Rematch Time: Carl Icahn and Biogen Idec Square Off Again

4/14/09Follow @xconomy

It’s rematch time in the battle for control of Biogen Idec. With the Cambridge, MA-based company’s annual shareholder meeting likely coming sometime in the next couple months, the incumbent board nominees are being challenged by four rivals put forth by billionaire activist investor Carl Icahn. A media leak has fueled speculation of a potential buyout to raise the stakes, and hedge funds have been fanning the rumor flames as they place leveraged bets in the options market.

Facts often get shoved aside by opinions and assertions in brawls like these. But there are some key data points that will emerge Thursday afternoon that could influence whether Biogen wins the way it did last year, or whether billionaire investor Carl Icahn gets the multi-billion dollar takeover he desires. Thursday is an important day because Biogen plans to report its first-quarter earnings after markets close for the day. The results will include an important tally of the number of patients taking its drug for multiple sclerosis, natalizumab (Tysabri).

Tysabri is generally considered by physicians to be the most effective drug against MS, although it has to be given under a strict patient monitoring program for signs of a potentially deadly brain infection called PML. When Icahn first built a stake in Biogen in 2007 and started urging for a sale to a larger drugmaker, Tysabri was gaining momentum after it had a little more than a year in the marketplace. But since then, several new cases of PML have been diagnosed in patients, and growth projections have slowed. About 37,100 patients were taking the drug worldwide when Biogen reported figures at the end of December. When Biogen releases Tysabri’s first-quarter sales Thursday, along with the updated number of patients on Tysabri, it may indicate how demand has slowed, and whether the potential upside is worth the risk to an acquirer.

Partly because of the slowing growth trend for Tysabri, and fierce new competition expected from Novartis and Merck KGaA, which are developing oral MS drugs, at least one analyst is skeptical that this is the time for Biogen to dress up for a sale. So even though the Financial Times reported in February that Sanofi-Aventis may want to buy Biogen, which triggered renewed activity among options traders last week, analyst Christopher Raymond of Robert W. Baird says he still wouldn’t bet on it. He lowered his Tysabri sales forecast for 2009 to $1.11 billion, from $1.15 billion.

“Given Tysabri trends and Avonex-arguably growing mainly through price increases, we don’t see the logic, and wouldn’t bite,” on rumors that the company is a takeover target, Raymond wrote in a note to clients yesterday.

Still, the games have already begun. As we reported back in February, Icahn has nominated four people for election to Biogen’s 13-member board. His nominees are Alex Denner, Richard Mulligan, Thomas Deuel, and David Sidransky. Denner and Mulligan were nominated last year, when Icahn came up short in his bid to gain a foothold on the board.

Icahn also has two other ideas for shareholders to consider. He wants shareholders to vote to reincorporate the company in North Dakota, which has corporate laws that make it easier for activist shareholders (like Icahn) to take control of corporate boards. The other is that he wants to freeze the board size at 13, and stop directors from making it larger, which would also make it harder for activists to take over.

Biogen has, for its part, come out with its own preliminary proxy statement which urges shareholders to ignore Icahn’s proposals, and his director nominees. The company has nominated its own slate of four directors for re-election: Lawrence Best, Alan Glassberg, Robert Pangia, and William Young. The annual meeting hasn’t yet been scheduled—last year’s was on June 19.

Plenty of room is left for both sides to maneuver and fire volleys at each other as the annual meeting approaches. But the facts that come out on Thursday, and the trends they highlight for Tysabri and the company’s other MS drug, Avonex, could go a long way toward determining whether a Big Pharma company decides the time is right to pay a fat premium to shareholders for the right to take over Biogen Idec.

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