One problem with this report - how do you go about negotiating merger/acquisition terms when your stock is trading at half of book value ??
NEWS SNAP: Oxford Glyco Restructures; Eyes M&A
Thursday September 26
LONDON -(Dow Jones)- Cash-rich biotechnology company Oxford GlycoSciences PLC Thursday said it is restructuring its business into three separate units and is in acquisition talks.
OGS, along with a growing number of European biotechs, has seen its share price fall by more than 90% since its early 2000 peak, leaving its market capitalization languishing below its cash levels, while it's yet to get a drug to market.
"It's an honest review. I'm not happy with the financial numbers, which is why together with the management team I've taken a number of steps," Chief Executive David Ebsworth, who took over the helm just ninety days ago, told Dow Jones Newswires. The weak market cap versus cash is "very frustrating," he said.
Ebsworth said he's in talks with a number of companies with to merge or buy a company focused on cancer, or to buy in cancer products. There seems to be more opportunities for M&A in oncology than elsewhere, he said.
OGS is to be split into three separate divisions: oncology; inherited storage disorders, which aims for profitability in 2005 and includes the company's most advanced drug Vevesca, for Gaucher's disease; and a proteomics division, aiming for profit in 2003, to leverage OGS' expertise in studying the role of proteins in disease. Each division will report its own profit and loss account from 2003.
In addition, recent job cuts in the U.K., the closure of an office in New Jersey, the restructuring of research and technology alliances and the hand-over in July of European marketing for Vevesca to Actelion Ltd. , should together cut the company's spending by around GBP10 million a year going forward, said Ebsworth.
Shares were down 2.5 pence, or 1.6%, at 150 pence at 0753 GMT. This values the company at GBP85 million, while its net cash position at June 30 was GBP153 million.
"With the second largest cash pile in U.K. biotech, OGS is well-touted as one of the key potential consolidators in a sector that appears ripe for synergistic M&A," said Adrian Howd, analyst at ABN Amro.
"The segmentation of the business announced today is in our view a 'clearing of the decks' in preparation for larger oncology-focused product acquisitions or M&A," said Howd.
"The restructuring is significant. Ebsworth has taken a pragmatic approach," said Sam Fazeli at Nomura.
As a result, transparency across the business will increase, while future divestment of any one of the three new divisions will be easier, said Fazeli. He said that the proteomics business may eventually be sold, and speculated that Xenova Group PLC (XNVA) is one of OGS' potential acquisition targets.
The company met U.S. regulators at the Food and Drug Administration Tuesday to discuss the progress of Vevesca, and now awaits the FDA's response, said Ebsworth. The FDA said in June that the drug wasn't approvable, but OGS hopes for a review of the decision.
Vevesca, for genetic disorder Gaucher's disease, is by far the most advanced of OGS's drugs, and is on the threshold of being approved in Europe after the Committee for Proprietary Medicinal Products recommended that the European Union approve it for sale. The company plans to submit it by year-end for marketing approval in Israel, where a large number of sufferers live.
Also Thursday, the company reported first-half earnings in line with analysts' forecasts, and announced the appointment of Denis Mulhall as Chief Financial Officer. Mulhall was previously CFO at Metzeler Automotive Profile Systems.
Revenues in the six months were GBP5.8 million, down from GBP8.7 million in the first half of 2001 and bang in line with the market consensus. Loss per share at 35.1 pence was wider than the 13.3 pence loss in the first half of 2001, but roughly in line with forecasts of 31 pence.
-By Susannah Rodgers, Dow Jones Newswire |
