Logic defeats Idercryst and Baker Brothers

The much criticised takeover of Idera by Biocryst will not, after all, take place.


In the end two large Biocryst investors prevailed – as, some will say, did logic – and the group’s attempted takeout of Idera was voted down at yesterday’s shareholder meeting. Thus Biocryst’s latest desperate attempt to reinvent itself has fallen flat on its face.

This is a major defeat for Baker Brothers, a fund invested in both entities and a key proponent of the failed transaction. It might also spell the beginning of the end of Jon Stonehouse’s tenure as Biocryst’s chief executive, given that the deal was meant to draw a line under his leadership, during which the company has suffered one setback after another.

Indeed, the acquisition was to have seen Mr Stonehouse take a back seat, handing control to Idera’s current C-suite and becoming a director. Since becoming chief executive Mr Stonehouse had overseen the failures of successive strategies in influenza, hepatitis C, gout and hereditary angioedema (HAE), as well as a botched attempt to buy Presidio Pharmaceuticals.

Battle of the funds

That said, the proposed combination of Biocryst and Idera, to form an entity to be known as Valenscion, really came down to the views of several hedge funds, which split into two camps.

Baker Brothers, holding 14% of Biocryst and 18% of Idera, had agreed to vote its shares in favour of the deal. Strongly opposed, meanwhile, were RA Capital and Great Point Partners; these two investors respectively owned around 7% and 8% of Biocryst.

RA stated that Biocryst was undervalued, and should focus on its existing lead molecule, BCX7353, for HAE, despite the earlier failure in HAE of avoralstat. Great Point, meanwhile, cast doubt on Idera’s oncology lead, IMO-2125, and said two other assets, IMO-8400 and IDRA-008, appeared to have been discontinued.

The case of IMO-8400 is particularly interesting. It was this TLR antagonist, for the inflammatory disease dermatomyositis, that was to allow Valenscion to style itself as a “rare disease company”. However, it flunked its phase II trial a month ago, giving opponents the final impetus needed to scupper the deal.

Lacking logic

Of course, the transaction lacked logic even before this setback removed any doubt. The combination had no strong purpose beyond Biocryst wanting to reinvent itself, opportunistically using a share price climb to achieve majority control of Valenscion, an entity actually to be run by Idera’s management team.

To prove the point both companies’ share prices fell when the deal was announced at the start of 2018 (Execs celebrate the birth of Idercryst; investors, not so much, January 23, 2018). Today Idera dipped 6%, while Biocryst opened flat.

After the deal fell through Biocryst issued a statement spelling out its future as a standalone entity, which will centre around BCX7353 – as RA Capital had suggested – and an Alk2 inhibitor that is to enter phase I in fibrodysplasia ossificans progressiva next year.

Mr Stonehouse is set to remain at the helm, though how long this situation lasts is anyone’s guess.

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