Analyst: New drug behind Facet plans; Time likely to keep printing; Cliffs raises Freewest bid

By Cristal Cody

Tupelo, Miss., Dec. 10 - Facet Biotech Corp.'s board turned down the latest buyout offer from Biogen Idec Inc. on Thursday.

The company may well have good reason with the hint of a potential blockbuster drug in the works, an analyst said in an interview with Prospect News.

Also on Thursday, shares of Time Warner Inc. gained on the first day of trading in shares of AOL Inc. following the internet company's spinoff.

Time Warner plans to focus on its core assets and is expected to keep its publishing division, an analyst told Prospect News.

In other situations on Thursday, Cliffs Natural Resources Inc. said it increased its takeover offer for Freewest Resources Canada Inc. to give shareholders a clear choice against rival bidder Noront Resources Ltd.

Cliffs raised the buyout offer for Montreal-based Freewest to C$1.00 a share in stock, up from an earlier offer of 90 Canadian cents in stock.

However, Cliffs has agreed to pay that in cash if Noront becomes the registered owner of more than 12.5% of Freewest's outstanding shares.

Meanwhile, equities rose on Thursday to send the Dow Jones Industrial Average up 68.78 points, or 0.67%, to close at 10,405.83.

The Standard & Poor's 500 index rose 6.40 points, or 0.58%, to 1,102.35, while the Nasdaq Composite index gained 7.13 points, or 0.33%, to end at 2,190.86.

Facet may hold hidden ace

Facet's board recommended in a letter to stockholders on Thursday that they reject the $493 million offer Biogen made on Dec. 3.

Biogen had said the $17.50-a-share cash proposal, up from an earlier bid of $14.50 a share, is the biotechnology company's final offer.

The bid is scheduled to expire on Wednesday.

"We analyzed the unsolicited, revised tender offer of Biogen Idec and determined that $17.50 per share does not reflect the value of our company and its prospects. We believe Biogen Idec is materially undervaluing our assets while overstating our liabilities, and their offer demonstrates an incomplete understanding of our pipeline and technologies," Facet Biotech president and chief executive officer Faheem Hasnain said in a statement.

Hasnain said the company has opened up its books to Biogen and other interested parties and will seek other proposals.

Carol Werther, an analyst with Summer Street Research Partners, told Prospect News on Thursday that the company has an "interesting antibody for myeloma. In July, I was not hearing that but in December I am. That might be one of the reasons the board is rejecting the offer. It's very early, but it's promising."

Facet shares have traded below the company's cash value "because people didn't think they have enough money to develop their pipeline and discounted the company greatly," Werther said. "Biogen smartly [tried to] buy the assets on the cheap."

Cambridge, Mass.-based Biogen has partnered with Facet since 2005 to develop cancer and multiple sclerosis drug treatments. Facet also has drug-development partnerships with other biotechnology companies.

The Redwood City, Calif.-based company was spun off in December 2008 from PDL BioPharma, Inc.

Facet shares closed up 58 cents, or 3.34%, at $17.97 on Thursday.

Biogen shares rose 9 cents, or 0.19%, to $48.26.

Shares of Incline Village, Nev.-based PDL added 19 cents, or 2.87%, to close at $6.81.

Time Warner gains

On Wednesday, one share of AOL was distributed for every 11 shares of Time Warner to complete the spinoff.

On Thursday, Time Warner's stock climbed $1.24, or 4.25%, to $30.45.

Shares of New York-based AOL closed down 15 cents, or 0.63%, at $23.52 after the split from Time Warner, which acquired the internet company in 2001.

"There was a lot of built-up interest in the stock waiting for AOL to be spun out," Thomas Eagan, an analyst with Collins Stewart LLC, told Prospect News on Thursday.

Time Warner also spun off its cable division, Time Warner Cable Inc., in March 2009.

The company's other assets include cable networks and magazines such as People and Sports Illustrated.

Some speculation centered on whether Time Warner also would divest its publishing division, but that's unlikely, Eagan said.

"I think the management will give the publishing division a chance," he said. "They believe the current downturn is cyclical, so it'll come back next year or the year after."

Time Warner Cable shares lost 37 cents, or 0.86%, to close at $42.89 on Thursday.

Cliffs tempts Freewest

Both Noront and Cliffs want to acquire Freewest for the company's deposits of chromite, a key component in the production of steel, in an area known as the Ring of Fire in Ontario, Canada.

Cleveland-based Cliffs is North America's largest producer of iron ore pellets for the steel industry.

Toronto-based Noront mines for nickel-copper-platinum-palladium, chromite, gold and vanadium in the Ring of Fire area.

Noront's stock offer for Freewest, valued at 78 Canadian cents a share, is scheduled to expire just before midnight ET on Friday.

Freewest's board recommends in favor of the offer from Cliffs. Shareholders are expected to vote on Cliffs' offer at a special meeting on Jan. 15.

Cliffs, which owns about 12.4% of outstanding Freewest shares, said Thursday that investors holding 10.5% of outstanding Freewest shares have agreed to vote for its proposal.

"We decided to raise our offer to make it as clear and simple as possible for Freewest shareholders to choose Cliffs over Noront," Joseph Carrabba, chairman, president and CEO of Cliffs, said in a statement. "We are taking this action to provide Freewest shareholders the absolute certainty that they can reject Noront's inferior takeover bid and still be able to receive C$1.00 per share in fixed and certain consideration from Cliffs."

Freewest shares jumped 9.09% to close Thursday at 96 Canadian cents.

Shares of Cliffs fell 29 cents, or 0.67%, to $42.85.

Noront's stock slipped 7 Canadian cents, or 2.97%, to C$2.29.

Mentioned in this article:

AOL Inc. NYSE: AOL

Biogen Idec Inc. Nasdaq: BIIB

Cliffs Natural Resources Inc. NYSE: CLF

Facet Biotech Corp. Nasdaq: FACT

Freewest Resources Canada Inc. TSX Venture: FWR

Noront Resources Ltd. TSX Venture: NOT

PDL BioPharma, Inc. Nasdaq: PDLI

Time Warner Cable Inc. NYSE: TWC

Time Warner Inc. NYSE: TWX

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