Shareholder Ramius offers to buy Cypress for $4 per share, blasts management strategy

Ramius offers $4 per share for Cypress Bioscience

NEW YORK — Shares of Cypress Bioscience jumped 44 percent Monday after Ramius LLC said it would buy the drugmaker in an all-cash deal.

Ramius already owns 9.9 percent of Cypress and said it would buy the rest of the company for $4 per share as it lashed out at the management. Its offer represents a premium of 60 percent to the stock’s Friday closing price of $2.50. As of May 5, Cypress had about 37.4 million shares on the market, meaning Ramius values the company at about $154 million, including the shares it already owns.

Cypress shares climbed 82 cents, or 32.8 percent, to $3.32 in afternoon trading. Shares traded closer to $10 last year at this time.

Ramius said poor decisions by Cypress management has damaged its stock price and that the company should hold off on making any further acquisitions or licensing deals.

Shares of the San Diego company are down 73.5 percent over the last 12 months, trading at their lowest prices since early 2003.

“Ill-conceived acquisitions and other internal investments proposed and executed by management and supported by the current board have resulted in significant destruction of shareholder value,” Ramius said, adding that Cypress shares have underperformed other biotechnology stocks and the broader market for years.

Cypress did not immediately respond to requests for comment.

In particular Ramius said Cypress’ 2008 acquisition of Proprius Pharmaceuticals has been “a complete failure” that cost Cypress $40 million while bringing in $600,000 in revenue. It added that investors have little confidence in the company’s licensing of a potential schizophrenia drug from BioLineRx.

Last month after Cypress Bioscience Inc. agreed to pay BioLineRx $30 million upfront for a schizophrenia drug in midstage development, company shares fell 37.8 percent in one day. Shares have fallen 42.4 percent since the deal was announced.

Ramius said if the deal goes through, it would consider allowing Cypress management to continue developing the BioLineRx drug if management can cover the costs of the trial itself, or if it can get funding from a third party. It said it would be willing to give up a 50 percent stake in the drug in order to reduce the risk to shareholders if it fails in tests.

In the first quarter, Cypress said it lost $4.6 million, or 12 cents per share. Most of the company’s revenue comes from a fibromyalgia drug called Savella. Cypress developed Savella and Forest Laboratories markets it, and pays Cypress royalties and sales force reimbursement. Cypress reported $8.1 million in revenue in the first quarter.