Biogen Idec will officially be CEO-less starting tomorrow. James Mullen, Biogen’s chief executive, retires on June 8 after a decade on the job and the Cambridge, MA-based company hasn’t named his successor.

The company (NASDAQ:BIIB), which also has significant operations in San Diego, said this afternoon that its in the final stages of selecting the firm’s future head honcho and expects to reveal its choice in “the coming weeks.” Whether the company, the world’s largest maker of drugs for multiple sclerosis, has even made an offer or picked someone for the CEO post is unclear. Biogen spokeswoman Christina Chan declined to comment on these specifics today.

In the meantime, the firm said today that the company’s chief operating officer, Robert Hamm, is retiring from the company on Dec. 31, 2010 after 16 years at the company.

Biogen’s search for a new chief executive began around the time Mullen announced his retirement from the CEO post and the firm’s board on January 4. Mullen, who became CEO of Biogen in 2000, has taken some shots from billionaire investor Carl Icahn in recent years for the company’s poor stock performance compared with its peers in the biotech sector. Icahn also has blasted Biogen’s senior management for the company’s inability to launch a new drug on the U.S. market since the FDA approved its hit MS product natalizumab (Tysabri) in November 2004.

Until Mullen’s successor is named, the company’s senior executives will report to the firm’s chairman, William Young. Young talked to Xconomy in February about the company’s high-profile CEO search, saying that Biogen may opt to hire a scientist for the firm’s No. 1 job.

In any case, the CEO job at Biogen is one of the biggest jobs in the biotech world. The firm’s $4.4 billion in annual revenue and nearly $1 billion in profit last year makes it one among a select group of biotech outfits that actually makes money. Its market cap at the close of the market today was $12.7 billion, which is surpassed in the biotech arena only by Amgen (NASDAQ:AMGN), Celgene (NASDAQ:CELG), Genzyme , and Gilead Sciences (NASDAQ:GILD).

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Another eventful week for New England’s life sciences companies, with big changes potentially in store for two of the biggest firms.

—Biogen Idec’s new board chairman, Bill Young, told Luke that the committee tasked with finding a replacement for outgoing CEO Jim Mullen is first and foremost looking for somebody “who has managed and understands the role of science in a biotech company, and how that needs to be bridged to the commercial side of things.” Mullen, who announced last month that he would step down after a decade at the helm of Cambridge, MA-based Biogen (NASDAQ: BIIB), has a business background rather than a scientific one

—Billionaire investor Carl Icahn nominated four candidates, including himself, for election to the board of Cambridge-based drugmaker Genzyme (NASDAQ:GENZ), which has been under fire following manufacturing problems, supply shortages, and other troubles. Genzyme indicated that it would evaluate Icahn’s nominees and announce its own slate; all nine seats on the company’s board are up for re-election this spring.

—Hamid Tabatabaie, the CEO of LifeImage, told Ryan that the Newton, MA-based health IT startup is partnering with Hopkinton, MA-based storage giant EMC (NYSE:EMC) on a cloud-based service for sharing medical images over the Internet. Dubbed “Time,” for Trauma Image Management and Exchange, the system is set to be unveiled early next month and has built to run on the EMC “Atmos” cloud storage and computing platform.

—Luke chatted with Celldex Therapeutics CEO Anthony Marucci about what it takes to run the small public company (NASDAQ: CLDX), which began as a spinoff from a Medarex division near Phillipsburg, NJ and grew through the recent acquisitions of Needham, MA-based Avant Immunotherapeutics, and Branford, CT-based Curagen. Chief among his tactics for building up the firm’s antibody drug business: an every-other-week commute by car between New Jersey and Needham.

—Sermo CEO and founder Daniel Palestrant told Ryan about his Cambridge-based firm’s plans to revamp its social networking website for doctors, shifting from the Java-based approach it has always used to the Ruby on Rails open source Web programming language. The move, aimed in part at helping Sermo cut its operational costs, combined with layoffs that Sermo made in December, should help the startup become profitable “very soon,” Palestrant said.

—Ryan profiled the efforts of Westborough, MA-based GenomeQuest to become the Google of DNA data searches. CEO Ron Ranauro explained how the unprecedented rate at which researchers are generating genetic data and life science companies’ growing reliance on cloud computing are coming together to boost demand for GenomeQuest’s technology, which researchers use to analyze and manage the genetic information during drug development and other biomedical research.

