Bioenvision Shareholder Battle

It looks like Rule Breakers picks aren't the only drugmakers involved in a shareholder revolt right now. Yesterday Genzyme (Nasdaq: GENZ) announced that it "cannot and will not" raise its $5.60-a-share bid for Bioenvision (Nasdaq: BIVN) before shareholders go to vote on its proposed takeover next Thursday.

Back in May, Genzyme offered $345 million for oncology drug-focused Bioenvision, valuing it at $5.60 a share. Bioenvision's leading shareholder -- sans Genzyme -- SCO Capital, which held 12.8% of shares outstanding as of Sept. 12, felt the offer was too little. SCO has repeatedly called for the offer to either be raised or for shareholders to reject it when they vote on Oct. 4. You can find SCO Capital's litany of complaints about the Genzyme offer in Securities and Exchange Commission filings here.

SCO isn't the only shareholder voting against the deal. Elliot Associates, holding 6.7% of shares, has also voiced its displeasure with the offer in regulatory filings. The two investment groups believe the deal undervalues Bioenvision's pipeline and was made at a time when the share price was artificially depressed because of recent dilutive financing.

Bioenvision's management has shot back that it could find no other bidders higher than Genzyme's $5.60 offer and that the Genzyme offer was $0.27 higher than what advisor UBS pegged as the top end of the fair value for shares (based on a discounted cash flow analysis).

Bioenvision and Genzyme are partners on leukemia drug Clolar. Genzyme markets it in the U.S. and Bioenvision markets it in the European Union, but the drug has a narrow label and sales thus far have been limited.

Multiple early- and mid-stage studies are underway to expand the label for Clolar. The target for revenue from Bioenvision's compounds in 2010 is $66 million, with 2016 sales jumping up to $579 million, as can be seen on slide 16 of this Bioenvision presentation.

Genzyme currently owns 22% of Bioenvision's shares, but with at least 19.5% of shares outstanding voting against the merger, it's unclear who will win next week.