MediciNova Acquiring Avigen: A Post-Mortem

Includes: AVGN, MNOV
by: Greenbackd

MediciNova Inc. (NASDAQ:MNOV) will acquire Avigen Inc (NASDAQ:AVGN) for $1.24 per share in cash or secured convertible notes. While the stock is trading at a slight premium to the bid, we’re taking the opportunity to exit. AVGN closed Friday at $1.29, which means we’re up 98.5% on an absolute basis. The S&P500 was at 816.21 when we opened the position, and closed Friday at 1,026.13, which means we’re up 72.7% on a relative basis.

Post mortem

We started following AVGN in December last year (see archived posts here) because it was a net cash stock and specialist biotechnology investor Biotechnology Value Fund (BVF) was pushing it to liquidate and return its cash to shareholders. Despite BVF’s failure to remove the board, we continued to maintain our position in AVGN because BVF won a number of important concessions from the board that made AVGN a much more attractive stock than it was when we started following it. We continuted to hold on when AVGN announced that it was back in negotiations with MediciNova, Inc. The consideration for the deal was announced as AVGN’s “net cash liquidation value plus $3 million” and “a contingent payment right for a specific product program milestone payment associated with Avigen’s Assignment Agreement with Genzyme Corporation, potentially subject to certain adjustments.”

That seems tono longer be the case. The deal announced Friday calls for a payment of around $1.19 a share when the deal closes, with approximately $0.05 per share to be paid on June 30, 2010. This is a disappointing deal. AVGN has been sold for its net cash liquidation value plus $3M from MediciNova. We held on because we believed that there was a reasonable chance that AVGN could yield more than its then $1.34 share price when the “contingent payment right” capturing the near term payments from Genzyme was taken into account. MNOV has not provided AVGN shareholders with any value for AVGN’s AV411 assets and program.

Here is the press release announcing the sale (via MarketWatch):

MediciNova To Acquire Avigen For $1.24 a Share

William L. Watts

MarketWatch Pulse

LONDON — Biopharmaceutical firm MediciNova Inc. will acquire Avigen Inc. for $1.24 a share in cash or secured convertible notes, under an agreement announced Friday by the biopharmaceutical firms. Under the deal, around $1.19 a share will be paid when the deal closes, with approximately 5 cents a share to be paid on June 30, 2010. The transaction is expected to close in the fourth quarter, pending the approval of Avigen and MediciNova stockholders and other considerations. The companies said the merger will allow them to combine their neurological clinical development programs based on ibudilast, an anti-inflammatory drug.

Full Disclosure: We have a holding in AVGN