—Ra Pharmaceuticals, a stealthy startup in Boston, reported in an SEC filing that it had raised $10.3 million of a planned $27.6 million round of equity financing. The firm’s CEO, Transkaryotic Therapies co-founder Doug Treco, is an Entrepreneur-in-residence at Morgenthaler Ventures, where Ra is being incubated, according to the venture firm’s website.

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The future leader of Biogen Idec might be as familiar with a petri dish as he or she is with a spreadsheet.

That’s according to Bill Young, who took over as Biogen’s chairman of the board on January 1. Young is on the board committee that’s searching to replace CEO Jim Mullen, who announced last month that he’s stepping down after a decade at the helm of the Cambridge, MA-based biotech giant (NASDAQ: BIIB). I met with Young last week while he was visiting a startup in Seattle.

“We have a whole list of criteria, but the most important of which is that we find someone who has managed and understands the role of science in a biotech company, and how that needs to be bridged to the commercial side of things,” Young says. “That may mean it’s a scientist or someone who understands how that fits into what biotech companies are designed to do, which is develop products.”

The job is one of the higher-profile gigs in biotechnology. Biogen, which also has operations in San Diego, is the world’s largest maker of multiple sclerosis drugs. It generated $4.4 billion in revenue last year, and came close to a $1 billion annual profit in 2009. Biogen had 4,750 employees worldwide heading into this year, and a stock market valuation of $15 billion that ranks it behind only Amgen, Gilead Sciences, and Celgene among biopharmaceutical industry peers.

Yet Biogen has its share of headaches. Uncertainty about the side effects of its fastest-growing multiple sclerosis drug, natalizumab (Tysabri), are a constant worry. Billionaire investor Carl Icahn ripped the company last year for poor R&D performance that he said added up to “failed leadership.” Icahn persuaded shareholders to give his slate two board seats, and he already has given notice that he wants three more in this year’s board election. This fight has gotten personal at times, like when Icahn reminded shareholders that Mullen was paid $60.8 million in total compensation, combining salary, bonus, and stock options over a five-year period, while Biogen stock declined from $66.61 to $47.63.

Bill Young

Mullen sounded battle-weary last month when he spoke at a Goldman Sachs conference about this exit: “If you’re going to have a mid-life crisis, you can do one of two or three things, right? Sports cars I’m too big for. Mistresses are not approved at home. Maybe a career change is what’s in order. I decided to go with Number 3. I think it’s a good time, for, you know, a transition.”

While Mullen looks for something else to do, he doesn’t appear to have groomed an obvious internal successor. It’s also worth noting that Mullen has a business background, not a scientific one.

“There may be some internal candidates we consider, but they are largely external,” Young says. “We have a lot of people interested. As you can imagine, there are not many large, cash flow positive biotech companies around these days. Many have been acquired or haven’t reached that stage yet. Biogen Idec is certainly one of those. There’s a lot to work with there. Good culture, strong science. Jim [Mullen] has been there 20 years, done a good job, but I think he was ready to try something else. That’s OK and appropriate. People will make that decision from time to time.”

The search committee has hired … Next Page »

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Massachusetts biotech giant Biogen Idec (NASDAQ: BIIB) is considering a move from Cambridge to Weston, acording to a report in the Boston Globe. Citing Cambridge’s high real estate costs as motivation for the possible change, Biogen CEO Jim Mullen told Globe reporter Todd Wallack that a yet-to-be-built 350,000 square foot building on Boston Post Road “looks like it is the best fit for what we are doing,” though other sites are  under consideration. The Boston Business Journal first reported that Biogen was looking for a new site for its headquarters back in August.

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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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Call it the Icahn Effect. To help keep top executives, scientists, and other employees on board and productive in the face of ongoing uncertainty and anxiety over Carl Icahn’s efforts to force a sale of the company, Biogen Idec (NASDAQ:BIIB) has launched a retention program that offers key employees bonuses of up to 150 percent of their annual salary. Employees must remain continually employed at the company through March of 2009 to qualify for the bonus, unless a change in company control occurs before then and they lose their jobs involuntarily, according to a regulatory filing posted this afternoon.

The filing specifies that all key employees in the company are eligible for the bonus except CEO Jim Mullen, who opted out of the plan, according to Biogen director of public affairs Naomi Aoki. She noted that while the filing language indicates the plan is only for senior executive officers, in fact it is meant to meant to be used strategically for critical employees in all aspects of company operations—medical, scientific, operational, commercial.

