Biogen Idec Sets Date for Showdown With Icahn, Proxy Battle Begins

5/9/08Follow @bbuderi

The meeting date has been set, the battle lines drawn, proxy salvos lobbed. And one famous Biogen Idec board member goes unnamed.

That’s the latest in the struggle between Biogen Idec and Carl Icahn. Yesterday, at long last, Biogen (NASDAQ: BIIB) set June 19 as the date for its annual meeting—where shareholders will chose between separate board slates advanced by the company and the famous activist investor, who has taken a 4.24 percent stake in the biotech and is pushing for its sale. In concert with setting the meeting date, Biogen also filed proxy materials that include a letter to shareholders making its case against Icahn, who in his own letter to investors urges shareholders to vote for current board member, Biogen co-founder, and MIT Nobel Laureate Phil Sharp without mentioning him by name.

We’ll sort it all out below. But first, here’s the background: After taking a stake in Biogen, Icahn agitated for the company’s sale last fall. Biogen officials agreed to explore a sale but in December announced there were no takers and that the firm would remain independent. An irked Icahn countered that the company had rigged the process to discourage potential buyers, and in January (as we had earlier predicted) started making a play for control of Biogen’s board. Icahn put forth a slate of three candidates for the four Biogen board seats up for reelection at this year’s annual meeting, leaving room for the renewal of Sharp. The investor’s announced plan is to win three seats this year, as well as the four coming up for reelection next year, giving him control of the 12-person board. He simultaneously is advancing a motion to fix the number of board seats at 12.

Biogen has fired back, essentially rejecting Icahn’s board candidates as the investor’s minions, bent on pushing his agenda of selling the company. Instead, its slate consists of three currently serving directors—Sharp, former Schering-Plough research executive Cecil B. Pickett, and former Congresswoman Lynn Schenk—and one new face, investment banker Stelios Papadopoulos, who is seeking the seat of retiring board member Thomas Keller. You can read more about all this here. For a long time, the date of the board meeting was left unannounced, but yesterday that particular piece of suspense ended. Meanwhile, the proxy materials Biogen filed in conjunction with setting the meeting date concisely lay out the company’s arguments. Biogen made three key points in a letter to shareholders:

—The current board, including the three directors up for re-election, has demonstrated its ability to create value, as evidenced by the company’s strong financial showing in recent years.

—Biogen’s four board candidates are “committed to creating significant value for all shareholders and will continue to pursue all options to do so.”

—This stands in contrast to Icahn’s slate, which will pursue “a single-minded agenda to sell the company.”

Perhaps the most interesting part of Biogen’s filing was the way it takes aim directly at Icahn’s argument that forcing a sale of the company will increase shareholder value. In fact, screams one section: “WE BELIEVE ELECTING THE ICAHN FACTION WILL HARM SHAREHOLDER VALUE.” The company stresses its steady revenue growth: Biogen reported $3.2 billion in sales last year, up from $2.7 billion in 2006. That was capped by a stupendous first quarter of 2008, with $942 million in revenues, up 32 percent from the same period a year earlier. “Over more than two decades,” Biogen’s material states, “Mr. Icahn has waged a long string of proxy fights, largely against underperforming companies. In stark contrast, Biogen Idec has been delivering strong performance and your company’s prospects for growth have never been better. Even Mr. Icahn has said that Biogen Idec is a ‘great company,’ and we agree.”

For his part, Icahn filed preliminary proxy material last week that included his own letter, addressed “To Our Fellow Biogen Stockholders,” asking them to fill out a gold proxy card backing his slate: Icahn associate Alex Denner and two scientists currently at Harvard Medical School, Richard Mulligan and Anne Young. Icahn also urged shareholders to reject an employee stock compensation plan and a management incentive plan favored by Biogen Idec. And he made it clear that he wanted shareholders to vote for Biogen slate member Sharp along with his own slate, although he doesn’t use Sharp’s name. Here’s the exact wording: “According to Biogen’s Proxy Statement, the Board of Directors of Biogen (the “Board”) intend to nominate four candidates for election as directors at the Annual Meeting. This proxy statement is soliciting proxies to elect not only Dr. Denner, Dr. Young and Professor Mulligan, but also the Biogen nominee other than Mr. Cecil B. Pickett, Ms. Lynn Schenk and Mr. Stelios Papadopoulos.”

Sharp, of course is the “other than” nominee. As we reported in January, based on a source close to Icahn, Icahn has no interest in knocking the Biogen co-founder off the board. We’re not sure why Icahn’s proxy materials don’t come out and name Sharp directly, but we’re looking into whether that’s at all significant. As always, any clues from our readers are appreciated.

Bob is Xconomy's founder and editor in chief. You can e-mail him at bbuderi@xconomy.com, call him at 617.500.5926. Follow @bbuderi

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