Avigen Inc.'s board recommended that shareholders take a pass on Biotechnology Value Fund's (BVF) offer to acquire outstanding shares of the company for $1 each, calling the offer "inadequate and not in the best interest of stockholders."

BVF, which owns about 29 percent of the Alameda, Calif.-based biotech and has been openly critical of recent decisions by management, offered to buy the remaining shares last month, pledging to expedite a proposed merger between Avigen and San Diego-based MediciNova Inc.

That merger, proposed in late December by MediciNova to consolidate rights to a small-molecule anti-inflammatory drug both firms own for different indications, would aim to return Avigen's cash to shareholders, and BVF's offer, according to a letter sent to shareholders last month, would have given those shareholders an option to get near-term cash ahead of the hoped-for merger. (See BioWorld Today, Dec. 24, 2008, and Jan. 26, 2009.)

But Avigen CEO Kenneth Chahine stated in a press release that the board feels it can "create more value for stockholders than the $1 per share that BVF has offered," and added that the firm has received "multiple proposals" in the past few weeks that "place significant value on the company's cash position, intellectual property, AV411 product development program and public listing on Nasdaq."

The board urged shareholders not to tender their shares to BVF, citing the price as substantially undervaluing the company and urging shareholders to wait for a potentially better offer. "In addition to pursuing a potential strategic relationship with MediciNova Inc., we have recently received other written proposals which appear competitive to the MediciNova proposal," the board stated in a letter.

The board also pointed out that Avigen's shares recently had traded above BVF's $1 bid price. Shares (NASDAQ:AVGN) gained 7 cents Friday to close at $1.07.

Avigen has been seeking strategic alternatives since October, when its lead product, AV650, failed in a Phase IIb multiple sclerosis trial. Since then, the firm has cut 70 percent of its staff and has divested an early stage blood coagulation compound for $7 million. (See BioWorld Today, Oct. 22, 2008, and Nov. 4, 2008.)

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