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By Michael Fitzhugh

Ramius, a hedge fund manager trying to gain control of Cypress Bioscience (CYPB), is taking its $148 million hostile bid directly to Cypress shareholders, bypassing the company's management after it rejected a lower bid in August.

San Diego-based Cypress in-licensed an antipsychotic for schizophrenia from Israel's BioLineRx for $30 million in June. The company could pay as much as $335 million in clinical, regulatory and commercial milestones if the drug is successful.

Following that deal, Ramius, which owns about 10 percent of Cypress, questioned the independence and balance of the company's board. In a July 19 letter, it claims that Cypress is destroying shareholder value by making what Ramius partner and managing director Jeffrey Smith called “increasingly risky investments.” It also outlined an offer to acquire all of the outstanding shares of the company for $4 per share.

Unmoved, Cypress’ board unanimously rejected the offer with Cypress CEO Jay Kranzler saying that the offer “grossly undervalues Cypress’ current business and future prospects.”

In August, Cypress continued to pursue investments intended to build its pipeline of central nervous system products. It is paying Alexza Pharmaceutical (NASDAQ:ALXA) $5 million for a worldwide license to its Staccato nicotine technology, an electronic multi-dose nicotine delivery technology designed to help people stop smoking. The company is also spending $750,000 to acquire patents and technology related to carbetocin, an oxytocin analog that may benefit individuals with autism, from Marina Biotech.

Ramius’ sweetened $4.25 per share bid would require that Cypress shareholders tender 90 percent of the company’s outstanding shares and is contingent on Cypress maintaining a balance of at least $80 million in cash or cash equivalents immediately prior to the consummation of the deal.

Ramius' new offer will expire at midnight, Eastern time, on October 13, unless it chooses to extend the deadline.

Source: Hedge Fund Manager Takes Bid Directly to Cypress Shareholders