Davis says his firm has seen no movement from other investors, either. “We haven’t heard anything” to indicate any momentum for the Genzyme offer, he says. “I don’t expect that they’re going to get much more on the tender this time around.”
One of the big issues for those fighting the sale, notes Davis, “is that most of the Wall Street analysts had 12-month targets for Bioenvision at $9 or higher.” To have Genzyme come in with a tender offer for $5.60—even though it was approved by the Bioenvision board—seems to be undervaluing the firm.
Especially given the disappointing news around two new Genzyme drug candidates, Davis thinks the Cambridge company will be motivated to up its offer to acquire clofarabine. The magic target price likely to get the job done?: $9 per share. “That’s what I’m hearing,” says Davis.
Genzyme declined comment until after tomorrow morning’s deadline had passed.
