The bidding battle for Oxford GlycoSciences is finally over, with Celltech the hands-down winner. But OGS’ proteomics business unit will likely not be part of the merged company.
Last Wednesday, Celltech, of Slough, UK, said it had acquired or received acceptance for just over 61 percent of OGS’ shares, making its all-cash offer of £101.4 million ($160 million) for the company unconditional. Celltech also appointed a new CEO that day — Göran Ando, who joins the company from Pharmacia (see p.2) and will now face the task of integrating the new acquisition.
These latest developments followed the reluctant acceptance of Celltech’s offer by the OGS board on April 11, after other potential bidders — including UK biotech investors Sir Christopher Evans and Alan Goodman, an international pharmaceutical company, a US-based biotechnology company, and a European private equity house — had withdrawn their interest, and Cambridge Antibody Technology’s merger offer had declined in value.
While the board said it continued to believe that Celltech’s offer did not reflect the value of OGS’ business and cash, CEO David Ebsworth stated that “due to the unfortunate decline of the CAT share price, the absence of any other credible bidders and the sale of significant blocks of shares to Celltech, we feel that the only alternative is for shareholders to accept the current offer by Celltech.”
Celltech, on the other hand, reminded OGS shareholders late last month that its offer “represents an increasingly generous offer for OGS as, due to OGS’ continuing cash burn, the value of OGS and its assets to Celltech, or any other potential offeror, declines as time progresses.”
Celltech’s prophecy fulfilled itself April 11, when Evans and Goodman said due diligence on OGS had led them to conclude that an offer in excess of Celltech’s was “not a viable proposition.” According to a source close to Evans, the main reason for the investors’ withdrawal was unexpected costs from a building lease “that ran into double figures of millions.”
Analysts agreed last week, though, that OGS, which had a cash balance of £136.4 million ($216 million) as of Dec. 31, was still a good bargain for Celltech.
For OGS’ proteomics business unit, however, the takeover means an uncertain future. “Proteomics is not an activity we are looking to get into,” said Richard Bungay, Celltech’s director of corporate communications, adding that the company will likely either divest the proteomics unit or, if that fails, shut it down.
OGS’ proteomics business arm, created last fall as part of a restructuring effort and scheduled to become profitable this year, has several research collaborations centered around the discovery of disease biomarkers, including deals with Pfizer, Bayer, the FDA, and Cystic Fibrosis Foundation Therapeutics. It has also been supporting OGS’ two other business units — Inherited Storage Disorders and Oncology.
Apart from OGS’ cash, what interests Celltech is OGS’ database of protein targets and the intellectual property associated with these, according to Bungay. But it is too early for specifics, since “we will only get a sense of the intellectual property from due diligence,” he said.
However, a number of potential targets from this database have already been offered or licensed to pharmaceutical companies, casting doubt on the purported value of OGS’ remaining intellectual property, said a UK analyst who covers OGS and requested anonymity. Nevertheless, Celltech has little to lose by mining the database for targets, which it will obtain automatically along with the company’s cash reserves. “If they don’t find anything, it’s not a problem, because they didn’t pay for it,” said Ravi Mehrotra, who covers OGS and Celltech for SG Cowen Securities. “If they do find something, it’s for free.”
Celltech might also value OGS’ expertise in effectively using its automated 2D gel electrophoresis platform, and consequently keep the company’s proteomics experts on board. But the bulk of the proteomics staff could well be cut from the Celltech payroll. “They may be keen to keep hold of key personnel, but not very many,” the anonymous UK analyst said. The intellectual property on the automated 2D gel technology — licensed last year by GeneProt for $1 million in cash and equity, and additional annual fees — is not likely to be of much value to Celltech either, according to the analyst. “I don’t think it’s a particularly tight patent,” he said.
OGS declined to be interviewed for this article.