Friday, February 08, 2008

PRHM Deal Not Good Enough, For Some...

Just when you think the $2.9B Celgene (NASDAQ: CELG) acquisition of Pharmion (NASDAQ: PHRM) is all but a done deal enter one Steven A. Cohen of S|A|C Capital Advisors, a private asset management firm who with its sub CR Intrinsic Investments, hold in aggregate approximately 3 million shares of Pharmion and thus near 10% of the company. Cohen believes that the approaching $3B offer from Celgene may be significantly undervaluing the deal.

How you ask? Cohen is considering the market space of Pharmion’s Vidaza® asset, used for treating the bone marrow disease Myelodysplastic Syndrome (MDS), a first in class compound generating approximately $200M per year and growing. There just so happens to be another player in the MDS space who goes by the name of MGI Pharma with their Dacogen® product. Now from my quick web search it appears as though FDA approval for Daccogen® in MDS was approved in May of 2006.

So then it would appear that there is some MDS Dacogen® survival data anticipated and Cohen’s bet is that if the yet to be reported data fails (inferior) to match the already reported Vidaza® survival data then the Pharmion asset would be poised to capture in excess of half of the MDS market. And this is exactly why Cohen wrote a letter (I thought the letter may be posted to the SEC site, it is listed as a Exhibit B in the SC13 filed on Wednesday but no such luck!) to Pharmion management stating that the current Celgene offer may be undervaluing their assets by as much as $8 to $28 per share, bring an expectation of a sale price in the $80 to $100 range and thereby yielding S|A|C Capital an additional $24M to $60M, now that’s no rounding error! It will be interesting to stay tuned and see how the drama unfolds…

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