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Cypress Bioscience investor Black Horse Capital opposes company's strategic direction
By Lisa Kerner
Charlotte, N.C., May 31 - Black Horse Capital Advisors LLC said it wants Cypress Bioscience Inc. to "abandon its pursuit of a potentially dilutive transaction and alternatively institute a stock buy back program" in a letter to Cypress' board.
The investor's letter refers to Cypress' May 30 filing with the Securities and Exchange Commission in which the company is offering 4.7 million shares in a secondary offering. The proceeds will be used to acquire another product candidate.
Black Horse believes that phase 3 results of Milnacipran in fibromyalgia syndrome indicate the drug shows promise.
"Our major concern, is that Forest Laboratories, or some other smart strategic buyer will make a take out offer while your stock still is multiples away from reflecting the true value of your future milestone and royalty income for Milnacipran," Black Horse stated.
"Cypress does not need to raise further capital. Your current balance sheet has over $100 million of cash and no debt. Your burn rate is negligible relative to this large cash position. In addition, your cash position will grow further even without selling stock," the letter stated.
Dale B. Chappell, managing member and director of Black Horse, ended the letter by saying "To the extent that you continue to pursue misguided strategies that will only dilute the value of Milnacipran, we will be forced to consider all alternatives available to us as large shareholders."
Through its affiliated funds, Black Horse Capital currently holds 1,201,461 shares of the San Diego-based pharmaceutical company's common stock.
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