Bioenvision shareholders led by SCO Securities object to planned merger with Genzyme

By Lisa Kerner

Charlotte, N.C., June 5 - Bioenvision, Inc. investors led by Steven H. Rouhandeh and SCO Securities LLC objected to the company's proposed acquisition by Genzyme Corp. for $5.60 per share, or about $345 million, announced on May 29.

The cash transaction is expected to close in July and will give Genzyme exclusive, worldwide rights to clofarabine, which was co-developed by Bioenvision and Genzyme for the treatment of acute lymphoblastic leukemia.

Both companies' boards have approved the deal. Bioenvision executive officers, directors and shareholders holding approximately 20% of the company's shares have entered into agreements in support of the transaction, according to a news release.

In a letter to Bioenvision's board of directors, Rouhandeh reiterated his disappointment and lack of support of the recent offer. "After further consideration, we remain extremely concerned about the valuation and timing of the transaction, and what appears to be a lack of a formal sale or auction process. Further, we are extremely concerned about the appearance of conflicts of interest among the board of directors and the holder of the series A preferred stock, namely Perseus-Soros Biopharmaceutical Fund L.P., and therefore whether the board has properly carried out its fiduciary duties to all shareholders," the letter, included as part of a schedule 13D filing with the Securities and Exchange Commission, stated.

The investor believes the offer does not give sufficient value to clofarabine's potential in a variety of other indications, such as myelodysplastic syndromes, non-Hodgkins lymphoma and bone marrow transplants, where some additional 25 clinical trials are planned or ongoing.

"Clearly, with over 20 million shares trading above the $5.60 offer price since its announcement, the market does not support this transaction. If Perseus-Soros wants an exit strategy, they should sell their shares to other investors rather than orchestrating a poorly-timed and inadequately priced tender offer," Rouhandeh said.

Rouhandeh beneficially owns 7,209,331 shares, or 13.4%, of the company's outstanding stock, the SEC filing stated.

Bioenvision is a New York biopharmaceutical company, and Genzyme is a Cambridge, Mass.-based biotechnology company.

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