Greenbackd

Avigen Inc (NASDAQ:AVGN) has authorized its CEO, Dr. Chahine, and RBC to contact Biotechnology Value Fund (BVF) to explore the possibility of negotiating a settlement between BVF and AVGN with respect to BVF’s increased $1.20 per share offer for AVGN. AVGN shareholders are to decide on BVF’s proposal to remove the board of AVGN and elect Biotechnology Value Fund’s (BVF) slate of director nominees at a special meeting of stockholders to be held this Friday, March 27, 2009.

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 investor BVF has been pushing it to liquidate and return its cash to shareholders. MediciNova Inc (NASDAQ:MNOV) has made an offer for AVGN that we think 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. BVF has offered $1.20 for each share of AVGN, which is up from its initial offer of $1.00. The stock is up 72.3% from $0.65 to close at $1.12 yesterday. We estimate AVGN’s net cash value to be $37M or $1.24 per share (BVF estimates $1.20 per share). The net cash estimate does not take into account AVGN’s AV411 assets and program, which could be worth considerably more, perhaps as much as $5M to $20M or between $0.15 or $0.60 per share.

The text of AVGN’s press release is set out below:

On March 20, 2009, BVF issued a press release announcing that the Purchaser had increased the Offer price from $1.00 per share to $1.20 per share in cash.

Later in the day on March 20, 2009, the Board authorized Dr. Chahine and RBC to contact BVF to explore the possibility of negotiating a settlement between BVF and Avigen with respect to the Offer and the proxy contest.

The Board is currently reviewing the revised Offer price and will provide its recommendation, or determination that it does not have a recommendation, after the Board has had sufficient time to review thoroughly BVF’s amended Offer and make its recommendation with respect thereto.

Avigen has continued discussions with third parties, including MediciNova, regarding potential strategic transactions. Avigen intends to continue such discussions, and does not intend to provide public updates on the status of such discussions until such time as a definitive agreement with respect to a strategic transaction has been reached with a third party or all such discussions are terminated. There can be no assurance that any discussions will lead to an agreement or transaction.

[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. Do your own research before investing in any security.]