Investing in biotech can be scary. Only one out of 10 new drug candidates ever makes it through the gauntlet of clinical trials to become an FDA approved product, and it usually takes hundreds of millions of dollars and a decade or more of research to separate the winners from the losers. Investors usually can’t bother asking serious questions about profit-and-loss statements, or price-to-earnings ratios, until a company is 15 years old or more. And the hype—from gene therapy, to stem cells, to you fill in the blank—can be quite distracting.

So Christopher Henney, 68, who has seen it all in a 30-year career in biotech as co-founder of Immunex, Icos, and Dendreon, knew he had his work cut out yesterday. He was trying to convince a crowd of 100 financial pros at the CFA Society meeting in Seattle that biotech, the classic boom-or-bust industry, is really a good place to invest.

“I want to de-mythologize the scariness,” Henney said at the outset.

Henney started off his talk by reminding the audience how he and Steve Gillis, a pair of immunologists at the Fred Hutchinson Cancer Research Center, went on to start Seattle-based Immunex, one of the members of what he called “the class of 1983.” These were the second-generation companies, following industry pioneer Genentech, that all went public back in a great wave of enthusiasm for biotechnology. The class included Amgen, Biogen, Cetus, Chiron, Genzyme, and Immunex. Seven of the 10 to 12 biotech companies (Henney didn’t name the losers) that went public in that early wave went on to create market valuations that exceeded $1 billion, Henney said.

But even during that great wave of optimism about the power of new genetic engineering technologies for creating new drugs, there were prominent skeptics. Henney told the story of how he and Gillis had a meeting in the early days of Immunex with “one of the doyennes” of the Seattle investment community, whom he didn’t name. Henney and Gillis told their story with great enthusiasm, and got a rude awakening.

“At the end, I remember him saying, ‘I don’t think it’s a scam, but I won’t introduce you to anybody, either,’” Henney recalled.

Both of them were academic scientists who “had a fair amount of hubris about our self-worth. To be told that what we’re doing was a scam, it wasn’t something I wanted to tell my Mom about,” Henney said.

He added, “It was our welcome-to-the-NFL moment.”

Still, the investor taking that position would have been right for the first 15 years or so. It took 17 years from Immunex’s founding before it struck gold with etanercept (Enbrel), a drug for autoimmune diseases that now generates more than $7 billion a year in worldwide sales for Amgen and Wyeth. It took much longer, and hundreds of millions of dollars more than industry pioneers like Henney thought it would, to create blockbuster drugs like that. “If you had thought about that beforehand, nobody would have given us any money at all,” Henney said.

But they got the money, and learned a lot of lessons along the way. In his talk last week, Henney distilled them into six hallmarks of a successful biotech that investors should look for, along with five red flags to watch out for as well (which I’m going to save for another story).

So, here are the six hallmarks to look for in a successful biotech …Next Page »

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Christopher Henney’s career in biotechnology looks like a three-act drama over three decades. He’s a classically-trained immunologist who went on to be the co-founder of Seattle’s three most successful biotech companies when ranked by stock market value—Immunex, Icos, and Dendreon.

Henney, now 68, pushed Dendreon on its odyssey when he joined as CEO in 1995. He developed its technology, drove it into late-stage clinical trials, took it public, and then handed over the company to his young protégé Mitchell Gold at the beginning of 2003. Henney left the company as chairman of the board a year later. He doesn’t make a whole lot of public appearances around town anymore, although he still lives in Seattle and serves on the boards of five different biotech companies around the world.

I caught up with Henney at the Starbucks in the Madison Park neighborhood, mainly to find out what he had to say about Dendreon (NASDAQ: DNDN). The company has become one of biotech’s biggest success stories of the year, since April, when it said a 500-patient clinical trial of its first-of-a-kind treatment for prostate cancer, sipuleucel-T (Provenge), was able to extend lives of men with terminal prostate cancer by a median of about four months, with minimal side effects like fever and chills.

Henney provided some interesting added history to the Dendreon saga. The company had actually started in 1992, and spun out of Stanford University under the name Activated Cell Therapy. It had a technique for sifting out a powerful type of white blood cell known as a dendritic cell from a blood sample, but didn’t really have a business model other than selling some commodity parts, Henney says. He recruited chief scientific officer David Urdal, then at Immunex, to join him on a mission to build what became Dendreon—a company that separates out the dendritic cells from a patient’s blood sample, and incubates them in such a way as to “teach” the immune system to fight cancer cells like a virus. If the FDA clears this treatment for sale early next year, as analysts generally consider a fait acompli, then this will be the first drug ever made commercially available in the U.S. to actively stimulate the immune system to fight any form of cancer.

