Cypress Bioscience, Inc. (MM) News - CYPB

Board Unanimously Rejects Ramius' Unsolicited Tender Offer

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Cypress Bioscience Board of Directors Unanimously Rejects Ramius' Unsolicited Tender Offer

Tuesday , September 28, 2010 08:21ET

SAN DIEGO, CA -- (Marketwire) -- 09/28/10 -- Cypress Bioscience, Inc. (NASDAQ: CYPB) ("Cypress" or the "Company"), a pharmaceutical company engaged in the development of innovative drugs to treat central nervous system (CNS) disorders, today announced that its Board of Directors has unanimously rejected the unsolicited tender offer by Ramius V&O Acquisition LLC to purchase all of the outstanding shares of Cypress for $4.25 per share in cash ("the Ramius offer").

The Cypress Board reached its recommendation after careful consideration, including a thorough review of the Ramius offer with its independent financial and legal advisors, and has unanimously determined that the Ramius offer grossly undervalues Cypress' current business and future prospects, is highly conditional rendering it illusory and is not in the best interests of Cypress and its stockholders (other than Ramius and its affiliates). Accordingly, the Cypress Board recommends that Cypress stockholders not tender any of their shares into the Ramius offer and withdraw any previously tendered shares.

The Cypress Board also announced today that it has determined to engage in a broad evaluation of Cypress' strategic alternatives, with the assistance of its financial advisors, in order to maximize value for all Cypress stockholders. The Board's commitment to explore strategic alternatives may include monetization of certain Cypress assets or other transactions that deliver value to Cypress' stockholders and/or pursuit of Cypress' current CNS strategy, or a sale or strategic combination of Cypress with third parties. Cypress will continue to operate its business in the ordinary course, taking into account the exploration of alternatives process. Among other ongoing activities, Cypress will continue to take actions to implement the Board's direction to sell its diagnostics business or exit from it by the end of the third calendar quarter of 2010. The Company noted that there can be no assurance that the evaluation of strategic alternatives will result in any transaction and the Company does not intend to disclose developments regarding the evaluation of strategic alternatives unless and until a final decision is made.

"The Cypress Board unanimously determined that the Ramius offer grossly undervalues Cypress' current business and future prospects, is highly conditional rendering it illusory and is not in the best interests of Cypress stockholders, other than Ramius and its affiliates," said Daniel H. Petree, Lead Independent Director of the Board of Directors. "Our Board continues to believe that the Company's current strategy of developing a portfolio of CNS drug candidates will deliver significant value to Cypress stockholders. The Cypress Board takes its fiduciary duties very seriously and values the opinions of its stockholders. In that regard, the Board has determined to engage in a broad evaluation of strategic alternatives to maximize value for all Cypress stockholders."

Reasons for the Board's Recommendation

In making its determination to reject Ramius' unsolicited offer, the Cypress Board considered a number of factors, including:

- The Ramius offer grossly undervalues Cypress'current business and future prospects. The Board believes that the Ramius offer is designed to provide Ramius with an extremely attractive return on its recent investment in the Company at the expense of all other Cypress stockholders. The Ramius offer does not adequately account for the significant value of the ongoing cash flow from the Savella royalty stream, which alone, significantly exceeds the value of Cypress implied by the Ramius offer. In addition, the Ramius offer undervalues Cypress' existing business and prospects in the CNS market, a market that generated $121 billion in worldwide sales in 2009. Cypress' management team possesses unique know-how that has led to the successful development and marketing of CNS products and Cypress holds a valuable portfolio of intellectual property rights and pre-clinical and clinical data relating to the CYP-1020, Carbetocin and Staccato Nicotine programs. The Board believes each of these programs has a positive expected value based on the cash investment required and future potential profits, and also notes that the Ramius offer is even below Cypress' liquidation value.