“This is in response to continued shareholder activism,” she said, specifically citing “Carl Icahn’s actions and the impact that they could have on recruitment and retention going forward.”

The retention bonus is separate from the firm’s annual cash incentive plan, meaning employees could earn even higher percentages of their base pay when that is taken into account. Under the terms of the retention plan, the actual size of the bonuses will be based on whether the company meets the 2008 revenue and earnings per share goals (each count equally toward the bonus) spelled out in its cash incentive plan. “Depending on the Company’s performance against those goals, payments can range from 0% to 150% of the target bonus opportunity,” the 8-K filing said.

According to the filing, the program also contains a trigger clause that allows key personnel to receive the bonus if they lose their jobs involuntarily due to “corporate change in control or a corporate transaction.” Employees will apparently get the bonus if they are terminated before December 31, 2008, no matter how the company is doing. If they are terminated after that date, they would be entitled to the bonus they would have earned the following March under the terms of the retention plan.

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Carl Icahn is making no bones about it—he is not happy with the way Biogen Idec handled its efforts to seek a buyer for the company, and so now he’s moving to take matters more into his own hands. That was the point behind Icahn’s announcement Monday that he plans to advance a slate of three candidates for Biogen’s board at its upcoming annual meeting. But what he didn’t explain is the reason he only asked for three board seats when four are coming up for vote: because he has no interest in trying to knock Biogen co-founder and MIT Nobel Laureate Phillip Sharp, one of the four directors slated for reelection, off the board. He is also well aware that a sale of the company might take a while and is positioning himself for a longer-term effort.

Those are two insights provided by a source close to Icahn’s thinking who asked not to be named, combined with a closer analysis of the investor’s announcement.

As laid out in general terms in Icahn’s press release, the bid for three board seats at the upcoming election (the date of which is not yet set but will likely happen by late spring) is part of a longer-term strategy to position Icahn to take control of the board at the 2009 annual meeting, when four more seats will be up for reelection. If Icahn were to win three seats this year and four next, the resulting seven seats would be enough to control the 12-person board. (That’s assuming it remains a 12-member board; Icahn is also proposing that Biogen’s bylaws be amended to fix the number of board seats at a dozen.)

Icahn is, of course, an astute investor and likely was under no illusions that things would be easy when he pushed late last year for a sale of Biogen—for reasons I’ll get to in a minute. But, as Icahn said in his press release, “We believe that the process was flawed in a number of key respects and that the process was run to placate us and other large shareholders who we believe asked for Biogen to find a buyer.” In particular, the statement cited the confidentiality agreement that prospective buyers were required to sign before they could talk to Elan Pharmaceuticals, Biogen’s partner on the key drug Tysabri, which is approved for treating multiple sclerosis and Crohn’s disease. (Elan holds some change-of-control rights on Tysabri that, if exercised, could discourage a sale of Biogen). Icahn stated, “We also believe that the confidentiality agreement was so restrictive that certain potential bidders were not able to sign the agreement and therefore were not able to participate in the bidding.”

Biogen director of public affairs Naomi Aoki told me, as she has said to other members of the press, that Biogen “ran what can only be described as a thorough, comprehensive process that was in keeping with industry standards.” And at an investor meeting earlier this month, Biogen CEO Jim Mullen also defended the process, saying it was like making an offer to buy a home, contingent on a final inspection, according to the Boston Globe. But that clearly was not how Icahn viewed it. He saw it more as prospective buyers being asked to make a significant commitment to purchase before they could even fully inspect the goods—a process that could make them nervous from the outset. Or, put another way, if a prospective buyer is going to spend $20 billion or so, it would like to talk to Elan directly from the get-go.

Indeed, Tysabri is central to the deal. And the biggest issue with the drug is a rare, often fatal brain infection called progressive multifocal leukoencephalopathy (PML) that occurred in three Tysabri users. In response to those cases, the drug was pulled from the market in February 2005. In July 2006 it was reintroduced under a strict prescribing and monitoring program; while there have been no new cases of PML in Tysabri users since that time, one theory—or fear—is that people who take the drug over a prolonged period might be more prone to the infection. That risk of an increased rate of the infection going forward is one reason even if companies could have easily negotiated with Elan, a sale might have been tough.