If that happens, it would be a coup for prostate cancer patients, and a vindication for a long-snakebit field of science. Even though Gold has said he hopes to build an anchor company for Seattle, like Biogen and Genzyme are for Boston, Henney says he doesn’t necessarily see that happening. Here are edited highlights of the conversation, which we’re running today and tomorrow:

Xconomy: Do you stay in touch with (CEO) Mitch Gold, and the Board?

Chris Henney: Absolutely. Not so much with the board, but with individual members of the board. At social levels. Mitch and I are very cordial.

X: Does he seek your advice from time to time?

CH: I wouldn’t say that, and I don’t proffer it. We talk …Next Page »

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Cambridge, MA drug giant Biogen Idec (NASDAQ:BIIB) and Hawthorne, NY-based Acorda Therapeutics (NASDAQ:ACOR) announced today that Biogen Idec has acquired the rights to develop and commercialize Acorda’s multiple sclerosis drug, Fampridine-SR, in markets outside the U.S. Acorda will receive an upfront payment of $110 million and additional payments of up to $400 million, and retains commercialization rights to Fampridine-SR in U.S. markets. The deal increases the Cambridge company’s MS drug footprint, which already includes Biogen drugs Avonex and Tysabri. The latter drug has come under scrutiny recently for its link to a severe brain infection called progressive multifocal leukoencephalopathy, or PML.

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Biogen Idec (NASDAQ:BIIB) reported a tenth case of a serious brain infection in a patient taking Tysabri, the Cambridge, MA-based company’s drug for multiple sclerosis and Crohn’s disease. The news was disclosed late last Friday on the company’s website (pdf here). Luke wrote back in December about the history of Tysabri, which was pulled from the market in February 2005 after two cases of PML and returned to the market under a strict monitoring program in July 2006.

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If you don’t already count EMD Serono among the leaders in research of multiple sclerosis treatments in the Boston area, perhaps you haven’t talked to EMD chief executive Fereydoun Firouz. For EMD Serono—the U.S. affiliate of German chemical and drug powerhouse Merck KGaA and its Swiss biotech unit Merck Serono— the Boston area is home to a multi-pronged effort to develop new drugs for multiple sclerosis as well as other neurodegenerative diseases, cancer, and fertility-related conditions.

Yet there’s reason to pay extra attention to EMD’s focus on MS drug research. Merck Serono in late April revealed impressive data on a pill form of Cladribine, which could become the first oral MS drug approved in the U.S. Oral drugs for MS are a potential alternative to the current standard treatment, injections of interferon beta. German Merck (not to be mistaken for Whitehouse Station, N.J.-base drug giant Merck & Co. (NYSE:MRK)) markets an interferon beta product marketed as Rebif, which is a rival to Cambridge, MA-based Biogen Idec’s (NASDAQ:BIIB) version, Avonex. Biogen is also developing an oral MS drug, which is in late-stage clinical trials, hoping to compete with EMD in that business as well.

To understand how vital the MS drug market is to German Merck, one only has to look at the company’s balance sheet. Rebif was the company’s No. 1 pharmaceutical product last year with about $1.8 billion in sales, which accounted for about 17.5 percent of the company’s total revenue.

Firouz tells Xconomy that he’s quite aware of EMD’s Boston-area competitors in MS drug research, but he emphasizes that his company is focused on advancing research in the field more than besting rivals. Multiple sclerosis is a chronic disease in which the immune system attacks the fatty tissue that protects nerve fibers, resulting in uncontrolled movements, numbness, and paralysis. About 400,000 Americans have MS. EMD, which employs about 650 people in Massachusetts, revealed in March the opening of a lab in Cambridge to house 50 researchers focused on MS and neurodegenerative diseases. The lab happens to be in Kendall Square, the same section of town where Biogen is headquartered. Genzyme (NASDAQ:GENZ), which is developing Campath for MS, has its corporate home there too.

EMD hasn’t decided whether Kendall Square is a long-term address for the company, Firouz says. Next year, the company plans to complete an expansion of its research labs in facilities under construction north of Boston in Billerica, MA, to accommodate 100 new scientists. (The firm also has a protein drug plant in Billerica and its main research and corporate facility in Rockland, MA, south of Boston.)

We caught up with Firouz recently to discuss the firm’s MS research strategy. The following are some excerpts from that conversation:

Xconomy: How strongly does the Boston area factor into your growth plans?