- The Ramius offer is funded almost entirely by Cypress' own cash and other assets, including the monetization of the Savella royalty, resulting in Ramius providing only approximately $17.8 million, or $0.51 per share, in purchase price that is not funded by Cypress. The $125 million contingent financing of the Ramius offer requires immediate repayment of $80 million in cash and delivery of 50 percent interest in the Savella royalty in exchange for the remaining $45 million at the closing of the Ramius offer. As of August 31, 2010, Cypress had cash and cash equivalents of approximately $99.7 million and Cypress currently expects to end the year with approximately $85 million. Furthermore, Cypress has no outstanding indebtedness. As a result, Ramius is funding nearly the entire offer with Cypress cash and partial monetization of the Savella royalty.

- The consummation of the Ramius offer would transfer significant value from other stockholders of Cypress to Ramius. Ramius is funding nearly all of the offer with assets of Cypress and will retain for itself at least 50 percent of the Savella royalty stream and other CNS assets, enabling Ramius to generate an enormous potential monetary return in a short-term period, at the expense of Cypress' other stockholders.

- The Board has determined to engage in a broad evaluation of its strategic alternatives, with the assistance of its financial advisors, in order to maximize value for all stockholders. The Board has committed to explore strategic alternatives for Cypress, which may include monetization of certain Cypress assets or other transactions that deliver value to Cypress' stockholders and/or pursuit of Cypress' current CNS strategy, or a sale or strategic combination of Cypress with third parties. The consummation of the Ramius offer would deprive other stockholders the opportunity to realize value from the Board's pursuit of strategic alternatives.

- The Ramius offer is not a firm commitment, is highly conditional and is unlikely to close by the expiration date, if at all -- calling into question Ramius' commitment to acquire Cypress. The Ramius offer has numerous conditions that make it highly unlikely to close on October 13, 2010 (the expiration date as stated in its offer), or thereafter, assuming the Ramius offer is extended. These conditions include, among others: the No Impairment Condition, the Financing Condition, the Minimum Cash Balance Condition, and the 90 Percent Tender Condition, which are discussed in detail in the Company's 14D-9. The Board believes that the Ramius offer is essentially a one-way option in favor of Ramius to acquire Cypress, not a bona fide offer subject only to reasonable and customary conditions.

- The Ramius offer is opportunistic and timed to take advantage of Cypress' currently depressed stock price. The Board believes that the Ramius offer represents an opportunistic attempt by Ramius to purchase shares of the Company's common stock that has been impacted by market dislocation resulting from Cypress' change in strategy, and is currently at a depressed level. The Ramius offer price represents a discount of 42.9 percent from Cypress' 52-week high. Ramius and its affiliates were not stockholders of Cypress until May 27, 2010, and sold virtually all of their shares immediately following the announcement of the BioLine transaction and thereafter acquired all of their current shareholdings at a weighted average cost of approximately $2.55 per share. Thus, the Ramius offer is intended to enable Ramius to profit enormously in a very short time period at the expense of Cypress' other stockholders who are being offered a discount to Cypress' liquidation value.

- Ramius' tactics have been designed to divert attention away from its grossly undervalued offer. Ramius has engaged in a carefully orchestrated public campaign designed to divert attention away from the fact that the Ramius offer grossly undervalues Cypress and inappropriately transfers significant value to Ramius and its affiliates from other stockholders. The Ramius offer is essentially a proposal to liquidate Cypress for the benefit of Ramius with the result that existing stockholders receive a significant discount to even the liquidation value of Cypress. Moreover, Ramius receives an enormous, disproportionate and unjustified return on its investment utilizing Cypress' cash and assets to effect a transaction, all at the expense of the other Cypress stockholders.

Cypress is filing with the Securities and Exchange Commission (SEC), and will mail to stockholders, a Solicitation/Recommendation Statement on Schedule 14D-9 setting forth the Company's formal recommendation with respect to the Ramius offer. Additional information with respect to the Board's decision to recommend that stockholders reject the Ramius offer and the matters considered by the Board in reaching such decision is contained in the Schedule 14D-9.

