Exiting Facet Biotech on Biogen's Offer

We have exited our position in Facet Biotech (FACT) for a net gain of 58% since our posting on the company last April.

Biogen Idec Inc. (BIIB) said Friday it offered to buy its partner Facet Biotech Corp. for $356 million, and at the same time criticized Facet for entering a partnership with Trubion Pharmaceuticals Inc. (TRBN) last week.

Biogen said it would pay $14.50 per share for Redwood City, Calif.-based Facet. Biogen said the companies have been working together since 2005 to develop the cancer drug candidate volociximab and the multiple sclerosis drug daclizumab.

We added FACT to our portfolio last April, noting that the company was then trading at 46% of its net cash value (see article here). The big winner of FACT’s offer is Seth Klarman at Baupost Group, who doubled his stake in the company last May to 20% ownership.

In going public with its offer, Biogen was sharply critical of Facet, saying it stated its interest in August and offered to buy the company for $15 per share on Aug. 21. A week after that, Facet announced a collaboration with Trubion on a leukemia drug. Facet acquired the marketing rights to a potential leukemia treatment in return for a $10 million investment, $20 million upfront, and potential payments of as much as $176.5 million.

In a letter to Facet CEO Faheem Hasnain, Biogen said the Trubion deal reduces Facet’s value, noting that Facet shares are down 18.8 percent since the partnership was announced. Facet did not immediately return calls seeking comment.

Facet shares finished at $8.82 Thursday, making Biogen’s new bid a 64.4 percent premium. Biogen said it would not have to borrow money to complete the deal and said the bid would not require approval from its shareholders. It asked for a meeting with Facet’s board of directors.

The ValueHuntr Portfolio is now up 127% since April 2008, compared to -24% for the S&P500. The portfolio consists of secondary companies selling for less than their intrinsic value where a catalyst has been identified. For more information see here.

The performance of our portfolio can be tracked here.

Disclosure: We do not have a position on FACT

Comments

[NUCLEAR1929:]

congratulations

Sep 07 08:42 AM

[Wide Moat I...:]

Well done; looks like you may even get a higher offer.

Sep 08 03:46 PM