Fereydoun Firouz: On the research side, we are building …Next Page »

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Boston is the biggest center of life sciences in the Xconomy network, and by our analysis, the Bay State’s biotech sector is also the best equipped to survive the economic crisis.

I reached this conclusion by combing through public company filings of more than 70 life sciences companies in Boston, Seattle, and San Diego. For all those companies, I asked the two most important questions about their financial health: How much cash does the company have in the bank, and how fast is it burning through it?

The good news for Boston is that it has a lot of companies with a lot of cash. Of the 40 companies that reported quarterly financial results through the end of September, 15 of them had war chests with more than $100 million. A subset of that group—10 companies—are also quite profitable, including Genzyme, Biogen Idec, and Thermo Fisher Scientific, to name a few. By comparison, San Diego has 10 companies with more than $100 million in reserves, and just three companies that are consistently profitable. Seattle has two companies in the $100 million cash club, and just one profitable operation (Sonosite, the ultrasound device maker).

Of course, there’s plenty of misery and anxiety to go around in Boston, too, as you’ll see below. Here’s a rundown of the 40 companies I analyzed, in alphabetical order. It’s not a comprehensive list, so if you’d like to nominate an operation that was left out, please send us a note at editors@xconomy.com.

—Abiomed (NASDAQ: ABMD). The Danvers, MA-based medical device company had $50.6 million in cash and investments at the end of September and a $6.3 million net loss in the third quarter.

—Alkermes (NASDAQ: ALKS). This Cambridge, MA-based company burned through about $47 million of its cash in the first nine months, but it still had $425.8 million left at the end of September.

—Alnylam Pharmaceuticals (NASDAQ: ALNY). The Cambridge, MA-based developer of RNA interference drugs doesn’t have any products on the market, but it actually has more cash now than it did at the beginning of the year because of partnership deals. Alnylam had $520 million in cash and investments at the end of September, and expects to close the year with more than $500 million. …Next Page »

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Within the first five minutes of sitting down for an interview with Kleanthis Xanthopoulos, I could see this guy likes to think big. The idea behind his company, Regulus Therapeutics, is to show that a young technology called microRNA has the same sort of potential that gene-splicing techniques represented in the 1970s and targeted antibody drugs did in the 1980s. Xanthopoulos’ message is that this will take a long time, but when it pays off, it will pay off big.

“Companies like Biogen, Genentech, and Amgen were built on that powerful concept,” Xanthopoulos said when I visited his office in Carlsbad, CA a couple weeks ago. “Monoclonal antibodies went through a 15- to 20-year incubation period. It typically takes that long for a transformational technology to yield a tangible drug.”

Regulus is the progeny of a couple other companies built on big ideas. It’s a 50/50 joint venture between Cambridge, MA-based Alnylam Pharmaceuticals (NADSAQ: ALNY), an RNA-interference drug developer, and Carlsbad, CA-based Isis Pharmaceuticals (NADSAQ: ISIS), a pioneer in antisense drug technology. These companies pooled their intellectual property in September 2007 to test the still far-out concept of drugs that block microRNAs. These tiny strands of RNA weren’t discovered until 1993 in worms, and not until 2001 in humans. They are thought to hold huge potential as therapeutics, because they can affect not just one gene or protein in isolation, but full networks of genes—a strategy which might be useful in treating complex diseases like diabetes or autoimmunity, where multiple genes can get fouled up.

Xanthopoulos has some reason to be comfortable talking about a 20-year vision. Before Regulus was even six months old, it was approached by the world’s second-biggest pharmaceutical company, GlaxoSmithKline. In April, Regulus signed a collaboration with Glaxo worth $20 million upfront and as much as $600 million to develop microRNA drugs for inflammatory diseases.

Still, the work is at very early stages. The company hasn’t publicly identified a lead drug candidate. It’s going to be another 18 to 24 months before Regulus can expect to get its first drug tested in humans, Xanthopoulos says.

Regulus is pursuing this work with a staff of 22. Xanthopoulos, an Xconomist, was previously a managing director at Enterprise Partners in San Diego, and was a co-founder and CEO of Anadys Pharmaceuticals (NASDAQ: ANDS). Earlier in his career, in the mid-1990s, he was a section head within the National Institutes of Health, where he worked on the Human Genome Project.

