Icahn Has Ideas For Biogen. Starting With More R&D Spending

6/9/08Follow @xconomy

Biogen Idec has accused Carl Icahn of having no ideas on how to improve the company, so today the billionaire shareholder activist fired back. Icahn wants to boost spending on research and development, improve employee morale, mend relations with partners, and possibly cut expenses outside research, according to a memo to shareholders filed today with the Securities and Exchange Commission.

“Our nominees will make it clear that we prioritize research and development as a central component to the ethos of Biogen,” said Alex Denner, a portfolio manager for Icahn, in the filing. Denner is one of Icahn’s three nominees to the 12-person board of Cambridge, MA-based Biogen (NASDAQ: BIIB).

The proxy battle is reaching the closing stretch, with the company’s annual meeting scheduled for June 19. Icahn initially showed interest in buying shares in August, then raised the ante in October, when he suggested a larger drugmaker might want to buy it for as much as $25 billion to fill up its pipeline of experimental drugs. Two months later, the investment fizzled when Biogen abandoned a sale, saying it didn’t receive any binding offers, and the stock lost $5 billion of its market value.

Since then, Icahn has charged that the way Biogen structured the sales process doomed it from the beginning — and he has put forth his own slate of three nominees to the board. Today’s filing repeats some of Icahn’s previous arguments that the Biogen board wasn’t intimately involved in the sale process, citing documents he successfully sued in a Delaware court to obtain recently. At one point, the activist investor advocated for another sales attempt, but he has since backed off those plans and is stressing instead that, yet his directors would offer valuable expertise to the board.

The fresh material in today’s filing includes the idea that Icahn’s nominees would boost research and development, and work to support promising projects that have “not received adequate attention” at Biogen, the world’s largest maker of multiple sclerosis drugs. The Icahn slate also pledges to boost employee morale, which is a bit ironic, given that Icahn started a battle that cast a cloud of uncertainty over the company, something that doesn’t usually fire up the troops.

Icahn’s group also wrote to shareholders that it can mend relationships between Biogen and its partners, namely Elan and Genentech. At least with Genentech, Biogen has been in an ongoing arbitration dispute about development plans for the next generation anti-CD 20 drug, a proposed follow up to the hit cancer drug Rituxan. Denner, Icahn’s portfolio manager, cites his experience in patching up relations between ImClone Systems and partner Bristol-Myers Squibb as a reason to think he can do it again.

The last point from the Icahn nominees is that they can cut expenses in areas outside of research. “We intend to do this in cooperation with the rest of the board,” Denner writes.

Biogen filed a proxy statement of its own with the SEC less than a hour after Icahn’s filing—and it didn’t sound so cooperative. “Mr. Icahn has failed to provide any evidence that he understands what has made Biogen Idec into a global leader that has outperformed the S&P 500, the Dow Jones Industrial Average and the Amex Biotechnology Index for the past one and three year periods,” wrote Chairman Bruce Ross and CEO James Mullen in their letter to shareholders.

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