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Shareholder Group Again Attacks Pharmacopeia, Eos Acquisition

SAN FRANCISCO, Jan. 8 – In its latest attempt to kill Pharmacopeia's acquisition of Eos Biotechnology, OrbiMed Advisors, a financial services firm that owns the greatest single stake in Pharmacopeia stock, on Tuesday urged shareholders to follow its lead and vote against the proposed deal.


In a letter released one day before the life sciences firms are to present their case to investigators and analysts at the 20th annual JPMorgan H&Q HealthCare Conference here, OrbiMed stressed again its belief that the deal “is not in the best interests of Pharmacopeia shareholders.”


“Pharmacopeia is paying far too much for Eos, Pharmacopeia's own shares are undervalued, it is the wrong time to undertake a major acquisition, [and] the Eos acquisition will be significantly dilutive to Pharmacopeia's earnings for the foreseeable future.


“We doubt that the Eos acquisition will be accretive even in 2004, as Pharmacopeia's management has suggested,” the letter went on.


OrbiMed, which owns 10 percent, or 2.4 million of the 23.9 million Pharmacopeia shares outstanding, also was skeptical of the firm’s “strategic arguments” for the Eos deal, saying that Pharmacopeia either can do in-house the research it expects to get from Eos, or even look for cheaper technology elsewhere.


“If Pharmacopeia wants to move towards becoming an independent drug discovery company rather than a service company, it should focus on forward-integration, by strengthening its drug discovery skills, not backwards-integration towards becoming a genomics company,” the letter said. “Furthermore, drug targets, such as those provided by Eos, are widely available, often at no or low cost.”


Despite the looming black cloud hung by OrbiMed, Pharmacopeia and Eos on Tuesday said they have penned an agreement to start screening Eos' lead antibody target and to identify potential small molecule drug candidates. This collaboration, which will see both firms jointly owning any resulting compound, comes just 10 days before Pharmacopeia shareholders are set to vote on the proposed merger.


Do it (no, don't!)


Last week, Pharmacopeia reissued a plea of its own to shareholders beseeching them to stand behind the Eos deal after OrbiMed initially tried to hamstring the deal.

"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," began the letter, written by Joseph Mollica, Pharmacopeia's chairman, president, and CEO.


"You may be aware that one of our stockholders, OrbiMed Advisors, has publicly objected to our proposed merger with Eos. We strongly disagree with their position,” Mollica wrote. “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.


The appeal was in response to a statement released on Dec. 19 by OrbiMed in which it first threatened to vote against the acquisition.


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.


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


Pharmacopeia and Eos are scheduled to present to investors and analysts at the H&Q meeting on Wednesday.

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