Stockholders Rights Agreement

Cypress also announced today that its Board of Directors has adopted a Rights Agreement to maintain the status quo while Cypress explores strategic alternatives to maximize stockholder value. The Ramius offer is subject to a condition that sufficient shares be tendered that would, together with the shares Ramius and its affiliates already own, constitute 90% of the then outstanding shares of common stock on a fully diluted basis. Under the Rights Agreement the purchase of that number of shares pursuant to the Ramius offer at a price of not less than $4.25 per share will not trigger the Rights Agreement, if prior to such acquisition, Ramius has irrevocably committed to a prompt merger of the Company where the remaining common shares receive the same value.

However, the Board of Directors urges stockholders, for the reasons expressed above and more fully in the Company's Solicitation/Recommendation Statement on Schedule 14D-9, not to tender shares into the Ramius offer. In addition, the Rights Agreement is intended to deter Ramius or any other stockholder from buying large amounts of shares outside of the context of the Ramius offer, which could adversely affect the ability of a third party to propose a superior alternative to the Ramius offer. The Rights Agreement is also intended to deter Ramius from amending its offer to provide terms which are worse to Cypress' stockholders than the current terms of the Ramius offer.

Under the Stockholders Rights Agreement, the rights will become separate from the common stock and become exercisable if a person becomes an "Acquiring Person" by acquiring 15% or more of the common stock of Cypress, if a person commences on or after September 27, 2010, a tender offer that could result in that person owning 15% or more of the common stock of Cypress, or if Ramius were to amend the Ramius offer in certain respects. Under the Rights Agreement, until there is an Acquiring Person, each Right entitles the registered holder to purchase from Cypress one one-hundredth of a share of Series A Junior Participating Preferred Stock, par value $0.001 per share (the "Preferred Shares"), at a price of $15 per one one-hundredth of a Preferred Share, subject to adjustment. Each one one-hundredth of a Preferred Share has designations and powers, preferences and rights, and qualifications, limitations and restrictions, designed to make it the economic equivalent of a share of Common Stock. The Rights become exercisable on more advantageous terms, and the Rights of the Acquiring Person and related parties are voided, only in the event that 15% or more of the common stock is acquired, creating an Acquiring Person. However, as described above, if Ramius acquires sufficient shares based on the current terms and conditions of the Ramius offer so that, together with the shares it and related parties already own, it owns 90% of the then outstanding shares of Cypress on a fully diluted basis, Ramius, provided it commits irrevocably to a prompt second-step merger on the same terms as the Ramius offer, would not become an Acquiring Person. The Rights Agreement will expire in one year. The description and terms of the rights are set forth in the Rights Agreement, which have been filed with the SEC.

Mr. Petree commented, "We have adopted this short-term Rights Agreement in order to maintain the status quo while we are pursuing strategic alternatives. We believe the Rights Agreement should help ensure that the Board of Directors has adequate time to consider all strategic alternatives for maximizing value for Cypress stockholders and prevent third parties from attempting to disrupt this process. However, if Cypress stockholders tender the requisite number of shares, the Rights Agreement will not prevent the consummation of the Ramius offer."

Jefferies & Company, Inc. and Perella Weinberg Partners are serving as financial advisors to Cypress. Cooley LLP, Sullivan & Cromwell LLP, and Potter Anderson & Corroon LLP are serving as Cypress' legal advisors.

Scov - SCHEDULE 13D
http://xml.10kwizard.com/filing_raw.php?repo=tenk&ipage=7153649

Towards the bottom: exhibit 99.1

CONFIDENTIAL (PAH LEEZE! Who uses the word confidential when you are filing with the SEC? What's that about?)

September 14, 2010

Ramius Value and Opportunity Advisors LLC
599 Lexington Avenue, 20th Floor
New York, New York 10022
Attention: Mr. Jeffrey Smith

Ladies and Gentlemen:

Ramius Value and Opportunity Advisors LLC (including its affiliates, “you” or “Ramius”) has advised RP Management, LLC, Administrator of Royalty Pharma Finance Trust (“Royalty Pharma”, “we” or “us”) that an affiliate of yours (“NewCo”) proposes to commence an all cash tender offer (the “Tender Offer”) for all of the capital stock of Cypress Bioscience, Inc. (“Cypress”).

