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Talk about a tough market, according to a recent report, half of all biotech’s with a market cap under $200M are trading for less than cash on hand. YM Biosciences (YMI)  is no exception and BBM is trying to snag a bargain.

Under BBM’s proposal, BBM would acquire all of the outstanding shares of YMI common stock for consideration per share of $0.50 in cash plus 0.375 share of BBM common stock (aggregating for all YMI stockholders approximately 45% of the combined company’s outstanding stock after giving effect to the merger). The cash portion of BBM’s proposal represents a premium of 84.5% above the closing price of YMI common stock of $0.271 on November 12, 2008 (and a substantially greater premium taking into account the value of the BBM stock issued in the merger).

Alternatively, if YMI’s board of directors prefers not to negotiate a merger as proposed, BBM is willing to undertake a tender offer at a cash price of U.S. $0.60 per share for at least 90% of the shares of YMI Corporation.

BBM is a holding company that had formerly been operating in the telecommunications space but who can blame them for switching over to biotech.  There aren’t a ton of industries with literally hundreds of opportunities trading below their level of cash.

Additionally, it’s not like YM doesn’t have a growth driver, they are developing nimotuzumab, an epidermal growth factor receptor (EGFR)-targeting monoclonal antibody that it hopes will prove safer than marketed EGFR drugs such as Erbitux (cetuximab, ImClone). Their European partner (OncoScience) is already enrolling patients in a Phase III study in adult glioma patients, as well as in a Phase IIb/IIIa study in combination with gemcitabine in patients with advanced pancreatic cancer.

This is a tough call for YM; the BBM offer clearly undervalues the company but if their near term cash requirements exceed the ~$55M they have on hand, there might be little alternative.  We just saw Genelabs Technologies agree to a similar deal from GSK.  They were picked up for a little less than half cash on hand.

For big pharma/biotech… and er… holding companies, small companies are fish in a barrel.

Source: BBM Looks for Bargain in YM Biosciences Acquisition Proposal