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On the Ropes, Pharmacopeia Head (Again) Beseeches Shareholders to Back Eos Acquisition

NEW YORK, Jan. 4 - Pharmacopeia late on Thursday reissued a plea to shareholders beseeching them to stand behind the firm's proposed acquisition of Eos Biotechnology.


"Dear Fellow Stockholder: Your Board And Management Are Confident That Our Merger With Eos Biotechnology Represents The Best Opportunity To Create Value For All Pharmacopeia Stockholders," the letter began.

 

"You may be aware that one of our stockholders, OrbiMed Advisors, has publicly objected to our proposed merger with Eos," wrote Joseph Mollica, Pharmacopeia's chairman, president and CEO. "We strongly disagree with their position. Your Board and management remain convinced that the Pharmacopeia-Eos marriage of genomics, biology and chemistry presents our company with the best opportunity to achieve increased revenues over the long term, and to maximize value for all stockholders."

 

"We need your support to take decisive strategic action now to control our own destiny," Mollica said.

 

Last week, Pharmacopeia issued its initial plea to shareholders asking them to ignore a formal request by a group of stockholders seeking to block Pharmacopeia's acquisition of Eos.

 

"We are confident that the proposed merger will position both Accelrys and our drug-discovery unit as viable, stand-alone businesses," Mollica said in a statement on Dec. 28.

 

That appeal was in response to a statement released last week by OrbiMed, an asset-management firm that owns roughly 10 percent of Pharmacopeia's common stock, in which it threatened to vote against the deal. OrbiMed said that the proposed acquisition, designed as a $160 million all-stock deal, is "overpriced."

 

New York-based OrbiMed, which invests exclusively in the health-care sector, said it believes it is currently the largest holder of Pharmacopeia stock. In a Schedule 13D filing with the SEC, the New York-based firm urged other shareholders to vote against the transaction.

 

The deal, proposed in August, would give Cranbury, NJ-based Pharmacopeia access to Eos' library of drug targets and therapeutic-development tools. The genomics firm would "also enhance Accelrys," Pharmacopeia's software business, by adding Eos' gene-expression databases to the unit's bioinformatics software products, Mollica added.

 

In a letter sent on Dec. 19 to Mollica, OrbiMed said that Pharmacopeia's plan  to issue more than 10 million shares of its common stock to buy Eos is "highly  dilutive to Pharmacopeia shareholders."

 

"We believe this is an ill-advised transaction for Pharmacopeia and have  determined to vote all of the shares we control against the Eos acquisition," said Samuel Isaly, managing partner of OrbiMed. "We urge our fellow Pharmacopeia shareholders to vote against the transaction as well."

 

Pharmacopeia's offer for Eos was "overpriced," said Isaly. "Pharmacopeia is paying approximately $160 million in stock for Eos, giving Eos shareholders approximately 30 percent of the combined company," he said. "According to Dresdner Kleinwort Benson (Eos' own financial advisor), this price for Eos was above the high end of the valuation range for all four methodologies they used."

 

"We need your support to take decisive strategic action now to control our own destiny," Pharmacopeia wrote in the latest appeal.

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