is urging its shareholders to turn down Biotechnology Value Fund
’s (BVF’s) $20.5 million takeover offer. At BVF’s request, a special meeting of stockholders has been scheduled, which will seek to remove Avigen’s current board.
A majority replacement of Avigen’s board with BVF’s nominees is one condition of the acquisition, which was made on January 16. In a letter from Avigen’s board of directors to its shareholders, the firm said “BVF, an activist investor, seeks to take direct control of the company with nominees that have conflicts of interest (all but one is a BVF manager or partner), have no insight into the value of Avigen's assets, have not been forthcoming with other stockholders about their dealings, and have a record of acting in ways that are not in the best interests of other stockholders.”
BVF already owns 29.63% of Avigen. When it made its move to gain full control of the company, BVF charged the Avigen board with being reckless with shareholders' assets by stalling the proposed merger with Medicinova. BVF said that if it was allowed to take over the board, it would pursue Medicinova’s proposal as well as other strategic options that would offer downside protection.
Avigen’s stock slipped to below $1 in October 2008, when it revealed negative Phase II data from Tolperisone in multiple sclerosis. Since then, the firm has gotten rid of 70% of its work force and sold its hemophilia program to Baxter for $7 million.
The company points out that these restructuring efforts has helped it preserve cash and it expects to have more than $40 million at the end of 2009. Avigen also notes that the current board of directors is best suited to form alliances since it has the most experience with the company’s assets, which consists mainly of mid-stage AV411 for pain and addiction.
Additionally, it reports receiving seven acquisition proposals, three of which are superior to Medicinova’s, and is in negotiations to get the best value. The company also states that it intends to give stockholders with a need or preference for liquidity in a transaction an option to redeem at least part, if not all, of their shares for cash. Finally, Avigen says that it's prepared to cash out stockholders if it can't find a better option.
“We believe BVF's need for liquidity greatly outweighs its interest in evaluating opportunities that could lead to increased value for other stockholders,” said Zola Horovitz, Ph.D., as chairman of the board, and Kenneth G. Chahine, Ph.D., CEO, on behalf of the board in the shareholder letter.