Why Biogen Idec Is Likely to Flinch Before Facet Biotech in Their Game of Chicken

(MoneyWatch)  Biogen Idec's attempted hostile takeover of Facet Biotech, its partner on the potential blockbuster multiple sclerosis drug daclizumab, isn't going according to plan.

It was one thing when Facet's board rejected Biogen's $14.50-per-share offer as a low-ball that essentially valued the company on its cash and gave the pipeline away for free. Facet's investors -- who were holding stock worth $8-per-share not long ago -- might have been expected to jump at the offer anyway. Except they didn't: as of mid-October, only 0.1 percent of shares had been tendered, prompting Biogen to extend its hostile takeover attempt by three months.

Despite the extension, Biogen is sticking to its guns on price. In the latest snippy back-and-forth between the two parties, Biogen president and CEO James Mullen said:

Biogen Idec views the acquisition of Facet as desirable but not a "must have." We already own a 50% interest in daclizumab--We do not intend to overpay for the rest.

He went on to warn that:

If Facet stockholders choose not to accept our offer, they will bear 50% of the risks associated with the development of daclizumab, 100% of the risks associated with Facet's interest in other development stage drugs and will own a company with a declining cash position.

To which Merriman Curhan Ford analyst Michael King responded:

GASP!! You mean biotech companies LOSE MONEY and shareholders have to TAKE RISK?!?!? Risk, schmisk, biotech investors are accustomed to taking risks on clinical candidates because it allows them to share the upside. We would ask if Biogen has stopped to consider the risks of Tysabri to the company's valuation, or the risks associated with the often dysfunctional relationship with Elan.

Touché.

There are only four possible outcomes to this game: Facet accepts the deal, Biogen walks away, Biogen raises its offer, or a dark horse acquirer steps in. No. 1 isn't looking likely, given the tender progress, or lack thereof, thus far. No. 2 is looking less likely the more Biogen threatens and manipulates and badgers with obvious desperation. That leaves No. 3 and No. 4--

Face-off photo by Flickr user INeedCoffee / CoffeeHero, CC.