Radius, fending off activists, outlines pitch for $890 million buyout

Dive Brief:

• Radius Health on Thursday outlined its case in a presentation meant to convince investors to support a deal the company reached last month to sell itself for up to $890 million.
• Radius agreed on June 23 to be taken private through a sale to two investment firms, Gurnet Point Capital and Patient Square Capital. The offer was announced two days after a pair of activist investors nominated three new board members and criticized the company’s strategy and stock performance. Shareholders will meet on July 26. 
• Under the deal, stockholders would get a total of $547 million, equal to $10 per Radius share, plus another $1 per share if the company’s osteoporosis drug Tymlos hits certain sales targets. Gurnet Point and Patient Square would assume all of the biotech’s debt. 

Dive Insight:

Radius’ deal was the culmination of a strategic review that began in 2020 and was meant to end a prolonged erosion in the company’s stock price.  

The company went public in 2014 on the promise of the drug that would become Tymlos, as well as a version of the treatment that could be worn as a wearable skin patch. Shares peaked at more than $80 apiece in early 2015, and Tymlos got to market two years later. 

Most of that value has since been erased. Though Radius saw Tymlos as a future blockbuster — like Eli Lilly’s rival treatment Forteo — sales, which totaled $219 million last year, haven’t reached that level. The skin patch version of the drug failed in clinical testing in December, leading the company to lay off 20% of its non-sales workforce. Shares sank to less than $10 apiece this year, their lowest levels since the company’s debut. 

On June 21, Velan Capital Investment Management and Repertoire Partners, which own about 7.7% of Radius’ shares, pushed for changes at the company, citing a “troubling track record of value destruction.” Radius isn’t alone, however. Many biotech stocks have tumbled since late last year, leading to dozens of restructurings. Dealmaking has started to pick back up after a dry spell, as companies look for ways beyond equity offerings to raise cash.  

Against this backdrop, Radius accepted a deal price that, though a premium to recent lows, represents a fraction of its worth in 2015. In a presentation, the company detailed the steps that led up to that decision. Radius simultaneously evaluated several options, including a debt refinancing, licensing out one of its drug programs, acquiring assets, or selling itself. 

Talks to license out a drug the company is studying for Prader-Willi Syndrome didn’t yield “substantive negotiations,” however. And while Radius agreed to a non-binding refinancing offer, the deal was placed on hold as sale talks gained traction. 

Among 15 contacted buyers, 3 submitted initial bids. Radius’ final offer, from Gurnet Point and Patient Square, was received on June 12. The deal requires shareholder approval. 

In a statement following the buyout’s announcement, Velan and Repertoire said they were “continuing to evaluate whether this deal represents a fair price for stockholders.”

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