NitroMed (NDAQ:
NTMD) buyout offer from Archemix received some opposition from an activist hedge fund.
Deerfield Partners said that the merger overvalues Archemix and contains numerous
conflicts of interest. Moreover, Deerfield, which holds a 12% stake, offered to acquire
the company for $0.50 a share, liquidate the company and distribute the proceeds to
shareholders. This would represent a substantially higher value than the current offer
on the table.
The majority of NitroMed’s value can be found in its $17.8 million in cash, equivalents
and short-term investments as of September 30th. The company also stands to get an
additional $26.3 million from the pending sale of heart failure drug BilDil, which
was approved for African-American patients in 2005 but never gained significant market
share. Assuming these sales, NitroMed would have about $44 million in cash to offer
either shareholders or Archemix.
“We ask that you seek a tangible means to deliver NitroMed shareholders fair value
for their ownership of the BilDil assets,” said James Flynn of Deerfield. “If there
is a means for shareholders to appreciate your current proposal provides in excess
of $0.50 per share, it should be simple to articulate, and the shares should appreciate
appropriately. If this cannot be demonstrated and you remain committed to your currnt
course, additional costly actions will be unavoidable.”
It’s not common for investors to push for liquidation, but Deerfield believes that
NitroMed’s cash, including the payment for BilDil, minus the costs winding down the
company, would allow a distribution to shareholders of $0.50 per share in cash and
potentially a good deal more. This would represent a substantial premium over the
firm’s current share price of just $0.36 per share.
