'Little guys' fight Genzyme buyout

Angry at what they say is an unfairly priced takeover attempt by Genzyme Corp. , more than three dozen small shareholders of a New York biotechnology firm are trying to band together to block Genzyme's deal to buy the company.

On a website set up by a shareholder of Bioenvision Inc. , investors claiming to own nearly a million shares have vowed to vote against the $350 million Genzyme takeover disclosed last week, calling it "ridiculously low," a "sham," and a "cheap sellout" driven by collusion among Bioenvision insiders, Genzyme, and billionaire investor George Soros .

In a Wall Street world where large investment firms command nearly exclusive power to grab the attention of corporate boards, the website, rejectgenzymetenderoffer.com , represents an unusual effort by small shareholders to wield their power collectively.

"I wanted to make at least some effort to stand up for the little guy," said Adam Shay , a North Carolina tax-company manager who owns Bioenvision stock and set up the website last weekend. "I think people just feel like it's one of those cases where the small shareholder is about to get it stuck to them by the larger shareholders."

Shay, 33, would not disclose how many Bioenvision shares he holds , but said he would lose money if the deal goes through at the price Genzyme is offering, $5.60 a share.

In one sense, there is nothing uncommon about the Bioenvision deal. Bioenvision owns the rights to a leukemia drug called clofarabine, and large biotechnology companies such as Genzyme frequently buy smaller companies to acquire a single drug in development. They often wait until the stock reaches a low point before making an offer.

But the Bioenvision deal has been controversial since Genzyme, the Cambridge biotechnology giant, said last week it had reached an agreement to buy the company. Although the offer price was slightly higher than Bioenvision's market value the previous week, it was far lower than the price the shares had reached for much of the past two years.

Almost immediately, Bioenvision's biggest shareholder sent a fax to Bioenvision's board of directors saying he thought the price was too low. On Monday, the same large shareholder sent the board a longer letter. Steven Rouhandeh of SCO Capital Partners LLC , which owns 13 percent of Bioenvision, wrote that his firm had been "inundated with calls" from shareholders unhappy with the deal, and raised the specter that the board may be serving the interests of another large shareholder.

That other shareholder is Soros, the billionaire currency trader whose investment company also controls 13 percent of Bioenvision. The Perseus-Soros Biopharmaceutical Fund LP owns all of the preferred shares , which will be bought in the takeover for $11.20 apiece . Two members of Bioenvision's six-member board are investment advisers for the Perseus-Soros fund.

A spokeswoman for Bioenvision said the company had no comment on Rouhandeh's letter but would soon file public documents with more detailed information on the rationale for the deal.

Though Bioenvision has just a handful of employees and no laboratories, it sees great promise in its cancer drug. Genzyme owns the rights to sell clofarabine in the United States, and buying Bioenvision would give it worldwide rights to develop and sell the drug. Although it is currently approved for use only in a small group of children with leukemia, both Genzyme and Bioenvision are running clinical trials to show the drug's effectiveness against other types of cancer. Genzyme estimates the drug could sell $600 million annually.

According to a regulatory filing, Genzyme first considered taking over Bioenvision in 2005, but dropped the negotiations. The current deal got underway in January when Dennis Purcell , who manages the Soros fund, met with a Genzyme executive to urge him to make a new offer for the company. The agreement announced last week carries the full approval of the Bioenvision board and the Perseus-Soros fund.

To stop the deal, holders of more than 50 percent of Bioenvision shares would have to refuse to sell their shares. So even if their claims of owning a million collective shares are true, the small investors on the website control too little of the company -- 2 percent -- to affect the deal. But Shay calls the site a "modern day picket line," a way for shareholders to show resistance even when too far-flung to gather outside the company office.

Although a shareholder website is unusual, biotechnology merger attorney Randy Katz of Bryan Cave LLP said the small investors were unlikely to have much sway.

"They may be able to agitate enough and get the board members of Bioenvision to go back to Genzyme and ask for another couple of pennies, but beyond that I'm not confident they're going to do much," said Katz, who is not involved in the deal.

A Genzyme spokeswoman said the company was aware of the website, but was not involved in any discussions to increase the offer price.

The timing of the Genzyme offer is key to the shareholder complaints. Bioenvision stock sank to a long-term low in April when it sold 8 million shares for $3.75 , saying it needed money to pay for clinical trials of clofarabine. That sale diluted the value of existing holdings and depressed the stock price further. But Bioenvision has applied to sell the drug in Europe as a treatment for adult leukemia, and if it succeeds, the value of the drug -- and the company -- would go up.

It is unclear who bought those 8 million shares, but by selling at Genzyme's offer price, they would earn a prompt profit of nearly 50 percent.

That seems wrong to shareholders like Bruce Gold, who holds about $35,000 worth of Bioenvision stock.

Gold says he would lose money on the Genzyme offer, and posted a message on the website saying he would vote against the deal.

"I just don't understand why the board of Bioenvision would even agree to this," he said.

Stephen Heuser can be reached at sheuser@globe.com.