Buyout Bid Boosts Anormed Shares

September 27, 2006
Vancouver Sun
By Gillian Shaw

Millennium offers $12 US per share in all-cash deal

Shares in Anormed Inc. jumped more than 26 per cent Tuesday on news that the company’s board has agreed to a $515-million US buyout from Millennium Pharmaceuticals Inc., an offer that tops Genzyme Corp.’s earlier bid by 40 per cent.

The Massachusetts-based Millennium offered $12 US a share in an all-cash deal, trumping Genzyme’s hostile takeover bid of $8.55 made in late August and representing a 21-per-cent premium over Monday’s closing price.

However, it may be only the latest scene in the takeover drama surrounding the Langley biotech as investors sent AnorMed shares up 26.6 per cent to $14.06 Cdn on the Toronto Stock Exchange and up $2.70 US to $12.74 US on the Nasdaq market.

Kenneth Galbraith, AnorMed’s acting chief executive officer and board chairman, welcomed the offer as one that is “supportable and fair and very timely,” but didn’t rule out the possibility there could be others.

“I would have a hunch to stay tuned,” Galbraith said in an interview following Tuesday’s announcement, repeating advice he had for shareholders at the company’s annual general meeting last week when he said the board was hoping for multiple offers.

Asked if he thinks other players who signed confidentiality agreements to review the company’s affairs are likely to make a bid for the company, Galbraith said “the steps people might take are beyond our control.

“There are lots of companies that have been to the data room that know what my cellphone number is,” he said.

The lure of AnorMed is its cancer treating drug Mozobil, which is expected to be launched in the U.S. in 2008. It was cited by Millennium as a strategic fit with its Velcade blood cancer drug.

“I’m excited to announce our agreement today to acquire AnorMed Incorporated,” Dr. Deborah Dunsire, Millennium’s president and chief executive officer, said in a conference call Tuesday. “The acquisition adds to Millennium a first-in-class phase-three oncology product with a planned launch date in 2008.

“… Mozobil is an excellent strategic fit with Millennium. First, Mozobil will accelerate our revenue growth starting in 2008 assuming successful approval and launch.

Second, Mozobil is a complement to our market-leading hematology-oncology franchise centred around Velcade, the market leader in relapsed multiple myeloma.”

Mozobil is a stem cell mobilizer that works by releasing stem cells from the bone marrow into the bloodstream where they can be collected and transplanted. It’s a treatment that allows patients to use their own stem cells to rebuild immunity following cancer treatment.

Millennium’s bid more accurately reflects the company’s value, said Karen Boodram, an analyst with Pacific International Securities.

“I think fair value from a buyer is in the range of $11 to $13, so this offer from Millennium falls into what I perceive as a fair value range for the company,” Boodram said.

Boodram pointed out that value could change if AnorMed were to wait further into its development of Mozobil and she also didn’t rule out the possibility of a third competing offer.

“It is possible a superior offer could come in before this offer expires or for that matter if AnorMed were to wait until the top-line results with Mozobil are released in the first half of ’07,” she said. “The risk in that is that while they most likely would get a superior offer, they would also have to begin increasing their investment behind the pre-commercialization efforts for Mozobil.

“They have to spend money to get a higher offer.”

AnorMed would have preferred a future sale, but Galbraith said that option was forestalled by Genzyme’s hostile bid.

“We were pretty clear in June that we didn’t want to sell the company, we thought the best way to build value for shareholders was to continue to build the company,” he said. “We just didn’t have a chance.”
Faced with what Galbraith termed an “unsolicited, hostile, inadequate offer from Genzyme,” the company hired Goldman, Sachs & Co to seek better offers. Galbraith said AnorMed shareholders were well served by technology that allowed for a due diligence process that was considerably shortened by the availability of a “virtual data room.”

Rather than having to arrange a parade of interested parties taking turns viewing company documents in a boardroom, AnorMed was able to give access to the information through a password-protected online data room.

The offer is a bittersweet development for British Columbia’s biotech sector. It’s proof that it is churning out sought-after research and discoveries, but at the same time marks the exodus of a made-in-B.C. company to the biotech belt of the U.S. which enjoys a critical mass not found here here.

“It’s bad news because we lose another good Canadian company like we did with ID Biomedical over a year ago,” said Boodram. “The good news is obviously we have the talent here to develop perspective products that are meeting market needs.

Last year, Vancouver-based biotech star ID Biomedical Corp. was snapped up for $1.7 billion by British drug giant GlaxoSmithKline Plc.

Millennium, which like its rival for AnorMed is based in Cambridge, Mass., said it is too early to say what will happen to Langley’s AnorMed headquarters and the 140 people working there. Millennium has 900 people at its Cambridge headquarters and another 200 people in its oncology sales force.

“Right now, we are really at the beginning stages of trying to figure out what the complete integration would look like,” said Millennium spokeswoman Lisa Adler. “We will have a better idea when we close the deal at the beginning of November.”