BioWorld International Correspondent
LONDON - British Biotech plc said it called off merger talks with MorphoSys AG after deciding it was not in the best interests of shareholders to go forward.
Tony Weir, British Biotech's finance director, declined to give reasons for the decision, but told BioWorld International, "It was not a management issue on either side. The management [of a merged entity] had been sorted out at an early stage."
Shares in British Biotech, based in Oxford, fell by 10 percent to 2.5 pence last week when the merger fell through. The value of the company has halved since the talks were initiated in September, giving British Biotech a market capitalization of £16.7 million against a cash pile of £50 million (US$77.9 million) at the end of April.
The failed merger and subsequent fall in the valuation came on top of the failure earlier in the year of two products in clinical development and the suspension of recruitment in Phase II trials of a third. Cumulatively, that puts British Biotech under even greater pressure to find other M&A prospects and/or to license late-stage products.
"M&A is still part of the strategy. We will look at other companies that will add value," Weir said. "In terms of looking to the future and where we are, British Biotech is still blessed with a reasonable amount of cash. We will guard that jealously."
At the current burn rate the company has enough money to last three years. "We will take a hard look at [our] products and develop those most likely to get to [at least] Phase III in the cash life of the company," Weir said.
British Biotech's need for late-stage products may be the reason the MorphoSys merger did not go ahead. The Munich, Germany-based antibody specialist has no products in the clinic and, with less than one year's money, would soon be eating into the cash resources of a merger partner.
There have been reports in UK newspapers of shareholders building stakes in British Biotech to force the breakup of the company and liberate the cash pile. Weir said no new shareholders have built up stakes and the company is in constant contact with existing major shareholders, and listens to what they say. "We were in contact as we went into the merger talks and as we came out of them, and they were supportive," he said.