Open hostility

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VANCOUVER—October 5, 2006—In a story that is developing into a battle of the biotech giants, AnorMED announced that Millennium Pharmaceutical has made an offer to acquire the B.C.-based biotech company. At a 40 percent premium over the offer made weeks earlier by Genzyme, AnorMED's Board of Directors has recommended that its shareholders accept the Millennium offer.
VANCOUVER--October 10, 2006--In response to the move by Millennium Pharmaceuticals, Genzyme announced it was prepared to raise its offer price for AnorMED to $13.50 per outstanding share, a full 12.5 percent premium over the Millennium offer. Said Genzyme CEO and Chairman Henri A. Termeer: "With approximately $1.4 billion of cash on our balance sheet at the end of June 2006, our strong financial position enables us to complete this transaction without any need for dilutive financing."
Success can often be a two-edged sword as the very same results or prospects that trigger the interest of small investors can also attract the attention of larger groups or organizations looking to bolster their balance sheets by picking up ripe or near-ripe fruit. Likewise, troubled finances can cause corporate neighbors to flee as though the company's balance sheet is showing buboes, leaving the company that much more vulnerable when they could most use the help.
The former situation was recently the case with Canadian biopharmaceutical firm AnorMED, which transitioned in a matter of days from talking about NASDAQ listings and stock options to fending off the unwanted attentions of biotech powerhouse Genzyme. Genzyme, for its part, was interested in acquiring AnorMED's portfolio of stem cell-based therapeutics and expertise, and has been in (apparently fruitless) talks with the Vancouver-based company since autumn of 2005.
Given the challenges that the drug industry has faced in recent years—e.g., social pressures to drop prices, regulatory pressures to improve safety, and market pressures arising from shrinking pipelines—early-generation pharmaceutical and biotech companies are going to turn increasingly to next-generation companies like AnorMED to solve their problems. And from the looks of things, the David's are going to play with Goliath's (referring to size, not menace) whether they want to or not.
Ironically, at the same time that some companies are fending off unwanted suitors like so many buzzing gnats, there is another subset of companies that are on the cusp of collapse and would probably welcome the attention of a savior on a white venture-cap charger, even if they are loath to say so publicly. Off the top of my head, I can think of a couple small biotechs that are walking the insolvency tightrope, offloading as many assets as possible to maintain core functions in the hope that if they can hold on just long enough, they'll reach the other side.
It's not that these players were necessarily founded on faulty business plans, but rather that drug discovery is a very tricky business and even the most promising discoveries can be overwhelmed by bad market, regulatory or technical timing. When I studied magazine publishing in college, one of my instructors warned me that good magazines often go under not because they can't find $500,000 but because they can't come up with $500 when desperately needed. The same apparently holds true in the biopharmaceutical industry.
How often do we read about up-and-coming companies in the pages of publications like Drug Discovery News, Fast Company and Forbes—companies on the cusp of something amazing—only to find out six months or a year later that they have bitten the dust? Or been gobbled up by a second company that doesn't understand the original company's corporate culture and thereby inadvertently guts the asset it found so intriguing in the first place?
The biotech and pharma market is littered with the bodies of a thousand and one good ideas gone sour and it is critical that the lessons they offer all of us—industry giant and lowly startup alike—are not forgotten in the attractions of the next big story.
Whether we like to believe it or not, given the vagaries of the industry, each of us could easily find ourselves fending off the sudden attentions of so many Leisure Suit Larry's or asking Regis for a Life Line. Our ability to remember and distill the experiences of those who came before us might just be a key to our own survival.

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