You have requested that Royalty Pharma commit to purchase from NewCo senior notes (the “Loan Notes”) of NewCo to finance the Tender Offer. As the premier fund dedicated exclusively to purchasing pharmaceutical royalties, we are prepared to commit significant capital to facilitate transactions that result in our acquiring royalty-producing assets. Should you succeed in acquiring Cypress, we are prepared to purchase the Loan Notes on the terms set forth below in order to acquire a half interest in Cypress’ Savella royalty.

(How would Forest feel about that? I thought they were behind Savella??)

As you know, we would also be interested acquiring the rest of the royalty if it is sold following the acquisition. Royalty Pharma has in excess of $1 billion in cash on hand for these purposes.

(So, share holders get their 4.25 cash - but then who gets the profit off of selling Savella? Ramius...and Then Royalty Pharma gets the future income off of Savella. Savella must work and well. That's good to know. I'm happy for that. Once again - how does Forest labs feel about that?)

In furtherance of the foregoing, Royalty Pharma is pleased to confirm its commitment to you (the “Commitment”) to purchase up to $125 million in Loan Notes pursuant to documentation in form and substance reasonably satisfactory to us, which shall include the terms and conditions set forth in the attached Term Sheet and such other representations, warranties, conditions, covenants, events of default and other provisions as are customary for transactions of this kind and reasonably satisfactory to us. The purchase of the Loan Notes by Royalty Pharma is referred to herein as the “Loan”. The obligation of Royalty Pharma to purchase the Loan Notes is expressly subject to the terms and conditions set forth herein and in the attached Term Sheet and will exist only upon the execution and delivery of the definitive documentation referred to above, and the satisfaction of the terms and conditions contained therein.

The Commitment may be terminated by Royalty Pharma (a) at any time on or after October 31, 2010; provided that if the Tender Offer shall be pending on such date, the Commitment may not be terminated by Royalty Pharma until the Tender Offer is terminated by NewCo or expires and (b) at any time if you shall have materially breached any of the agreements contained in this Commitment Letter or the attached Term Sheet in any respect. The termination of the Commitment hereunder will not terminate, limit or otherwise affect the indemnification, exculpatory, expense reimbursement, confidentiality, exclusivity and standstill provisions set forth herein. The Commitment is conditioned on (i) execution of mutually satisfactory definitive documentation for the Loan consistent with this Commitment Letter and the Term Sheet, (ii) the absence of any material adverse change or event with respect to Cypress, its assets, its financial condition or the Royalty (as defined in the Term Sheet), and (iii) Ramius and NewCo not amending any material provision or waiving any material term of the Tender Offer without Royalty Pharma’s prior written consent.

--------------------------------------------------------------------------------

CONFIDENTIAL

You hereby agree to indemnify and hold harmless each of Royalty Pharma and its affiliates (including, without limitation, controlling persons) and the directors, officers, employees, advisors and agents of Royalty Pharma (each, an “Indemnified Person”) from and against any and all third party losses, claims, costs, reasonable and documented out-of-pocket expenses, damages (other than indirect, special or consequential damages) or liabilities (or actions or other proceedings commenced or threatened in respect thereof) to the extent they arise out of, result from or in any way relate to this Commitment Letter, the Tender Offer, the Loan or any of the transactions contemplated hereby, and to reimburse each Indemnified Person upon its demand for any reasonable and documented out-of-pocket legal or other expenses incurred in connection with investigating, preparing to defend or defending against, or participating in, any such loss, claim, cost, expense, damage, liability or action or other proceeding (whether or not such Indemnified Person is a party to any action or proceeding), other than any of the foregoing of any Indemnified Person to the extent determined by a final judgment of a court of competent jurisdiction to have resulted by reason of the bad faith, gross negligence or willful misconduct of such Indemnified Person. You also agree that no Indemnified Person (i) shall have any liability (whether direct or indirect, in contract or tort or otherwise) to you for any loss, claim, damages or liability related to, arising out of or in connection with, this Commitment Letter, the Commitment or the matters contemplated hereby, except to the extent that any loss, claim, damage or liability is found in a final judgment by a court of competent jurisdiction to have resulted from such party’s bad faith, gross negligence or willful misconduct; and (ii) shall have any liability to you for any indirect, special or consequential damages related to, arising out of, or in connection with, this Commitment Letter, the Commitment hereunder or the matters contemplated hereby, even if advised of the possibility thereof.

