Elliott 'Extremely Dissatisfied' With Genzyme Bid for Bioenvision; Believes Offer Significantly Undervalues Company
NEW YORK, September 06, 2007 /PRNewswire-FirstCall/ -- Elliott Associates, L.P. (together with funds under common management), a major shareholder of Bioenvision , today said the following letter has been sent to the Board of Directors:
September 5, 2007 The Board of Directors Bioenvision, Inc. 345 Park Avenue, 41st Floor New York, NY 10154 Dear Members of the Board of Directors:
I write to you on behalf of Elliott Associates, L.P. and Elliott International, L.P. (together, "Elliott" or "we"), which collectively own approximately 6.7% of the common stock of Bioenvision, Inc. (the "Company" or "Bioenvision"). Elliott is extremely dissatisfied with the proposed Genzyme transaction, in which Bioenvision shareholders are to receive $5.60 per Company share (the "Genzyme Transaction"), because we strongly believe this transaction significantly undervalues Bioenvision. We believe this outcome was the result of a hurried and flawed sale process, apparent conflicts-of- interest on the part of the Board, and a miscalculation by the Company that shareholders would prefer a sale at any price rather than to wait for the significant value to which we are entitled.
Elliott will NOT vote for the Genzyme Transaction. It is clear to us that other stockholders share our view as Genzyme's tender offer attracted virtually no support apart from that of the shareholders who orchestrated the transaction. While we agree that a sale of Bioenvision may ultimately be the best course of action, it is our firm view that remaining a stand-alone entity is far preferable to the currently proposed $5.60 per share offer.
We feel compelled to point out to the Board some of the serious issues that other shareholders, equity research analysts and informed parties have raised regarding: i) the faulty process undertaken in selling the Company; ii) the outrageously low valuation at which Genzyme is attempting to appropriate Bioenvision; and iii) the lack of support for Genzyme's offer by the owners of the Company.
Flawed Sale Process
We believe the process undertaken by the Board in the sale of Bioenvision fell short of your fiduciary obligation to maximize shareholder value. Given the facts that Bioenvision had received a (dilutive) infusion of capital less than two months prior to agreeing to sell the Company and that directors associated with Perseus-Soros, the Company's largest shareholder and an eager seller of stock, were intimately involved in the sale process, we would have assumed that the sale process would have reflected a vastly higher duty of care. The recent capital raise provided the Company with liquidity and the Board involvement of a large, motivated seller of stock provided the Board with even greater reason, beyond its fiduciary obligations, to conduct a robust process to negate even the slightest appearance of a conflict-of- interest.
In our opinion, it would not be an exaggeration to state that this sale process had a greater resemblance to a "fire sale" than an auction. With substantial cash in the bank, a growing revenue stream, a currently approved and highly promising product, and positive catalysts around the corner, the (unconflicted) Board members had absolutely no need to rush to sell the Company, let alone to hurriedly accept such an inadequate offer.
Vastly Inadequate Valuation
Some of the facts that we have considered, and that the Board should have contemplated, in evaluating the $345 million, or $5.60 per share, proposal are as follows:
i) In a September 2006 corporate investor presentation, Bioenvision presented a slide entitled, "Evoltra - Global Blockbuster Potential" (Evoltra is the brand name for clofarabine) showing an estimated total market potential for clofarabine of $1.3 billion, excluding the potential to treat solid tumors and autoimmune diseases. ii) Genzyme's view of clofarabine, as discussed on the May 29, 2007 conference call with investors, is that it will reach $600 million of revenue. Note that this view selectively incorporates only the pediatric ALL, adult AML and MDS indications and was supplied by the acquirer who just announced a very favorable purchase price for this revenue stream. iii) The lion's share of equity research price targets were far higher than the $5.60 per share Genzyme offer price. UBS, the bank providing the "fairness opinion" to the Board, had a $13 price target (132% higher than the Genzyme Transaction). AG Edwards had a $9 price target (61% higher than the Genzyme Transaction). Rodman and Renshaw had a $12 price target (114% higher than the Genzyme Transaction). CIBC had an $8 price target (43% higher than the Genzyme Transaction). Oppenheimer had an $11 price target (96% higher than the Genzyme Transaction). In fact, of all the coverage on the Street, we could only find one price target below the $5.60 per share offered by Genzyme (Fortis Bank).
Furthermore, in evaluating clofarabine, Elliott retained expert life science consultants to complete their own, independent projections. Our consultants conceded that while the current application to the EMEA would likely require additional data (which has now been affirmed), they found clofarabine to be a novel compound with "several potential advantages" over current treatment options. Most importantly, they conservatively estimated that in only two indications (pediatric ALL and elderly AML), clofarabine's market potential is in excess of $420 million (this compares to Bioenvision's estimate for these two markets of $600 million) and that additional indications would yield additional revenue opportunities. The Board could have commissioned these independent projections just as easily as Elliott.
Given these facts, exacerbated by the complete lack of a need to sell the Company, we are simply astonished by the valuation agreed to by the Board.
And we aren't alone. The Board can read the published equity research reports commenting on the valuation but, most importantly, by refusing to tender their shares, shareholders have already spoken.
Lack of Support for the Current Offer
If shareholders were interested in receiving $5.60 per share, they would have tendered back in June. The fact that nearly no one - apart from insiders - did so should have sent a very clear message - $5.60 per share is insufficient consideration.
Looking over your concentrated shareholder base, it seems that Elliott is in the company of a number of well-informed and independent investors who have reached the same conclusion. As such, we see no reason whatsoever why the outcome will be any different in the upcoming shareholder vote. Given the price that shares have recently been trading, anyone desirous of receiving $5.60 has likely sold their shares in the market. Investors with greater return expectations will likely continue to hold the stock and vote against the Genzyme Transaction.
Certainly, we are among those with far greater return expectations.
To be clear, we are not opposed to the concept of a sale of the Company and, in fact, believe that Bioenvision is a strong complement to Genzyme. Our issue isn't the decision to sell; it is the price at which the Board proposes to give away the Company. At a fair valuation, the Board would receive our support.
We remain confident in Bioenvision's prospects and available to discuss our thoughts on the situation with the Board.
Sincerely, sig/ Jesse A. Cohn Senior Technology Analyst
About Elliott Associates, L.P.
Elliott Associates, L.P. and its sister fund, Elliott International, L.P. have more than $8 billion of capital under management as of July 1, 2007. Founded in 1977, Elliott Associates is one of the oldest hedge funds under continuous management. The Elliott funds' investors include large institutions, high-net-worth individuals and families, and employees of the firm.
(i) Bioenvision's share of this revenue, approximately 50%, is a multiple of the $345 million purchase price in the Genzyme Transaction, which ignores the fact that biotech companies typically trade at high multiples of future revenue. Additionally, the $1.3 billion revenue figure doesn't incorporate all indications. (ii) Even assuming this severely discounted and incomplete revenue estimate, the $345 million valuation is inadequate.
CONTACT: Scott Tagliarino, +1-212-974-6000, or cell, +1-917-922-2364, forElliott Associates, L.P.
Ticker Symbol: (NASDAQ-NMS:BIVN)
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Posted: September 2007