Some comments from FT's Lex on the latest moves in the CAT/OGS soap. Immuno-Designed Molecules mentioned in the article is a privately held French biotech, where Medarex upon conversion will hold abt. a third of the equity.
If investing in UK biotechnology stocks is like a visit to the casino, investors in Oxford GlycoSciences have a chance to cash out. Celltech's bid is just 20 per cent more than OGS's share price before its merger proposal with Cambridge Antibody Technology. That is not generous, and may, in effect, give Celltech OGS for free. The alternative is no more appealing. A slump in CAT's share price has reduced the value of its all-share offer to 20 per cent below Celltech's cash offer. The pressure is on CAT to respond to Celltech. But adding a cash component to its bid would mean plundering the £260m combined CAT/OGS cash pile. That cash was the main motivation for doing the deal.
If CAT raises its offer, more will be made of the long-term benefits of a merger with OGS. These include creating a second UK biotech "powerhouse" behind Celltech. But the two companies do not expect to be profitable for at least five years.
Rather than gambling on a leap of faith, investors should press Celltech for a higher bid, possibly around £2 a share. The pressure on Celltech will rise if a third possible contender, Immuno-Designed Molecules, comes forward. Celltech can also afford to go a little higher. Its offer is £35m short of the £136m of cash on OGS's balance sheet. That leaves some margin for manoeuvre, even if it wants to keep the deal cash neutral. Meanwhile, investors who regret cashing in their chips before the roulette wheel has stopped can always reinvest the proceeds in other biotech stocks. |