During his days at the NIH, Xanthopoulos and his colleagues looked at long stretches of the 6-billion letter sequence of the human genome and saw vast areas that were “non-coding”—they didn’t appear to provide instructions for making any molecules that performed any sort of bodily function. Those stretches were branded “junk DNA” for years, wrongly. “It was right under our noses. We thought it was uninteresting, but it was,” Xanthopoulos says. …Next Page »

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Late last year a fire destroyed the biochemistry department at the Southern University of Chile and dealt a severe blow to its researchers. But thanks to Seeding Labs, a non-profit based in Cambridge, MA, the labs might soon be up and running again. The organization collects discarded lab equipment, sorts and packs it, and ships it to scientific institutions in developing countries.

“We see ourselves as a kind of angel investor,” says Seeding Lab founder and executive director, geneticist Nina Dudnik. “We can give our fellow scientists in developing countries a kick-start. The equipment makes it possible to get research done, publish articles, attract international funding and in the end build a self-sustaining lab through international grants.”

Seeding Labs was started five years ago by a group of graduate science students at Harvard. Almost all of the founders had worked in developing countries.

“I had worked at an agricultural research institute in the Ivory Coast in West Africa which had a molecular biology department,” Dudnik says. “When I came to Harvard I was struck by the stark differences in resources. Here, if you need something, you can order it in the morning and it comes the next day. In West Africa we would have to wait for months. Often the only way to get reagents was to ask a colleague who was going to a conference to pick them up.”

So far, Seeding Labs has sent equipment to 20 labs in 12 countries in Latin America and in Africa. The recipients—or their co-sponsors—pay for the shipping.

During its early years, Seeding Labs got its equipment from the academic sector, mainly from Harvard. But this year the organization has also started to collect used hardware and unused supplies from the private sector.

“We got an incredible generous donation from Biogen Idec—It consisted of lab equipment and consumables sufficient to send to five labs,” Dudnik says.

The Biogen Idec donation was organized by Mahin Aratsu, at the company’s neurobiology discovery department in Cambridge. “A co-worker had seen a flyer from Seeding Labs and had brought it over,” says Aratsu. “I thought it was a perfect opportunity to clean up our labs and get rid of equipment and send it over to places that would probably use it a lot more than we did. It turned out that our immunology department did something similar after we did, and we are hoping to continue this on at least every couple of years.”

The supplies and equipment collected at Biogen Idec range from test tubes and petri dishes to centrifuges and gel electrophoresis systems. After being packed up by a group of about thirty volunteers, part of the donation is now in Seeding Labs’ warehouse, waiting to be shipped to the Southern University of Chile.

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Seems like most of the Massachusetts life sciences industry is out in San Diego at BIO this week—along with Governor Patrick—plugging the newly signed $1 billion funding bill. But those left in town had a few bits of interesting news to share as well.

—Blue Cross Blue Shield of Massachusetts became the first health insurer to team up with the newly launched Google Health. Perhaps BCBSMA was inspired by Beth Israel Deaconess Medical Center, one of the first two hospitals to link up with Google Health, which gives patients a secure online environment for managing their own health information.

—Clinical research and consulting firm Parexel International (NASDAQ: PRXL), of Waltham, MA, put up $182 million for the U.K.’s ClinPhone, which provides voice response and electronic data capture for drug companies.

—Genzyme (NASDAQ: GENZ) of Cambridge, MA, filed for in the U.S. and Europe for approval of a drug called Mozobil that would aid the treatment of lymphoma and other cancers by improving the efficiency of stem-cell harvesting.

—Boston’s American Well launched a 24/7 online healthcare marketplace which pairs patients and doctors for live medical consultations via webcam, instant messaging, or phone.

—With a shareholder vote to decide who will sit on Biogen Idec’s board finally at hand, nominee Alex Denner—a top strategist for activist investor Carl Icahn—told Bob about what he will do if he gets a seat. First priority: reinvigorating the Cambridge, MA, firm’s research operations.

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Biogen Idec (NASDAQ: BIIB) pulled off a trifecta today as the third major advisory firm for corporate elections, Proxy Governance, recommended shareholders vote in favor of the biotech’s own slate of directors instead of those nominated by activist investor Carl Icahn. Earlier in the week, RiskMetrics Group/ISS Governance Services and Glass, Lewis & Co. also said Icahn failed to make his case for ousting the Biogen directors.

The trio of recommendations “seem to make it more likely that Biogen’s slate will prevail,” said Eric Schmidt, a biotech analyst with Cowen & Co. in New York, in an e-mail. The reason is that big institutional investors, like Fidelity or T. Rowe Price, often have covenants that require them to justify a decision to overrule an advisory firm, which takes extra work and exposes the firm to risk, said one analyst who couldn’t speak for attribution.

