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.
About Cypress Bioscience
Cypress Bioscience is a pharmaceutical company dedicated to the
development of innovative drugs targeting large unmet medical needs
for patients suffering from a variety of disorders of the central
nervous system. Since 1999, Cypress has received multiple FDA
approvals, including for Prosorba™, a medical device for rheumatoid
arthritis, and Savella® (milnacipran HCl), for fibromyalgia. The
Company focuses on generating stockholder value by reaching
clinical development milestones as quickly and efficiently as
possible. Cypress' currently marketed products include Savella and
the Avise PG(SM) and Avise MCV(SM) therapeutic monitoring,
diagnostic and prognostic testing services for rheumatoid
arthritis. Development-stage assets include CYP-1020 for cognitive
impairment in schizophrenia, as well as AVISE-SLE(SM), a lupus
diagnostic testing service. More information on Cypress and its
products and development assets is available at
http://www.cypressbio.com/
Forward-Looking Statements
This press release, as well as Cypress' SEC filings and website
at http://www.cypressbio.com, contain forward-looking statements
within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements include statements with respect to
Cypress' plans to explore strategic alternatives to maximize value
for Cypress' stockholders, statements with respect to Cypress'
ability to execute on its strategic plan, statements regarding
future actions that may be taken by Cypress' Board of Directors,
statements regarding Cypress' expectations with respect to the
value of the Savella royalty stream, statements regarding Cypress'
anticipated future cash balances and statements relating to the
Cypress Board of Directors' expectations regarding the impact of
the Rights Agreement. Actual results could vary materially from
those described as a result of a number of factors, including risks
involved with the high uncertainty that characterizes research and
development activities and drug development in general. Other risks
and uncertainties relating to Cypress are described in Cypress'
most recent Annual Report on Form 10-K, most recent Quarterly
Report on Form 10-Q and any subsequent SEC filings. You are urged
to consider statements that include the words "may," "will,"
"would," "could," "should," "believes," "potential," "expects,"
"plans," "anticipates," "intends," or the negative of those words
or other comparable words to be uncertain and forward-looking. The
statements in this press release speak only as the date hereof, and
Cypress does not undertake any obligation to publicly update any
forward-looking statements, whether as a result of new information,
future events or otherwise.
Additional Information and Where to Find
It
In connection with the unsolicited tender offer commenced by
Ramius LLC, Cypress has filed with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9. Cypress's
stockholders should carefully read the Solicitation/Recommendation
Statement on Schedule 14D-9 (including any amendments or
supplements thereto) prior to making any decisions with respect to
Ramius LLC's tender offer because it contains important
information. Free copies of the Solicitation/Recommendation
Statement on Schedule 14D-9 and the related amendments or
supplements thereto that Cypress has filed with the SEC are
available at the SEC's website at www.sec.gov.
INVESTOR CONTACTS: Mary Gieson Investor Relations Manager
(858) 452-2323 MacKenzie Partners, Inc. Amy Bilbija / Bob Marese
650-798-5206 / 212-929-5500 MEDIA CONTACTS: Joele Frank,
Wilkinson Brimmer Katcher Sharon Stern / Dara Silverstein
212-355-4449
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