Tuesday, September 8, 2009

Facet Biotech (NASDAQ:FACT): Biogen May Have to Increase its Offer to ~$20 - BMO Capital

BMO Capital is discussing offer from Biogen Idec (NASDAQ:BIIB) to acquire Facet Biotech (NASDAQ:FACT) shares for $14.50 per share (~$385 MM) in cash:

We estimate Facet’s current (3Q09, post TRU-016 deal) net cash (cash on hand minus 1-3 year lease obligation) is ~$288 MM or ~$11 per share. Therefore, Biogen’s offer values Facet’s pipeline at roughly $3.50 per share or ~$95MM. Subtracting the $30MM daclizumab milestone payment Biogen would have to pay Facet for the initiation of a Phase III trial in multiple sclerosis (MS) in 1H10, Biogen is essentially offering ~$65MM. For $65MM, Biogen would own 100% of daclizumab and volociximab, ~40% of elotuzumab, 50% of TRU-016, save up to $630MM future milestone payments to FACT, be eligible for up to $680MMmilestone payments from BMS on elotuzumab and be liable for up to $177MM milestone payments to Trubion for TUR-016. We believe Biogen’s offer, inaddition to being opportunistic, is triggered by the futility analysis of daclizumab’s Phase IIb SELECT trail announced on August 3. We have learned that the futility analysis had shown that daclizumab exceeded an undisclosed efficacy threshold(most likely an efficacy that is superior to Avonex), which clearly increases thevalue of daclizumab significantly. We believe Biogen may have to increase its offer to ~$20 per share to better reflect Facet’s pipeline value.

Action: So basically Biogen Idec is trying to get FACT for pocket change.. Might have worked 6 months ago but not in this kind of market.

FACT issued PR this morning rejecting the bid as too low. I expect the shares to trade up over the next week in anticipation of higher offer. Anything below $16 should be considered as a buy.

1 comment:

  1. Check PDLI's 10Q's. Section 10:

    "In connection with the Spin-Off, we entered into amendments to the leases, and a Co-Tenancy agreement, under which Facet agreed to indemnify us for all matters related to the leases attributable to the period after the Spin-Off date. . . . As of June 30, 2009, the total lease payments for the duration of the guarantee, which runs through December 2021, are approximately $135.6 million."