Promptly following the closing of the Tender Offer and the purchase of the Loan Notes by Royalty Pharma, NewCo agrees to pay all reasonable, actual, documented, out-of-pocket fees and expenses of Royalty Pharma (including, without limitation, legal fees and expenses and expenses incurred in connection with Royalty Pharma's due diligence investigation) associated with the transactions contemplated hereunder.

You agree that, for the period of time commencing on the date of this Commitment Letter and continuing through the earlier of (x) 180 days following the date of this Commitment Letter, (y) the closing of both the Tender Offer and the Exchange and (z) the expiration or termination of the Tender Offer without a closing thereunder due to a termination of the Commitment Letter by Newco or Ramius because Royalty Pharma is not ready, willing and able to fund its obligations hereunder or a termination by Royalty Pharma for any reason other than a breach by Newco or Ramius of its obligations hereunder (the “Ramius Exclusivity Period”), none of Ramius, NewCo or any of their affiliates (including any officer or director of Ramius, NewCo or any of their affiliates) shall, and Ramius and NewCo shall use their commercially reasonable efforts to cause their agents and representatives (including any financial advisor, attorney or accountant retained by Ramius, NewCo or any of their affiliates) not to, directly or indirectly, solicit, initiate, encourage or facilitate (including by way of furnishing information or data) any inquiries from a third party or the making of any proposal or offer by a third party with respect to (a) a loan to Ramius, NewCo or any of their affiliates for the purposes of facilitating the Tender Offer or (b) the purchase of any interest in, or the making of any loan or other investment secured by or the returns on which are derived by reference to or are dependent on payments on, the Royalty (collectively, “Solicit”). For purposes of this paragraph, Ramius agrees, and Royalty Pharma acknowledges, that Cowen Healthcare Royalty Management, LLC and the entities it manages shall be deemed a third party and not an affiliate of Ramius and NewCo (i.e., Ramius and NewCo agree that they will not, directly or indirectly, Solicit, Cowen Healthcare Royalty Management, LLC and any of the entities it manages). Notwithstanding the foregoing, Royalty Pharma acknowledges and agrees that Cowen Healthcare Royalty Management LLC and the entities it manages are not subject to any of the restrictions in this Commitment Letter.

2
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CONFIDENTIAL

We agree that, for the period of time commencing on the date of this Commitment Letter and continuing through the earliest of (x) 180 days following the date of this Commitment Letter, (y) the closing of both the Tender Offer and the Exchange and (z) the expiration or termination of the Tender Offer without a closing thereunder (the “Royalty Pharma Exclusivity Period”), neither we nor our affiliates (including any officer or directors of ours or our affiliates) shall, directly or indirectly, alone or in concert with others, solicit, initiate, encourage or facilitate (including by way of furnishing information or data) any inquiries from a third party or the making of any proposal or offer by a third party with respect to (a) any loan to any person or entity to finance or otherwise facilitate a transaction competitive with the Tender Offer, or (b) engage in a transaction competitive with the Tender Offer in any capacity whatsoever.

For the avoidance of doubt, if Ramius, NewCo or any of their affiliates complete the Tender Offer during the Ramius Exclusivity Period and regardless of whether NewCo elects to sell the Loan Notes to us, we shall have the Exchange right as specified under “Exchange Right” in the Term Sheet to acquire a one half interest in the Royalty (as defined in the Term Sheet) for $45 million in Loan Notes (if NewCo elects to sell the Loan Notes to us) or in cash (if NewCo elects not to sell us Loan Notes), which Exchange right is a binding obligation of Ramius, NewCo and their affiliates.