Our information is that Icahn understands that the question marks around Tysabri could mean that a sale … Next Page »

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It’s a little bit of an odd week, with the Monday holiday and all the last-minute preparations for last night’s AWESOME battle of the bands (more on that soon), so I’m rounding up last week’s deals a little later than usual. The bonus is you get the first part of this week’s action as well.

—Woburn, MA’s LogMeIn, a provider of IT support and remote-connection services, registered for an $86.25 million IPO.

—Physicians-only social network Sermo inked a deal with Nature Publishing Group (NPG). The partnership will give Sermo’s 50,000 or so members online access to the full text of 10 of the medical journals that NPG publishes.

—MIT forged a five-year, $50 million research agreement with Italian energy firm Eni. Under the agreement, half the money will be used to help set up the MITEI (MIT Energy Initiative), spanning research, education, energy security efforts, supply and demand studies, and a variety of other energy-related programs at MIT, and half will go to establishing the Eni-MITEI Solar Frontiers Research Program.

— Pervasis Therapeutics, a regenerative medicine company in Cambridge, MA, closed $9.75 million in new funding from Flagship Venture Partners, Polaris Venture Partners, Highland Capital Partners, and Musket Research Associates.

—EMC virtualization subsidiary VMware (NYSE: VMW) acquired San Francisco-based Thinstall for an undisclosed sum. Wade explains how Thinstall’s technology lets corporate computer users run Windows programs on their desktops without actually installing them.

—Cambridge, MA-based Elixir Pharmaceuticals postponed what would have been the first Boston-area IPO of the year. The company, which is developing treatments for diabetes, obesity, and other metabolic diseases, had filed for an offering of five million shares, and set a range of between $14 and $16 per share.

—Genzyme spinoff PeptImmune of Cambridge, MA, raised a $8.2 million first tranche of a Series D round. The deal was led by New Enterprise Associates, MPM Capital, Hunt Ventures, Boston Medical Investors, and Silicon Valley Bank Capital, among others.

—Bedford, MA-based Hologic (NASDAQ: HOLX) sold the rights to Gestiva, a drug for preventing preterm birth, for $82 million to St. Louis, MO’s KV Pharmaceutical. The drug must earn FDA approval, however, for Hologic to collect the full sum.

—Art Technology Group (NASDAQ: ARTG), an e-commerce firm in Cambridge, MA, said it’s set to acquire Seattle’s CleverSet for some $10 million in cash.

—Finally, the last week saw a couple of new rumors of deals for Biogen Idec (NASDAQ: BIIB). Last Tuesday, billionaire investor Carl Icahn said in an interview on CNBC that he still believed that the Cambridge, MA-based biotech giant would be bought, despite its unsuccessful effort to find a buyer, which ended in December. Then, on Monday, came the news that Biogen CEO Jim Mullen had said in an interview with news service Mergermarket that the company could make an acquisition of its own this year, perhaps spending as much as $10 billion.

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Pharmaceutical suitors shied away from buying Cambridge, MA-based Biogen Idec (NASDAQ:BIIB) last fall because they were too afraid of the risks associated with acquiring a biotech, Biogen CEO James Mullen said in today’s Boston Globe. In San Francisco for this week’s JPMorgan investor conference, Mullen said that pharmaceutical companies are in general much more cautious than biotechnology firms, and that this culture clash ultimately contributed to sale discussions petering out. “They never would have pursued some of the drugs we pursued,” Mullen told the Globe.

Mullen hit a similar note during his conference remarks earlier in the week. Both the Globe and Reuters reported that the Biogen CEO acknowledged that potential buyers were worried about Tysabri, the MS treatment developed by the company and partner Elan. That drug was pulled from the marketplace a few years ago after being linked to a rare brain infection. Sales of Tysabri resumed in late 2006. However, Mullen told conference attendees, “I think there is a fair bit of fear, loathing and tort out there.”

In his interview with the Globe, Mullen noted that would-be buyers were also anxious about Biogen’s partnership agreements with Elan and Genentech involving, respectively, Tysabri and Rituxan, a treament for lymphoma and arthritis. Each partner has the right to buy out Biogen’s share of the co-developed drugs in the event of a change in the firm’s ownership.

