Cypress Bioscience, Inc. (CYPB) recently disclosed its agreement with Exagen Diagnostics, Inc. for the sale of its diagnostics business for up to $8 million.
Earlier this year, Cypress Bio had announced its intention to sell its diagnostics business by the third quarter of 2010. Per the terms of the deal with Exagen, Cypress Bio will receive an upfront cash payment of $4 million, which will be paid in two equal installments. The second installment will be paid 24 months after the first.
Besides the upfront payment, the company could receive up to $4 million in the form of milestone payments. Moreover, the company could receive a royalty of 10% on product sales.
Focus on CNS Portfolio
Cypress Bio’s agreement to sell its diagnostics business is part of the company’s restructuring program that was announced earlier this year. As a part of its efforts to streamline its business and reduce its cost structure, the company had also announced plans to cut down its headcount by about 86% or 123 employees. The company intends to focus its resources on the development of candidates that target treatments for central nervous system (CNS) disorders.
With the intention of strengthening its CNS pipeline, Cypress Bio entered into several agreements over the past few months. The company acquired the exclusive North American license for CYP-1020 by entering into an in-licensing agreement with Israel-based BioLineRx for the development and commercialization of the novel antipsychotic agent to treat schizophrenia.
The company also in-licensed Alexza Pharmaceutical’s (ALXA) Staccato nicotine technology, which is designed to help people stop smoking. Moreover, the company acquired patent rights and technology associated with an intranasal formulation of carbetocin, which could be used for the treatment of the core symptoms of autism.
Exploring Strategic Alternatives
Meanwhile, Cypress Bio has been in the news lately mainly due to the takeover attempts by Ramius LLC. In July 2010, the company received an unsolicited proposal from Ramius under which Ramius extended an offer to acquire Cypress Bio for $4 per share in cash. After being rejected, Ramius upped its offer price by 25 cents and took its offer directly to Cypress Bio’s shareholders.
Cypress Bio is currently exploring other strategic alternatives that would maximize shareholder value. These include the monetization of certain assets, or the sale or strategic combination of Cypress Bio with third parties among others.
Neutral on Cypress Bio
We currently have a Neutral recommendation on Cypress Bioscience, which is supported by a Zacks #3 Rank (short-term Hold rating). While Cypress Bio has been working on strengthening its pipeline, we remain concerned that the in-licensed/acquired products/technology are still in early stages of development and several years away from commercialization.
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