After being refused twice, Biogen Idec (BIIB) launched a hostile bid to acquire its development partner, Facet Biotech (FACT) for $14.50 per share, by taking its offer directly to Facet’s shareholders. Biogen also sent a letter to Facet’s Board stating that Facet’s cash balance is less than Biogen’s offer price. The deal is valued at approximately $356 million. The tender offer will expire at 12:00 midnight, ET, on Oct. 19, 2009.

As a reminder, Biogen had initially approached Facet with an offer of $15 per share on Aug. 17, 2009. However, Facet did not accept the offer as the company believed that it was not in the best interests of its shareholders. Soon thereafter, Facet entered into a collaboration with Trubion Pharmaceuticals (TRBN), a move that was criticized by Biogen.

According to Biogen, the Trubion deal led to a reduction in Facet’s value with the company’s stock price reducing by 22% since the announcement of the deal. Based on Facet’s reduced value, Biogen came back with a reduced offer price of $14.50 per share.

Biogen and Facet have been working together since 2005 on the development of daclizumab for the treatment of relapsing multiple sclerosis and volociximab (M200) for the treatment of solid tumors. In addition to these two candidates, Facet has three other candidates in its pipeline, one of which is being developed in collaboration with Bristol-Myers Squibb (BMY).

The acquisition of Facet would help Biogen boost its pipeline. Moreover, Biogen would not be required to make any milestone payments related to the development of daclizumab and volociximab. Under the terms of the collaborative agreement, Biogen is required to make certain development and commercialization milestone payments upon the achievement of certain program objectives totaling up to $660 million over the life of the agreement.

Facet’s Board has advised the company’s shareholders to refrain from acting on the offer — the Board expects to advise the shareholders on its position regarding the offer within 10 business days. With Facet currently trading at $17.09, we think Biogen’s current offer price will not find many takers.

The proposed acquisition of Facet is the second major deal announced by Biogen in 2009. Earlier this year, the company signed a licensing deal with Acorda Therapeutics (ACOR) for a multiple sclerosis candidate.

We currently have a Neutral rating on Biogen.

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