2nd UPDATE:Facet Again Shuns Biogen Offer, Adopts Poison Pill

Facet Biotech Corp. (FACT) again shunned Biogen Idec Inc.'s (BIIB) approaches Tuesday, calling its $356 million takeover offer "inadequate" and "not in the best interest" of shareholders.

The cash-rich Redwood City, Calif., biotech company argued that Biogen's $14.50-a-share offer doesn't put much value on its product pipeline and operations. Facet contends that Cambridge, Mass.-based Biogen is trying to cheaply acquire the full rights to daclizumab, a multiple-sclerosis treatment in development by the companies.

In response, Facet has adopted a poison-pill plan to prevent a hostile takeover attempt, but Wall Street analysts project Biogen taking a friendlier approach and raising its offer closer to $20 a share in order to close the deal.

A Biogen spokeswoman declined to comment.

The companies have worked together since 2005 on treatments for multiple sclerosis and solid tumors, but Biogen made its interest in buying Facet public on Friday after Facet rejected earlier takeover approaches.

Facet's stock jumped the $14.50 offer price on Friday, an indication that investors expect a higher bid to be on the way. Facet shares recently traded up 5.7% to $16.25, while Biogen shares rose 39 cents to $51.40.

In a statement, Facet Chief Executive Faheem Hasnain highlighted that the company's substantial cash holdings, at $371.1 million as of June 30, means that Biogen's offer "places no value on the operating and other assets of the company."

Analyst Jason Zhang with BMO Capital Markets estimates that Facet currently has closer to $288 million, or $11 a share, in cash when factoring in lease obligations and payments made to Trubion Pharmaceuticals Inc. (TRBN) under a recent collaboration agreement.

But acquiring Facet would relieve Biogen from having to make a $30 million milestone payment upon the beginning of a planned late-stage trial early next year for daclizumab.

Over the long term, acquiring Facet would save Biogen up to $630 million in potential future milestone payments to Facet, Zhang noted. Biogen would also be eligible to receive up to $680 million from Bristol-Myers Squibb Co. (BMY) related to the development of elotuzumab, an experimental multiple-myeloma treatment, but Biogen could also be liable to pay up to $177 million in payments to Trubion.

"We believe Biogen may have to increase its offer to [about] $20 per share to better reflect Facet's pipeline value," Zhang said, noting that recent early data on daclizumab may have sparked Biogen's interest.

Hasnain said "it does not appear to be a coincidence" that Biogen made its offer within weeks of the companies' decision to start the Phase III trial for daclizumab. Hasnain called that move a "positive development" which hasn't been reflected in its stock price.

Oppenheimer analyst Bret Holley agrees that Biogen seems to be trying to obtain full right to daclizumab "on the cheap" but sees a "reasonable probability" that a higher offer will materialize.

Holley believes that buying Facet for less than $20 a share would be an "incremental positive" for Biogen.

Meanwhile, Facet is intent on stopping Biogen from going hostile and taking its lower offer directly to shareholders. It enacted a shareholder-rights plan to prevent any person or group from acquiring more than 15% of Facet's common stock without board approval.

Hasnain said the move was prompted by Biogen's "unsolicited and aggressive actions" and to ensure that the board has enough time to consider the best interests of shareholders.

Facet was spun off from PDL BioPharma Inc. (PDLI) in December in order to separate the company's biotech assets from its royalty-producing assets. After the spinoff, Facet had $405 million in cash to fund its operations for a number of years while it attempts to develop its pipeline.

-By Thomas Gryta, Dow Jones Newswires; 212-416-2169; [e-mail]