Icahn had the fourth-largest stake among investors in Biogen, with 3.4 percent of the company through March 31, according to data compiled from regulatory filings by Yahoo Finance. FMR, Primecap Management, and Barclays Global Investors have larger stakes.

The shareholder vote is scheduled for June 19 in Cambridge, MA.

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Biogen Idec got a boost today in its proxy battle with billionaire investor Carl Icahn. Two big firms that advise institutional investors and mutual funds on how to vote in corporate elections—RiskMetrics Group/ISS Governance Services and Glass, Lewis & Co.—recommended that shareholders vote for the Cambridge, MA-based biotech company’s slate and reject Icahn’s three nominees.

RiskMetrics reasoned that “The dissident has not met its burden of proving that board change is warranted at Biogen. Absent a showing that the incumbent board has failed in some fashion, we find it difficult to support the removal of directors,” according to a quote from its report cited today by Biogen (NASDAQ:BIIB).

Glass, Lewis & Co.’s comment backed up the sentiment: “We believe that shareholders should support management’s nominees. In our opinion, the current board and executives have created substantial value for shareholders and we believe that the company has solid growth opportunities as a stand-alone entity.”

The wrangling over Biogen started back in August when Icahn increased his stake in the company. He 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, Icahn’s investment tanked when Biogen abandoned a sale, saying it didn’t receive any binding offers, and the stock lost $5 billion of its market value. Icahn has since argued that the sale process was doomed from the start, and that the board had “very little” input.

The shareholder votes will be tallied at the company’s annual meeting on June 19.

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Activist investor Carl Icahn launched another salvo in his battle to force a sale of Biogen Idec (NASDAQ: BIIB), filing a suit yesterday in a Delaware court demanding that the Cambridge biotech turn over documents related to its unsuccessful effort to sell itself last year. Icahn has previously charged that the sale process, which was carried out under pressure from him, was deliberately undermined by Biogen officials—an accusation the company has strongly denied.

Now comes the lawsuit. Reuters broke the news yesterday. According to that article, Icahn’s complaint, filed in Delaware Chancery Court, repeats his earlier accusations that the confidentiality agreements prospective buyers were required to sign before they could talk to two key Biogen partners, Elan Pharmaceuticals and Genentech, were too restrictive. Both companies hold some change-of-control rights on key Biogen drugs—Elan on the multiple sclerosis and Crohn’s disease drug Tysabri, and Genentech on cancer-fighting Rituxan. Biogen’s restrictions on how suitors could talk to the companies, Reuters said Icahn charged in the complaint, “prevented any potential bidders from learning where Biogen’s third-party partners stood on exercising change-of-control options on key Biogen drugs.”

In the wake of the failed sale, Icahn has nominated candidates for three Biogen board seats that are up for election at the company’s annual meeting to be held at a still-unspecified date this spring. In the lawsuit, according to Reuters, Icahn said the records he wants Biogen to relinquish could help the biotech’s stockholders decide whether a new slate is warranted.

Naomi Aoki, a spokeswoman for Biogen, said that Biogen does not consider Icahn’s request valid. “We believe his request is simply another in a series of manipulative tactics to advance a single-minded agenda of forcing a sale of the company, this time by using the request to propagate his wild conspiracy theories about the sale process,” she said this morning.

Icahn’s suit was prompted by Biogen’s rejection of a request made by the investor on March 28 for all documents related to the design and conduct of the sale process, including minutes from board meetings, Aoki said. At that time, Icahn indicated he wanted to look at the materials and decide what information should be provided to shareholders ahead of the annual meeting and vote on board members.

Biogen refused to hand over the information that Icahn demanded in part because CEO Jim Mullen and the company already shared much of it at a JP Morgan conference in early January, Aoki said. What’s more, she said, Icahn himself was a potential bidder on the company, and has already received much of the information he’s now seeking. “He has the information he says he’s looking for,” Aoki said. To disclose anything beyond what is already disclosed, which would include confidential internal documents, “we believe would compromise and negatively affect our ability to maximize value for shareholders in any future sale process,” she said.

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Looks like Carl Icahn isn’t the only activist investor yanking local life sciences firms’ chains these days. Just a few weeks after a California fund manager called for a sale of cancer-diagnostics firm Exact Sciences (NASDAQ: EXAS), the Marlborough, MA-based firm announced that it’s putting itself on the block. (Seriously, what is it with all the acquisition news the last couple of days?)

