Two large Icagen investors say that Pfizer's $56 million takeover offer for the Durham drug-development company is too low and will push for a higher price.
Pfizer announced on July 20 that it planned to buy the remaining shares of Icagen it doesn't already own for $6 each.
But Merlin Nexus and New Leaf Venture Partners believe that Icagen's shares could be worth up to three time as much, the investment firms wrote in a letter last week to Icagen's board and chairman Charles Sanders. The firms disclosed the letter in a Securities and Exchange Commission filing on Friday.
"We believe the purchase price dramatically undervalues Icagen’s assets, and is not in the best interests of all stockholders," they wrote. "We believe that the Board should have sought a greater valuation for Icagen and at the present time we do not intend to tender our shares under the current acquisition terms. We continue to explore our options, including potentially contacting other stockholders to share our concerns."
Their resistance could attract another suitor willing to pay more or force Pfizer to raise its acquisition price for Icagen, but it's not likely to derail the deal.
Pfizer owns more than 1 million shares, a stake it bought as part of an previous agreement to help pay for Icagen's research on experimental pain medicines.
Pfizer also lined up support for its deal from another Icagen shareholder, the Venrock investment firm. Together, they control a 17.7 percent stake in Icagen.
Merlin Nexus and New Leaf together own 12.7 percent.
The investment firms believe that Icagen is making progress on pain medicines that target so-called sodium ion channels to block the body's ability to feel pain. That and an experimental epilepsy drug make the company worth much more than the $56 million Pfizer agreed to pay, they wrote. They project a value of $100 million to $165 million.
Icagen's shares were trading well above Pfizer's offer price before the deal was announced, signaling that Wall Street expected a much higher bid.
On Friday, the shares closed at $6, a sign that Wall Street isn't expecting Pfizer's bid to go much higher.
If Icagen takes a better offer, it would have to pay Pfizer a $2.25 million termination fee, the companies reported in an SEC filing.
Founded in 1992, Icagen shares began trading publicly in 2005 at the equivalent of $64 each. But the stock fell as investors lost faith in the company's prospects for developing successful new drugs. In January, the shares were trading below $2 each.