(Updated with Biogen Idec announcement of preliminary results, 3:18 pm, June 4—see below)
When last we left the cliffhanger that was yesterday’s Biogen Idec (NASDAQ: BIIB) annual meeting: the forces of billionaire investor Carl Icahn claimed they had won two of four director seats up for election. The New York Times was reporting Icahn had secured at least one place, and Biogen itself had adjourned the meeting saying results of the vote were not yet clear and would be announced later this month.
That was after a contentious day in which Biogen officials kept the voting open longer than anticipated—prompting charges by Icahn that the company was trying to change the outcome in its favor and leading the dissidents to file a lawsuit seeking to force Biogen to close the polls. “This is not North Korea,” proclaimed the leading member of Icahn’s slate, Alex Denner, when the extended voting period was first announced.
In short, it was not your usual boring cookie-and-coffee shareholder meeting. Since then, Biogen has essentially said only that the voting results are not yet fully tabulated and that it will announce the outcome as soon as possible. The company has not commented on what a potential Icahn pick or two on the board might mean. “From our perspective, it’s difficult to comment on Dr. Denner’s claim, given that the official tabulation has not yet been completed,” says Jennifer Neiman, a company spokeswoman.
It is a different matter for Icahn’s team, though. I met Denner and the other apparent Icahn-backed victor, Richard Mulligan, last night for an exclusive interview. The pair describe how the Biogen contingent had abruptly left the meeting without shaking hands with them, and they named (for the first time, as far as I can tell) the two members of Biogen’s slate they thought had lost. Denner and Mulligan also shared some insights about why they believe they were more successful this year than last—when Icahn’s slate was shut out from winning a single board seat. And they spoke about their plans to reinvigorate Biogen—stressing, in Denner’s words, that “our objective is not to put the company up for sale.” (This is the same assurance Denner made to shareholders of San Diego-based Amylin Pharmaceuticals, and it worked in that hard-fought proxy contest, as he was elected to Amylin’s board.)
On the voting front, Denner appears to have been the runaway winner. According to a preliminary tally from a vote tracking service they use, Denner was more than 20 million votes ahead of the nearest other vote-getter. But with four seats in total up for election, the next four candidates—Mulligan and three of Biogen’s four choices—were closely grouped, within a few million votes of each other and apparently at the point where one or two changes of mind by major shareholders could shift the outcome.
But the tally showed Mulligan in third place overall. If that holds when the votes are finalized, that means he would also gain a board seat. So would Biogen picks Robert Pangia and William Young, while Biogen choices Alan Glassberg and Lawrence Best would be defeated. All four are current Biogen board members. The other two members of Icahn’s slate, Thomas Deuel and David Sidransky, were far back and appeared out of the running.
[Update: June 4, 3:18 pm: Biogen has put out a press release announcing that it appears Denner, Pangia, and Young have been elected to its board, as indicated in our article. It says the vote for the fourth board seat is too close to call.]
Denner says the vote has not been finalized and that he anticipates Biogen might try strategies to change the outcome—but that he feels confident he and Mulligan will prevail. “From what our sources tell us it’s very clear,” he told me earlier in the day. But, “I guess you never know.”
Last night, Denner reiterated his objection to the delay in the voting and expanded a bit on his North Korea analogy. “I think it’s like North Korea or some banana republic, where the voting process is not respected,” he says.
Denner says they felt like two wall flowers at a dance when Biogen’s leadership left the building without a word to them. “Richard and I tried to engage with some of the directors, but they were escorted out behind guards before we could talk to them,” he says. When I asked Biogen spokeswoman Neiman about the incident she said it was the first she had heard of it, and that she could not comment further.
At the same time, both Denner and Mulligan say they are hoping for an amicable and productive working relationship. “There are reasonable people on the board who would work to the best interests of all shareholders,” Denner says.
I asked about how influential they might be. Mulligan, a professor of genetics at Harvard Medical School and director of the Harvard Gene Therapy Initiative, pointed to the presentation by research and development head and board member Cecil Pickett as illustrating areas where he thought they might make a difference. In making their case to shareholders before yesterday’s meeting, Icahn’s forces have said, among other things, that they would prioritize research areas and improve the focus of R&D. And while he was not specific about Pickett’s remarks yesterday, Mulligan says: “We have the highest respect for the researchers at Biogen and feel that they would welcome an effort to more critically define the strategy of R&D.”
Mulligan and Denner also pointed to the changes they made as Icahn representatives on the board of New York-based ImClone Systems, where they have been credited with helping engineer a successful turnaround that led to the company’s being sold last year for some $6.5 billion. Says Mulligan, “Many of the problems at Biogen are similar to the problems that we encountered and solved at ImClone.” The men showed me a slide they had prepared for Biogen shareholders that compared what they had done at ImClone to what they want to do at Biogen in five areas: strengthening partner relations, improving cost structure, advancing the product pipeline, improving strategic direction and focus (which they think is diffused over too many therapeutic areas at Biogen), and settling litigation issues.
“Our objective is not to put the company up for sale,” says Denner. “It’s to improve shareholder value, improve the pipeline, reinvigorate the culture and research, implement smarter spending, and improve the relationships between Biogen, Genentech-Roche, and Elan—and potentially to renegotiate a deal with Elan that’s better for the shareholders of both companies.”
Icahn’s tensions with Biogen date back to the summer of 2007, when he started accumulating a stake in Biogen and declared it was a takeover candidate for a larger drugmaker. Biogen invited bids, but by December shut down the sale effort, saying it had received no “definitive offers.” That announcement sparked a Biogen stock sell-off that cost the company $5 billion in market value in one day. Icahn complained afterward that the sale process was sabotaged by onerous restrictions Biogen placed on talks with its partners, a charge the company denied.
Both Denner and Mulligan ran for election to the Biogen board last year, and both were defeated that time, along with a third candidate Icahn put forward. They acknowledged last night that they did a better job this time around of making a compelling case for their agenda to shareholders (as Luke Timmerman, our national biotech editor, has also noted). Denner says they were focused too much on the failed sale attempt by Biogen last year, and not as much on fundamental areas of change, as they were this year.
“It will be very hard for them not to go with us if we’re addressing those issues,” says Mulligan.