In an announcement this morning, Exact said it has hired Boston-based investment bank Leerink Swann to help its board “in its evaluation of strategic alternatives for the business, including, but not limited to, the sale of Exact or merger with another entity.”

Exact’s announcement follows close on the heels of a prodding SEC filing made by Kenneth Luskin, founder of Santa Monica, CA-based Intrinsic Value Asset Management. The filing said that Luskin—whose fund owns 8 percent of Exact’s common stock—had recently “communicated with [Exact] and to members of its board of directors great concerns about serious deficiencies in the management of the [firm].” (The filing doesn’t get more specific on those “deficiencies,” but Exact has been criticized in some quarters for its handling of the regulatory issues surrounding its noninvasive colon-cancer screening test; the test was recently added as an option in American Cancer Society guidelines for screening for the disease.)

Luskin’s filing, dated February 28, went on to say that, “Over the last week, the filing person has come to the conclusion that the sale of the Exact Sciences through a formal auction process, led by mergers and acquisitions team from a highly reputable investment banking firm, is the best and safest way to maximize shareholder value. Therefore, the filer is formally requesting that the board of directors immediately retain an outside investment firm to be charged with selling the company to the highest bidder in a process to be conducted over a period not less than 30 days or more than 90 days.” Reputable investment banking firm? Check. Exploration of a sale? Check. Timeline? Not specified in Exact’s announcement. Exact says it’s not likely to make any more announcements about a potential sale or merger until the board has approved a transaction.

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Shares of Biogen Idec (NASDAQ: BIIB) are climbing back up today after taking a dip yesterday on news that Tysabri, which Biogen markets in partnership with Ireland’s Elan, may cause liver damage. The stock closed down a couple of percent yesterday, at $60.13, but was trading back up around $61 at noon.

To be clear—and maybe this is aiding the bounceback in Biogen’s share price—the liver risk is not really new news. According to FDA spokesperson Sandy Walsh, it was discussed back in July when an FDA advisory committee met to consider the approval of Tysabri for Crohn’s disease. (Tysabri had previously been approved for treating multiple sclerosis.) What’s more, language warning about the risk was added to the labeling for the drug in January, when the Crohn’s approval was granted. The reason it popped up on the radar screen yesterday, she says, is that the manufacturers voluntarily decided to send a letter to physicians to ensure that they were aware of the warning.

In the letter, Biogen and Elan write that some patients treated with Tysabri have had elevated blood levels and other signs of liver damage as early as six days after their first treatment. What’s more, these sorts of signs recurred in some patients who were “rechallenged” with the drug, “providing evidence that Tysabri caused the injury.” The letter warns that treatment with Tysabri should be halted in patients with jaundice or other evidence of liver damage.

The new warning is based on 28 cases of liver damage observed in postmarketing surveillance of Tysabri users, according to an article by Bloomberg reporters Luke Timmerman and Catherine Larkin. In each case, the injury was reversible, and none of the patients died or required a liver transplant, the Bloomberg piece adds.

A host of different types of drugs cause liver side effects and, given that more than 21,000 patients were taking Tysabri at the end of last year, the risk associated with Tysabri doesn’t look to be a huge one. It likely came to light because Tysabri is one of the most closely scrutinized drugs out there. It was pulled from the market in 2005 after three users developed a dangerous brain infection called progressive multifocal leukoencephalopathy (PML) and reintroduced the next year under a strict prescribing and monitoring program.

But even though no Tysabri users have developed PML since the drug’s reintroduction, the drug’s safety profile is, for some, an ongoing source of skittishness. Indeed, many believe that it’s a big part of what tanked Biogen’s attempt to find a buyer for the company late last year. Our sources say that billionaire investor Carl Icahn, who has agitated for a Biogen sale, understands he’ll likely need to wait for safety data on Tysabri to accumulate and quell would-be buyers’ fears. Of course, if the company continues to have to add warnings to the label, even relatively mild ones, the additional time and scrutiny could have the opposite effect.

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Vertex Pharmaceuticals (NASDAQ: VRTX) is turning to the market for an infusion of new cash after a series of delays and disappointments that have nudged the Cambridge, MA-based firm’s stock steadily downward for the last several months. The biotech, whose shares were trading around $40 in September, last night priced an underwritten offering of 6 million shares of its common stock at $17.14 per share. At the same time, the firm inked a deal to sell $250 million worth of convertible senior subordinated notes due in 2013. If over allotments are exercised in both categories, the gross receipts from the offerings could surpass $400 million.

