Enormous Interest in AnorMED

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No matter what sector you invest in, there's nothing more fun than owning shares of a company caught in the middle of a bidding war between two larger rivals. Investors in Canadian biotech company AnorMED (Nasdaq: ANOR) are now in this enviable situation, after Millennium Pharmaceuticals (Nasdaq: MLNM) announced a bid for AnorMED yesterday.

Earlier this month, I wrote about an unsolicited and unwanted bid for AnorMED from much larger Genzyme (Nasdaq: GENZ). Genzyme offered $8.55 a share in cash, which would have valued all of AnorMED at $380 million.

Before the offer, shares of AnorMED were floating around the $4 range, but AnorMED's management was adamant that Genzyme's bid was undervaluing the company, and that it could find a better deal elsewhere. With Millennium's offer of $12 a share in cash yesterday, it looks like AnorMED's management was right.

AnorMED won't come too cheaply to Millennium. Millenium's bid values AnorMED at $515 million. With only $626 million in the bank, and still burning cash, Millennium will have to pursue some sort of financing to maintain a healthy balance sheet.

Buying AnorMED will help fill Millennium's threadbare pipeline with a late-stage clinical compound named MOZOBIL, indicated for stem-cell transplants. Previously, AnorMED had estimated that it would report MOZOBIL top-line results in the first half of 2007, with possible approval coming sometime in 2008. Millennium has indicated that it plans on speeding up this timetable if it acquires AnorMED, using its existing Velcade sales force to market the drug.

Genzyme has much deeper pockets and more resources than Millennium. If it wants AnorMED, it will have no problem stealing it away. Millennium wouldn't come away empty, though; it would be able to pocket a $19.5 million transaction fee.

Shares of AnorMED currently trade for more than $12 a share, indicating that some shareholders are expecting some sort of counteroffer from Genzyme or another company. I wouldn't bet against such a proposition, considering that Genzyme had been in talks with AnorMED's management for months about acquiring the company. Either way, AnorMED shareholders are sitting pretty right now.

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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy .