Playing Hard to Get

Small, money-losing biotech firms usually jump at the chance to sell to bigger rivals, particularly if those larger companies are helping them develop promising new treatments.

But, then again, a lot of biotech companies don't have as much cash as Facet Biotech Corp., which is spurning the advances of Biogen Idec Inc.

In rejecting Biogen's $356 million offer earlier this month, Facet CEO Faheem Hasnain noted his company had $371 million in cash and marketable investments as of June 30. Hasnain decided to play hardball for a better offer. Biogen responded with a hostile offer to buy Facet's shares today, but Hasnain can still point to that cash position.

Cambridge, Massachusetts-based Biogen wants full ownership of Facet's experimental multiple sclerosis drug daclizumab, which the companies are developing together. And it wants it bad enough that Facet's hard-to-get play probably will result in a higher purchase price if Biogen can't tender enough shares, analysts say. Facet's holdout probably wasn't intended to last forever.

While Redwood City, California-based Facet has enough cash to keep going for another year or two, the $14.50 a share cash offer was a more than 60 percent premium over Facet's stock price just before the Biogen deal was made public.

"They were insulted by the offer, but in practical terms it was reasonable," says Ian Somaiya, a managing director at Thomas Weisel Partners LLC.

Somaiya predicts Biogen will offer a 10 percent to 15 percent increase to close the deal, a move he thinks still makes financial sense for the suitor.