Vertex could use the cash. The company announced on Monday after the end of trading that it expects to spend a half billion dollars or so on R&D in 2008—a figure that seemed to concern some analysts and investors. Yesterday’s close of $17.14 was down almost 6 percent from Monday’s close.

The Motley Fool’s Brian Lawler points out that Vertex’s R&D budget is now about half the size of Biogen Idec’s (NASDAQ: BIIB), even though Vertex has only one drug approaching FDA approval—the hepatitis C treatment telaprevir—and an eighth the market cap of its fellow Cambridge biotech. But even so, likely because of the massive potential market for a hepatitis C drug, investors close to Vertex seem to think the company is a smart buy. Research firm Morningnotes wrote in a note yesterday afternoon (funny, I know): “We are hearing the common issue was covered inside of the first hour of marketing by the top shareholders.” The convertible note offering was oversubscribed as well, the note added.

Shares of Vertex opened at $18.41 on the news of the deal, up 7.4 percent from yesterday’s close.

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We at Xconomy are anxiously waiting to see what activist investor Carl Icahn has to say about the B word (Biogen Idec) when he puts bits to screen on his newly announced blog. But in the meantime, yesterday’s quarterly earnings call gave us a little taste of what Biogen CEO Jim Mullen has to say (directly and indirectly) about Mr. I., his recent attempts to force a sale of the company and put his own people on the board, his fiery press release from last week, and the potential effect of all that on Biogen’s staff.

Mullen opened with the news that Biogen (NASDAQ: BIIB) has achieved its 2007 growth targets. The company had $3.2 billion in revenues, an 18 percent increase over 2006, and its non-GAAP earnings grew by 22 percent. The last quarter was particularly strong, he added, “and I think that is despite some of the uncertain events in the fourth quarter.”

Chief among those “uncertain events,” of course, was the attempted sale of the company. Mullen outlined why Biogen embarked on that effort: “We had received expressions of interest, first. Second, after the MedImmune and AstraZeneca transaction, [editor's note: a $15.6 billion Icahn-orchestrated deal] there was a prevailing view in the market that big pharma companies were very interested in acquiring biotech companies like Biogen Idec. The timing of our process was ultimately triggered by Mr. Icahn’s offer and our investors, which include Mr. Icahn and many others, strongly encouraged us to do so. The management and the Board felt we should test the thesis in a comprehensive and objective way to see whether it could result in a transaction that would result in greater returns to shareholders than the plan that we have described.”

Mullen went on to outline and defend the sales process, expanding a bit on what he said on the subject last month at the JPMorgan conference in San Francisco: “Our Board, in consultation with management and advisers, developed and executed a sale process that was professional, objective and thorough and was designed to elicit the highest possible value for the company’s shareholders. We engaged two investment banks that were already intimately familiar with the company’s business. These two investment banks happened to be the same two that executed the MedImmune/AstraZeneca transaction. These bankers proactively contacted a range of potentially interested buyers, close to 20 in all, to solicit interest.”

Interested parties had the chance to do “thorough due diligence,” Mullen went on to say—a counter to Icahn’s complaint that would-be buyers didn’t have sufficient opportunity to negotiate with Biogen partner Elan early enough in the process. “Despite the Monday morning quarterbacking going on about this or that decision around the process, all of which was done in concert with our financial advisers and other advisers, the basic fact remains that no company put a bid on the table.”

Mullen added—and here’s a rare point of agreement between him and Icahn—that in the end he thinks that potential buyers likely balked at the risks associated with Tysabri, a Biogen drug for multiple sclerosis and Crohn’s disease, that has been linked to a rare and potentially fatal brain infection called progressive multifocal leukoencephalopathy (PML). And he refuted the much-reported speculation that Biogen itself is considering making a big acquisition—an idea that particularly irked Icahn. “In late 2006 and early 2007, we concluded that there were no significant acquisition targets that met the test of strategic fit at attractive valuations and we, therefore, returned $3 billion to shareholders in a Dutch auction,” Mullen said. “We do occasionally see smaller acquisition targets that could be executed for cash and accommodated into our current business forecast. At this time, our valuation of the acquisition market for a large company is that no company meets the dual test of strategic fit at attractive valuation.”

In the Q&A portion of the call, Bill Tanner, an analyst at Leerink Swann, asked how disruptive Mullen thought it would be if the company was forced to revisit the idea of a sale in the case of a board shakeup. “It sounds like the last iteration was somewhat painless,” Tanner added.

