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Mar 26, 2009

Avigen Ceases Merger Discussions and Plans for Liquidation if BVF’s $20.5M Bid Doesn’t Succeed

  • In a turn of events, Avigen’s latest statement on Biotechnology Value Fund’s (BVF) $20.5 million buyout is neutral after vehemently rejecting it since January. The company, which previously stated that it had received more valuable offers, is also now saying that if the BVF acquisition doesn’t go through, the company will be liquidated.

    “Based on the actions taken by BVF, Avigen's board believes its ability to pursue the strategic alternatives that the board believes will increase stockholder value are all but foreclosed,” explains Zola Horovitz, Ph.D., Avigen's chairman of the board. “As such, the board determined that the company no longer needs to retain the services of the majority of its employees that were supporting strategic discussions and has reduced its headcount accordingly.”

    A stockholder meeting to be held on March 27 will discuss BVF’s request to transplant Avigen’s board with its nominees, which is a condition of BVF’s takeover proposal. If BVF is not successful, however, Avigen will plan for liquidation since it has discontinued merger talks.

    Avigen’s so-called neutral stance states that while it believes BVF’s $1.20 per share price is approximately the company's current net cash value less wind-down costs, it does not reflect the value of company's early-stage pain and addiction program, AV411, or rights to future payments from Genzyme.

    With liquidation, the board believes it can deliver more than $1.20 per share from net cash assets less wind-down costs, rights to approximately $6 million ($0.20 per share) in near-term Genzyme payments, and the sale of AV411.

    Avigen previously pointed out that BVF was not familiar enough with the company’s assets to negotiate a viable deal. BVF had reported that it supported a MediciNova offer for the company, which the Avigen board continues to stand against.

    Avigen also said that BVF’s activist investor strategies were motivated by its need for liquidity and not to by its interest in raising the value of the company.

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