SAN FRANCISCO -(Dow Jones)- A large stakeholder in Arris
Pharmaceutical Corp. said Monday that it would vote against Arris'
planned acquisition of Sequana Therapeutics Inc. because the $166
million deal doesn't adequately reflect Arris' value.
Biotechnology Value Fund LP, which holds a 5% stake in Arris (ARRS),
said other large shareholders have indicated they would vote against the
transaction. Mark Lampert, the fund's manager, said that because Arris'
pipeline of experimental drugs is superior to Sequana's (SQNA), Arris
investors should receive significantly more than the roughly 52% of the
combined entity under the deal's current structure.
"We believe this exchange is unfair and negates whatever other
benefits might be gained from the acquisition," said Lampert. "We call
on Arris and Sequana to cancel or significantly restructure this
acquisition."
The purchase was announced Nov. 3. Arris, based in South San
Francisco, Calif., is pursuing drugs in the class called protease
inhibitors as therapies for asthma, osteoporosis, herpes and
cardiovascular disease. Sequana, based in La Jolla, Calif., is a
genomics company focused on finding genes that may eventually lead to
new drugs.
Executives for Arris and Sequana defended the transaction, saying
Sequana's capabilities at the earliest stage of drug discovery
complement Arris' strengths in later-stage research and development. The
deal, which has been approved by the boards of both companies, is set
for a shareholder vote Jan. 7.
Terms of the acquisition call for Sequana shareholders to get 1.35
shares of Arris stock for each share of Sequana stock. The combined
entity is to be called Axys Pharmaceuticals Inc.
"The deal has been cast," said John Walker, president and chief
executive of Arris, adding that he isn't prepared to alter its terms.
"What we are doing is marrying a pipeline and a technology platform.
The long-term success of the company requires a nearer-term pipeline of
clinical candidates and the ability to repeat that success well into the
future," Walker said.
The proposed acquisition surprised some analysts, in part because
mergers in the biotechnology sector are relatively rare. Usually, the
purchase of a biotech company, or a large-scale collaboration, involves
major pharmaceutical companies seeking to expand their technology base.
And, as in most mergers, the question of which chief executive
presides over the combined entity is a major stumbling block.
This would be the second purchase for Arris. At the end of 1995,
Arris paid $22 million for Khepri Pharmaceuticals Inc., which led to a
collaboration in the research and development of a treatment of
osteoporosis with Merck & Co., CEO Walker said.
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