This Commitment Letter is furnished for your benefit, and may not be assigned by you (other than to NewCo or any other affiliate for the purpose of the Tender Offer) or relied on by any other person or entity. This Commitment Letter is delivered to you upon the condition that neither the existence of this Commitment Letter nor any of its contents shall be disclosed by you or any of your affiliates, directly or indirectly, to any other person, except that such existence and contents may be disclosed (i) to your (or NewCo’s or any other affiliate for the purpose of the Tender Offer) directors, officers, employees, advisors and agents, in each case on a confidential and “need-to-know” basis and only in connection with the Tender Offer, (ii) to Cypress and its directors, officers, employees, advisors and agents, in each case on a confidential and “need-to-know” basis and only in connection with the Tender Offer, (iii) in order to satisfy regulatory requirements or other requirements of law, and (iv) if determined by you in good faith to be to prudent, to shareholders in connection with disclosures related to a purchase of shares of Cypress, provided (x) such disclosure also states that the Commitment is subject to various conditions and that no shareholder is entitled to rely upon the Commitment or is a third party beneficiary of the Commitment and (y) you shall, to the extent legally permissible, provide us with 24 hours notice of such disclosure together with a copy of the proposed form of disclosure (or, if your counsel advises that such delay is inadvisable, then at least four hours notice) and take into account in good faith our reasonable comments.

3
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CONFIDENTIAL

Neither the existence of this Commitment Letter nor any of its contents shall be disclosed by us or any of our affiliates, directly or indirectly, to any other person, except that such existence and contents may be disclosed (i) to our directors, officers, investors, employees, advisors and agents, in each case on a confidential and “need-to-know” basis and only in connection with the Tender Offer, and (ii) in order to satisfy regulatory requirements or other requirements of law, provided (x) such disclosure also states that the Commitment is subject to various conditions and (y) we shall, to the extent legally permissible, provide you with 24 hours notice of such disclosure together with a copy of the proposed form of disclosure (or, if our counsel advises that such delay is inadvisable, then at least four hours notice) and take into account in good faith your reasonable comments.

No waiver, amendment or other modification of this Commitment Letter shall be effective unless in writing and signed by both parties. This Commitment Letter together with the Term Sheet sets forth the entire understanding of the parties with respect thereto and supersede any prior versions hereof or thereof. This Commitment Letter shall inure to the benefit of and be binding upon Ramius and Royalty Pharma and their respective successors, heirs and permitted assigns and no other person or entity.

The indemnification, exculpatory, expense reimbursement, confidentiality, exclusivity and standstill provisions of this Commitment Letter shall survive the termination hereof.

This Commitment Letter together with the Term Sheet shall be governed by and construed in accordance with the laws of the State of New York, without regard to the principles of conflicts of laws thereof that would apply any other law. Each of Ramius and Royalty Pharma hereby irrevocably agrees that any legal action or proceeding with respect to this Commitment Letter and the Term Sheet shall exclusively be brought in the federal or state courts located in New York County, New York. In the event that any such legal action or proceeding arises out of or relates to a Federal question, then such legal action or proceeding shall be brought in such federal court. In the event of any dispute arising under this Commitment Letter, the substantially prevailing party shall be entitled to recover its expenses relating to such dispute, including reasonable attorneys fees.

4
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CONFIDENTIAL

Please indicate your acceptance of the terms hereof by returning to us executed counterparts of this Commitment Letter not later than 5:00 p.m. Eastern Time, on September __, 2010. This Commitment Letter and the commitment of Royalty Pharma hereunder are conditioned upon your acceptance hereof and our receipt of executed counterparts hereof.

We are pleased to have been given the opportunity to assist you in connection with the Tender Offer.

Very truly yours,

ROYALTY PHARMA FINANCE TRUST

By: RP Management, LLC, as Administrator

By: /s/ Pablo Legorreta
Pablo Legorreta
Chief Executive Officer

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