Major news:
Major Arris Shareholder Opposes Acquisition of Sequana
SAN FRANCISCO, Dec. 8 /PRNewswire/ -- Biotechnology Value Fund, L.P. (BVF), a major, long-standing shareholder of Arris Pharmaceutical Corp. (Nasdaq: ARRS), announced today its intention to vote against Arris' recently proposed acquisition of Sequana Therapeutics (Nasdaq: SQNA).
"We do not take this step lightly," said Mark Lampert, President of BVF's General Partner. "We believe Arris is one of the finest companies in the biotechnology industry. Precisely because of our high regard for Arris and its management team, we feel the enormous dilution associated with this transaction is not in the interest of Arris shareholders. Based on conversations with several other large shareholders, we believe our view may be widely shared."
The acquisition of Sequana would require Arris to issue 1.35 shares of common stock for each share of Sequana common stock. In total, Arris would issue approximately 15 million new shares, equal to the outstanding shares of Arris. The resulting company would thus be owned equally by current shareholders of Arris and Sequana.
"The transaction, as structured, has the effect of requiring us to swap half of our interest in Arris' portfolio of previously established programs for a half interest in Sequana's portfolio. We believe this exchange is unfair and negates whatever other benefits might be gained from the acquisition," said Mr. Lampert. "In its existing, partnered programs, Arris has retained double digit royalties on blockbuster drug candidates of moderate risk that are in, or nearing, clinical development. Sequana, in contrast, possesses largely low single digit royalties on, as yet, unvalidated drug targets which are further away from clinical development."
Arris would face a new set of challenges if the transaction is consummated. With nearly 400 employees spread over multiple sites, the company's overhead would increase significantly. The integration of the two companies could divert attention from Arris' established programs. Arris would need to double the productivity of its research and partnering activities in order to offset the shareholder dilution resulting from the acquisition.
"We are also quite concerned about the 15 million share overhang from Sequana shareholders, none of whom are subject to lock-up provisions," said Mr. Lampert. "This overhang, coupled with our present uncertainty about the outcome of the shareholder vote, has led us to reduce our stake in Arris from six percent of the outstanding shares to five percent."
"We call on both Arris and Sequana to cancel or significantly restructure this acquisition," said Mr. Lampert. "If the companies are determined to combine efforts, we urge them to consider a joint venture arrangement whereby current shareholders remain undiluted with respect to existing programs."
Biotechnology Value Fund, L.P. is a private investment partnership based in San Francisco which specializes in the biotechnology industry.
SOURCE Biotechnology Value Fund, L.P. |
