Biotech Values

[DewDiligence]

Kosan Strikes Another Blow to the Biotech-Buyout Canard

[BMY is paying more than triple the market price to buy KOSN. Thus, we have yet another data point to refute the oft-spoken canard that biotech companies are never acquired at a huge premium to the market. Two other recent data points were the acquisition COLY by PFE in Nov 2007 at a 167% premium and the acquisition of IOMI by Intercell two weeks ago at a 147% premium.

The BMY-KOSN deal has the unusual twist that the companies have inked a license that will take effect if the buyout is not consummated.]

http://www.reuters.com/article/marketsNews/idINN2919286920080529

>>
Bristol to buy cancer expert Kosan for $235M

Thu May 29, 2008 11:01am EDT

NEW YORK, May 29 (Reuters) - Bristol-Myers Squibb Co (BMY) will acquire Kosan Biosciences Inc (KOSN) for about $235 million to boost its presence in oncology, the companies said on Thursday.

At $5.50 per share, the deal represents a huge premium over Kosan's closing price of $1.65 on Wednesday on the Nasdaq, although it is below the 52-week high of $6.49 that Kosan shares reached in June 2007.

The deal is valued at $234.6 million, considering the 42.66 million Kosan shares outstanding as of its latest quarterly securities filing.

After deducting Kosan's projected net cash balance at June 30, the companies calculated the deal as having a net purchase price of about $190 million.

The deal includes two members of a promising class of cancer drugs designed to block a protein called Hsp90, including one in late-stage trials, said Jennifer Fron Mauer, a Bristol-Myers spokeswoman.

Mid-stage trials of the similar other drug, meant to treat metastatic breast cancer, were put on hold in February due to the company's limited financial resources, Fron Mauer said.

The deal also includes several experimental epothilones, a new family of cancer drugs derived from the widely used taxane class of treatments, she said.

"We think the price accurately reflects the value of all their assets, as well as their discovery technology," Fron Mauer said.

Kosan in March said it would cut its workforce by about 37 percent to focus on its lead research programs.

The companies also entered into a separate licensing agreement that would generally remain in effect only should the deal not be completed. Under that agreement, Kosan has granted Bristol-Myers an exclusive worldwide license to the epothilone products, and will receive an initial payment of $25 million.

Bristol-Myers is striving to regain its leadership position in oncology after losing its marketing exclusivity on Taxol, once the world's top-selling cancer drug but now sold by numerous generic drug makers. Its newer cancer drugs include Erbitux, a treatment for colon and head and neck cancer sold in partnership with ImClone Systems Inc (IMCL), and Sprycel, for treatment of leukemia.
<<