Greenbackd

Avigen, Inc. (NASDAQ:AVGN)‘s management has filed its comments on Biotechnology Value Fund (BVF)’s proposal to replace AVGN’s board with BVF’s slate of director nominees who will support MediciNova, Inc.’s (NASDAQ:MNOV) offer for AVGN.

We’ve been following AVGN (see archived posts here) because it’s a net cash stock (i.e. it’s trading at less than the value of its cash after deducting all liabilities) and specialist biotechnology activist fund BVF has been pushing it to liquidate and return its cash to shareholders. We think MNOV’s offer represents a clever way for AVGN’s stockholders to receive cash equivalent to that which they would receive in a liquidation (less $7M to be paid to MNOV) with the possibility for “an extraordinary, uncapped return” if MNOV is successful post-merger. We estimate AVGN’s cash at around $1.22 per share (BVF estimates $1.20 per share), which is a little less than 40% higher than AVGN’s $0.87 close yesterday.

AVGN’s board has responded to BVF’s proposal in a press release:

Avigen, Inc. (Nasdaq: AVGN), a biopharmaceutical company, announced today that its Board of Directors has retained two independent financial advisors to support its strategic objectives. RBC Capital Markets and Pacific Growth Equities LLC have been engaged to oversee the review of merger and acquisition opportunities and assist in monetizing the company’s AV411 assets, as outlined in the recent Open Letter to Shareholders.

“We believe our strong balance sheet and public listing provide shareholders with an opportunity for an attractive return on their investment,” commented Kenneth Chahine, Ph.D., J.D., Avigen’s President and Chief Executive Officer. “While we recognize that the distribution of cash is one option, we have a responsibility to our shareholders to run a comprehensive and competitive process. For over a year, we have explored strategic discussions with MediciNova, Inc., and will include their proposed acquisition offer in our analysis.

“We believe that our recently expanded effort to partner or sell AV411 and our glial attenuation program can deliver significant value to our shareholders in 2009 and are moving actively to review all alternatives,” continued Dr. Chahine. “If at any point during this process, however, our Board of Directors concludes that a favorable transaction is unlikely, we intend to narrow our focus to our other options, including a partial or compete distribution of cash.”

Biotechnology Value Fund, L.P., a significant Avigen shareholder, has requested a special meeting of shareholders for the purpose of replacing Avigen’s current Board members with a slate of Directors proposed by them. The company is in the process of facilitating the request for a Special Meeting.

Avigen management intends to provide an update on the progress of the strategic review at its upcoming quarterly conference call scheduled for Wednesday, February 11, 2009.

Hat tip to Ted.

[Full Disclosure: We have a holding in AVGN. This is neither a recommendation to buy or sell any securities. All information provided believed to be reliable and presented for information purposes only.]