“Well, somewhat painless is probably an overly optimistic description of the last process,” Mullen responded. A key challenge, he added, “is how do we keep people focused on the ball and how do we recruit in great talent to continue the momentum in the business? Certainly, a lot of distractions around that aren’t helpful for that or business development…I don’t think the right way to run the business is to have, for anybody’s sake, a permanent ‘For Sale’ sign out on the front lawn. So I think we have to get back to the business, focus on prosecuting and going forward and if circumstances and conditions change, we will address those at that time.” Though employee turnover rates were solid in the fourth quarter, Mullen said, “I am actually more interested in what happens in the first six months of this year, because every headhunter used that as an opening to call everybody in the place.”

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Cambridge, MA-based ImmunoGen (NASDAQ: IMGN) has snagged a $1.5 million milestone payment from Biogen Idec (NASDAQ: BIIB), the latest in a string of positive signs for a company that has struggled for decades, as David described last week. The payment was triggered by Biogen filing for FDA permission to being clinical trials of an anti-tumor agent that combines the two companies’ technologies.

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Two prominent local academics are among a group of three people to be nominated to Biogen Idec’s board of directors at the company’s upcoming annual meeting, the Cambridge, MA-based biotech giant announced today. Biogen (NASDAQ: BIIB) received notice of the planned nomination came from entities affiliated with billionaire investor Carl Icahn, who as of January 24 owned nearly 10.4 million Biogen shares, or just under 4 percent, up from 8.8 million, or 3 percent, reported at the end of 2007’s third quarter.

Icahn’s move, coming after his unsuccessful push late last year for a sale of Biogen, is no big surprise. About a month ago Bob took a look at Icahn’s history with companies like ImClone and MedImmune and concluded that “given his track record, it seems reasonable to think that the activist investor will become more active on the Biogen front, perhaps beginning with trying to win a board seat and pressing more vigorously for whatever changes he thinks are needed in order to bring the company’s stock price in line with what he believes is the true value of the company.”

Indeed, two of the three people on the slate that Icahn intends to nominate at Biogen’s 2008 annual meeting (which will likely take place in late spring or early summer) are current members of the ImClone board: Alexander Denner, the managing director of two of Icahn’s investment funds, and Richard Mulligan, a professor of genetics at Harvard Medical School and the director of the Harvard Gene Therapy Initiative. Mulligan, a MacArthur “genius” award winner, is joined on the list by fellow Harvard Medical School professor Anne Young. Young is the chief of the neurology service at Massachusetts General Hospital, and the founder and scientific director of the hospital’s Institute for Neurodegenerative Disease.

Impressive credentials, to be sure, but electing all three to the board might necessitate bumping out some other big names, such as Cecil Pickett, Biogen’s president of R&D, or Phillip Sharp, MIT professor, Nobel laureate—and Biogen co-founder. (Mulligan, by the way, did part of his training in Sharp’s lab at MIT’s Center for Cancer Research.) That’s because Icahn is also proposing to amend Biogen’s bylaws to fix the board’s size at 12 members; that’s the size it is now, but under the current bylaws the number of directors is not fixed. The current terms for Sharp, Pickett, and longtime board member Lynn Schenk are all expiring this year, and each would have to be re-elected to remain on the board. (A fourth director, Thomas Keller, will have reached mandatory retirement age by the time of the annual meeting).

All of which sets the stage for some tricky jockeying for position over the next few months. Biogen of course had no comment beyond the statement that its board will “review the notice and consider it in light of the best interests of all shareholders of the Company.” The board’s options include putting up a completely separate slate of board nominees, or including some or all of Icahn’s picks on its own slate. And whether shareholders will be able to vote for each nominee individually or will be required to vote for one slate or the other depends on the specifics for the proxy that Icahn will ultimately file to make the nominations official. When exactly that proxy will be filed remains to be seen. Nothing like a little election drama to go with this year’s election drama, eh?

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In a call-in interview on CNBC yesterday, investor Carl Icahn, who recently pushed unsuccessfully for a sale of Biogen Idec (NASDAQ: BIIB), expressed his belief that the fundamentals are still there for the company to be sold. Icahn spoke about several issues, including the state of the stock market (”it doesn’t look good”), and on the Cambridge, MA-based biotech he was to the point: “with Biogen, I still have belief that, you know, it’s a great company and that somebody will buy them. And we’re still looking at that and still in contact on that.”

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Biogen Idec (NASDAQ: BIIB) of Cambridge, MA, and Ireland’s Elan announced this afternoon that the FDA has granted an expanded approval for their drug Tysabri as a treatment for Crohn’s disease. The drug was previously approved to treat multiple sclerosis.

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