Famed scientist Phil Sharp’s retirement from the board of directors at Biogen Idec (NASDAQ:BIIB) leaves the board without what was perhaps its leading scientific voice, but his departure doesn’t leave activist investor Carl Icahn with much of an opening to seize greater control over the company.
When I reported last week that Sharp had stepped down from the board of Biogen, which he co-founded in 1978, it was still unclear whether or how Sharp’s retirement would impact the balance of power at the Cambridge, MA-based biotech company, which Icahn is on a quest to take over. It turns out that Biogen’s board of directors will decide whether or not to find someone to take Sharp’s seat on what is now a 12-member board of directors—but the board wouldn’t have had this power had a vote that took place at Biogen’s annual shareholders meeting on June 3 turned out differently.
At the meeting, Biogen shareholders rejected an amendment that Icahn proposed to the company’s bylaws, which would have set the number of seats on the board of directors at 13. During the proxy battle leading up to the meeting, Biogen, which also has significant operations in San Diego, advised shareholders to reject that amendment because it would remove the board’s power to determine how many directors there should be.
As of this writing, there were no indications one way or another from Biogen about whether its board would seek a replacement for Sharp.
“There is no obligation to fill his seat, as you may recall from following our proxy contest,” Biogen spokeswoman Jennifer Neiman told me, “so the board will make that decision based on what they feel is in the best interest of our shareholders.”
By the numbers, the reduction in the number of board members to 12 gives investment manager Alex Denner and Harvard genetics professor Richard Mulligan—the two newly elected directors endorsed by Icahn—a slightly greater percentage of voting power than when Sharp was on the board. Part of the goal behind fixing the number of directors at 13 was to prevent Biogen’s board from swelling its ranks to dilute the power of those members nominated by Icahn, who controlled 5.6 percent of Biogen’s common stock as of last month.
The bottom line is that Icahn will have to wait until the next round of elections for board members next year when five seats on the board of directors—including those of Biogen CEO James Mullen the company chairman Bruce Ross—are up for reelection.
Still, Biogen’s board loses some significant scientific pedigree with the retirement of Sharp, a top molecular biologist, geneticist and Institute Professor at MIT. He won a Nobel Prize in medicine in 1993 for his co-discovery of gene splicing and a 2004 National Medal of Science for his pioneering research in the field of RNA interference. He had also served on the board longer than any other director, having first been seated in 1982.
Biogen didn’t provide much of an explanation for why Sharp retired two years before his current term on the board was due to expire, and he has not yet responded to an e-mail we sent him regarding his decision.
“What I can tell you is this a personal decision that [Sharp] made based on his individual goals and circumstances,” Neiman said, “and I’m not aware of the specifics beyond that.”
It’s probably worth noting that Icahn—whose has made past attempts to push for the sale of Biogen—singled out Sharp last year as the only one of four Biogen directors up for reelection that he didn’t want to replace with his own nominees. Bob provided some insights behind Icahn’s decision not to target Sharp’s seat on the board last year, citing a source that told him that Icahn was taking a longer view on gaining control of the board.
We’ll have to wait and see whether Biogen decides to replace Sharp. Neiman declined to say when the board meets next, noting that the company does not disclose such dates.