April 15, 2015
By Riley McDermid, BioSpace.com Breaking News Sr. Editor
Roche , Celgene Corporation , Amgen , AbbVie and Gilead Sciences, Inc. are all being named as possible acquirers of Boston-area biopharma Ariad Pharmaceuticals, Inc. , after a nasty proxy battle for control of the company mounted by its largest shareholder, activist fund Sarissa Capital, continues to heat up. An analyst at Stifel Nicolaus & Co., Brian Klein, said this week he estimates Ariad could sell for between $2.2 billion and $2.8 billion.
The Boston Business Journal named the five companies as its top list of contenders for Ariad, though other analysts have also included global giants with an interest in building out their oncology offerings like Pfizer Inc. or Merck & Co. .
Activist investor Alex Denner and his hedge fund Sarissa Capital are looking to shake up the board of oncology specialist Ariad Pharmaceuticals, Inc. (ARIA) by ousting current Chief Executive Officer Harvey Berger, a scant year after gaining a seat of the company’s board.
That power struggle has left the market wondering who might take advantage of the instability to snap up a smart little bolt-on buy with plenty to offer.
Ariad has long been on Sarissa’s To Do list, ever since it struggled to get American regulators to reinstate its leukemia drug Iclusig, a process which took two separate tries in 2013 before finally being approved. During that period, the share price of Ariad tanked as much as 90 percent, although it has since rebounded on the strength of a roaring biotech sector and solid sales. Iclusig only brought in $56 million, a wincingly low number from the $1 billion a year it was projected to earn when it was launched.
Ariad now is a prime target for both change and profit. The company inked a $77.5 million deal with Japanese firm Otsuka Pharmaceutical in December, giving Otsuka the rights in 10 Asian countries to Iclusig. In addition to Japan, the rights will incorporate China, South Korea, Indonesia, Malaysia, the Philippines, Singapore, Taiwan, Thailand and Vietnam.
Sarissa said in a Feb. 19 filing that it is “extremely concerned with the conduct of certain members of the board, particularly with respect to compensation, governance and financial matters.”
That could be setting Sarissa up for a proxy fight for control of Ariad, “It’s pretty interesting there is some quote-unquote activism here, but it’s been pretty quiet,” RBC Capital Markets analyst Michael Yee told CNBC in February, when Denner began pushing for changes. “Typically activists come in and start to make noise, write an open letter, demand changes, send tweets, whatever it is; none of that has actually happened.”
Sarissa is run by former Carl Icahn protégé Alex Denner, and another well-known associate of both men, Richard Mulligan. Together the two have upped Sarissa’s stake in Ariad to 6.9 percent, a significant amount of ownership that could give it leverage to institute the changes it wants to see made without a bruising proxy war. Denner received his seat of Ariad’s board in February 2014 and appears to be marking his anniversary by mounting a campaign for massive change.
Denner made BioSpace ’s list of “The Biggest Biotech VC Vampires” in October because of how actively he’s managed to agitate in the sector.
“Since 2006, he has helped effect the sale of four biotech firms — including Genzyme Corporation — for a total of more than $37 billion, and was a part of a plan to replace Biogen Idec (BIIB)‘s former CEO, James Mullen, with its current one, George Scangos, in 2010,” wrote the Boston Business Journal. “The change at Biogen, Inc. helped result in a 400 percent increase in that company’s share price over the past five years to become one of the world’s top biotech companies.”
No biotech investor list would be complete without significant mention of Denner, who first met Icahn while trying to flip the troubled but promising ImClone.
After Denner was able to shepherd the company’s marquee-name experimental drug ramucirumab into Phase III development, he quickly capitalized on the market’s good will and brokered ImClone’s $6.5 billion exit to Eli Lilly and Company . Denner rolled from that success right into engineering Genzyme Corporation’s sale to Sanofi to the tune of $20 billion.
More recently, Denner was front and center when obesity-drug maker VIVUS, Inc. found itself in his crosshairs when major shareholder First Manhattan, which controls 9.9 percent of the company, criticized its solo launch of weight loss panacea Qsymia, which has met with sales disaster after disaster.
So far Denner has been stymied finding a partner or even an offer for VIVUS, which is currently the fourth most shorted stock on the NASDAQ.
BioSpace Temperature Poll
After last week’s news that Gilead had issued a health advisory to doctors, concern is growing after nine patients taking Harvoni or Sovaldi along with another drug, amiodarone, were treated for abnormally slow heartbeats. One of the patients died of cardiac arrest. Three of the nine patients required a pacemaker. That has BioSpace asking, what next?
