Biogen Idec-Icahn Story Likely Far From Over; History Says the Activist Investor Will Act Again

Does anyone really think Carl Icahn is done with Biogen Idec? He pushed for a sale of the company, by most reports at a price around $80 per share. But as of yesterday’s close, just three trading days after the Cambridge biotech’s announcement that it had failed to find a buyer and would remain independent, the value of Icahn’s 8.8 million shares in the company had fallen by nearly $180 million. (Overall, Biogen had lost almost $6 billion in value—the stock closed Monday at $55.57, down 27 percent from Wednesday’s close, which came shortly before the announcement.) If you were Icahn, would you leave things there?

An analysis of Icahn’s style indicates that the veteran boardroom battler is not likely to walk away with that outcome. Based on his past actions, he could well push for a management change, as a way of unlocking the value he apparently sees in Biogen (NASDAQ: BIIB), and maybe encouraging the company to revisit its efforts to attract a buyer. Given his clout and the fact that, at the end of Q3 he owned 3 percent of the company, he might also push for a board seat for himself or one of his representatives—although a Biogen spokeswoman said yesterday that she knew of nothing like that in the works.

A quick recap of what likely went wrong with the sale. Biogen is one of the world’s top biotech concerns. According to Thursday’s Wall Street Journal, analysts expect its sales to reach about $3.1 billion this year, with the company on track to meets its profit forecast of roughly $600 million. Perhaps more importantly, the company’s pipeline includes some 15 drugs in Phase 2 trials or beyond. In September, CEO Jim Mullen provided a bullish forecast and set a goal of achieving at least 15 percent annual growth in revenues through 2010.

In surveying the company and its prospects, Icahn reportedly told people, also according to the Journal, that he thought Biogen might bring a share price of “high 70s to low 80s.” Big pharmaceutical makers, after all, have been struggling to fill their pipelines, especially with looming patent expirations on many of their blockbuster drugs. But the general take in many news reports over the last few days is that would-be purchasers of Biogen deemed that kind of price as simply too steep.

Of particular concern is the uncertainty surrounding the market and prospects for Biogen’s three core drugs—Rituxan for non-Hodgkins lymphoma and rheumatoid arthritis, and Tysabri and Avonex for multiple sclerosis. What’s more, Biogen partners Elan and Genentech have, respectively, certain rights to Tysabri and Rituxan. In an intriguing analysis of the failed sale posted on the In Vivo Blog, Roger Longman laid much of the blame on the fact that Biogen evidently made would-be bidders sign an agreement that prohibited them from negotiating with Elan or Genentech about the drugs’ futures. “That means the prospect of buying Biogen wasn’t merely expensive, it was a complete crapshoot,” writes Longman. Biogen spokeswoman Naomi Aoki says the company is not commenting further on the sales process and that she can neither confirm nor deny this report.

But where does that leave things? Icahn no doubt knew about the core issues with Biogen’s big drugs and still concluded that the price range where Biogen had been trading when he amassed his shares was too low. Between June 30 and September 30, for example, Icahn bought some 6 million of his 8.8 million … Next Page »

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