Ramius Makes Unsolicited Bid for Cypress Bioscience

An activist investment fund managed by Ramius, a New York multi-fund hedge fund, pounced on Cypress Bioscience (NASDAQ: [[ticker:CYPB]]) today, offering to pay almost $160 million in cash to acquire the San Diego biotech. Ramius Value and Opportunity Advisors, a subsidiary of the $7.8-billion Ramius fund group, already owns about 9.9 percent of Cypress, making it one of the company’s largest shareholders.

Shares of Cypress, which closed at $2.50 on Friday, soared this morning by more than 80 cents a share, a gain of more than 30 percent, after Ramius revealed its offer, which includes a letter to the Cypress board that was critical of the biotech’s “significant destruction of shareholder value.” Ramius says its $4-per-share offer represents a 60 percent premium over Friday’s close and a 74 percent premium since Cypress acquired BioLineRx’s BL-1020 drug candidate.

Cypress did not immediately respond to a request for comment. The San Diego biotech has about 37.4 million shares outstanding, and additional, unvested options that also would be part of Ramius’ offer to acquire all shares it doesn’t already own.

The company specializes in developing drugs for unmet medical needs in pain management, physical medicine, and rehabilitation, including such challenging disorders as fibromyalgia and rheumatoid arthritis. Cypress also provides personalized medicine services, including a test that aids in the diagnosis and progress of rheumatoid arthritis.

In the letter sent to Cypress, Ramius partner and managing director Jeffrey C. Smith, makes several specific points:

—Ramius expects the Cypress board to immediately hire a reputable investment bank to evaluate its offer and to formally explore selling the company.

—Ramius is prepared to enter into immediate discussions with the board to structure a transaction that maximizes value for all shareholders

—Ramius says it its willing to consider a structure that would allow Cypress to continue the development of the recently acquired BL-1020 drug candidate, if management can fund the required financing for the Phase IIb trial themselves or from a third party financing source.

—Ramius demands that the Cypress board “cease and desist” from approving any additional acquisitions given the company’s “poor judgment” in making previous, “highly speculative” deals.

Author: Bruce V. Bigelow

In Memoriam: Our dear friend Bruce V. Bigelow passed away on June 29, 2018. He was the editor of Xconomy San Diego from 2008 to 2018. Read more about his life and work here. Bruce Bigelow joined Xconomy from the business desk of the San Diego Union-Tribune. He was a member of the team of reporters who were awarded the 2006 Pulitzer Prize in National Reporting for uncovering bribes paid to San Diego Republican Rep. Randy “Duke” Cunningham in exchange for special legislation earmarks. He also shared a 2006 award for enterprise reporting from the Society of Business Editors and Writers for “In Harm’s Way,” an article about the extraordinary casualty rate among employees working in Iraq for San Diego’s Titan Corp. He has written extensively about the 2002 corporate accounting scandal at software goliath Peregrine Systems. He also was a Gerald Loeb Award finalist and National Headline Award winner for “The Toymaker,” a 14-part chronicle of a San Diego start-up company. He takes special satisfaction, though, that the series was included in the library for nonfiction narrative journalism at the Nieman Foundation for Journalism at Harvard University. Bigelow graduated from U.C. Berkeley in 1977 with a degree in English Literature and from the Columbia University Graduate School of Journalism in 1979. Before joining the Union-Tribune in 1990, he worked for the Associated Press in Los Angeles and The Kansas City Times.