For anyone who’s been following Genzyme’s attempted merger with New York-based biotech firm Bioenvision (NASDAQ: BIVN), one phrase likely comes to mind: What a mess.
Here’s a quick summary of what we’ve covered so far (the related posts list at right pretty much has everything): Individual shareholder protest. Merger rejected. CEO and other execs cash out. Board members resign. At least five class action lawsuits. Bid to end Genzyme’s license to Bioenvision’s leukemia drug.
And all this in only about two months. Then comes word today that one of the execs who cashed out (to the tune of $1.7 million), former Bioenvision executive vice president and general counsel David Luci, has filed suit in New York State court seeking $108 million. According to a small item in the Boston Herald, Luci alleges that Bioenvision breached his employment agreement and has failed to pay him for his role in facilitating the attempted sale of the company to Genzyme (we note that Cambridge-based Genzyme (NASDAQ: GENZ) was only able to amass about 22 percent of Bioenvision stock).
“Wow. It does seem like a mess,” concurs Ren Benjamin, an analyst who follows Bioenvision for New York investment house Rodman & Renshaw, when we told him about the Luci lawsuit.
We tried unsuccessfully this morning to find out more about the lawsuit. Benjamin, though, provided some good perspective about the takeover—and how the mess might be cleared up over time. First, he says, “I don’t want to call it a failed takeover, but it is one that is a little bit in limbo.” He notes that Genzyme already has North American rights to the leukemia drug, clofarabine, so it makes perfect sense for the company to want to take over Bioenvision and acquire the drug’s worldwide rights. He was only surprised at the $5.60 per share offer. (Many analysts set a one-year target price for Bioenvision stock of closer to $9 a share). “We just didn’t expect it at this low a valuation,” Benjamin says.
Predicting an outcome to the current stalemate is harder since Bioenvision’s key managers, including CEO Christopher Wood, sold all of their personal shares to Genzyme as part of the takeover bid, Benjamin says. “So the question is how is that going to continue to move forward…how are the shareholder interests and management interests going to stay in alignment?”
With a lot of clouds hovering over this case, Benjamin feels it will be a while before things are resolved. Still, he says, “I’m going to guess that the stock price is going to stay around where it is right now [$5.43 as we write this], which is around where Genzyme had placed their takeout bid.”
Bioenvision shareholders, he notes, are obviously hoping Genzyme will come back with a higher offer (which, in light of a proposed special shareholder vote on the merger, we speculated about earlier this week). But Benjamin says the Cambridge company can probably bide its time about buying up more Bioenvision shares, if indeed it decides to continue pursuing a takeover at all.
“They can sort of let everything continue the way it’s going and wait for Bioenvision to continue to execute,” he says. It’s a bit of a double-edged sword, though. “If they execute well, they’ll be buying the rest of the company at a higher price,” Benjamin says. If Bioenvision doesn’t execute well, then Genzyme might get the company at a lower price, he adds.
But if things aren’t looking good, we wonder, will Genzyme still want Bioenvision at all?