Since much of Biogen’s value is associated with its share of sales of those drugs, it would be critical for a potential buyer to know Elan’s and Genentech’s intentions. But Roger Longman over at the In Vivo Blog reported back in December that Biogen evidently made potential bidders sign an agreement prohibiting them from negotiating with its key drug partners. “That means the prospect of buying Biogen wasn’t merely expensive, it was a complete crapshoot,” wrote Longman.

Although Biogen had previously declined to comment on this issue, Mullen confirmed in today’s Globe that the company did indeed block potential suitors from negotiating with its partners prior to making a bid. However, he stressed that any possible buyer would have had the chance to conduct such negotiations before finalizing a deal.

In the end, even though the company was widely expected to command a purchase price of up to $30 billion, it all added up to not a single bid. Biogen had put itself up for sale at the urging of activist investor Carl Icahn.

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Does anyone really think Carl Icahn is done with Biogen Idec? He pushed for a sale of the company, by most reports at a price around $80 per share. But as of yesterday’s close, just three trading days after the Cambridge biotech’s announcement that it had failed to find a buyer and would remain independent, the value of Icahn’s 8.8 million shares in the company had fallen by nearly $180 million. (Overall, Biogen had lost almost $6 billion in value—the stock closed Monday at $55.57, down 27 percent from Wednesday’s close, which came shortly before the announcement.) If you were Icahn, would you leave things there?

An analysis of Icahn’s style indicates that the veteran boardroom battler is not likely to walk away with that outcome. Based on his past actions, he could well push for a management change, as a way of unlocking the value he apparently sees in Biogen (NASDAQ: BIIB), and maybe encouraging the company to revisit its efforts to attract a buyer. Given his clout and the fact that, at the end of Q3 he owned 3 percent of the company, he might also push for a board seat for himself or one of his representatives—although a Biogen spokeswoman said yesterday that she knew of nothing like that in the works.

A quick recap of what likely went wrong with the sale. Biogen is one of the world’s top biotech concerns. According to Thursday’s Wall Street Journal, analysts expect its sales to reach about $3.1 billion this year, with the company on track to meets its profit forecast of roughly $600 million. Perhaps more importantly, the company’s pipeline includes some 15 drugs in Phase 2 trials or beyond. In September, CEO Jim Mullen provided a bullish forecast and set a goal of achieving at least 15 percent annual growth in revenues through 2010.

In surveying the company and its prospects, Icahn reportedly told people, also according to the Journal, that he thought Biogen might bring a share price of “high 70s to low 80s.” Big pharmaceutical makers, after all, have been struggling to fill their pipelines, especially with looming patent expirations on many of their blockbuster drugs. But the general take in many news reports over the last few days is that would-be purchasers of Biogen deemed that kind of price as simply too steep.

Of particular concern is the uncertainty surrounding the market and prospects for Biogen’s three core drugs—Rituxan for non-Hodgkins lymphoma and rheumatoid arthritis, and Tysabri and Avonex for multiple sclerosis. What’s more, Biogen partners Elan and Genentech have, respectively, certain rights to Tysabri and Rituxan. In an intriguing analysis of the failed sale posted on the In Vivo Blog, Roger Longman laid much of the blame on the fact that Biogen evidently made would-be bidders sign an agreement that prohibited them from negotiating with Elan or Genentech about the drugs’ futures. “That means the prospect of buying Biogen wasn’t merely expensive, it was a complete crapshoot,” writes Longman. Biogen spokeswoman Naomi Aoki says the company is not commenting further on the sales process and that she can neither confirm nor deny this report.

But where does that leave things? Icahn no doubt knew about the core issues with Biogen’s big drugs and still concluded that the price range where Biogen had been trading when he amassed his shares was too low. Between June 30 and September 30, for example, Icahn bought some 6 million of his 8.8 million … Next Page »

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Cambridge, MA-based Biogen Idec (NASDAQ: BIIB) today announced that it has formed an alliance with a Swiss startup, Neurimmune Therapeutics, to develop antibody-based treatments for Alzheimer’s disease. Under the terms of the deal, Biogen could pay up to $380 million for candidate molecules, which it will be responsible for developing and commercializing. In an interview with Bob back in August, Biogen CEO Jim Mullen talked about how deals like these fit into Biogen’s overall innovation strategy.

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Thank you Carl Icahn. Thanks for stirring the pot by purchasing a few million shares in the local economy. In just the last 12 days, you’ve raised the market cap of Cambridge’s biotech giants by, oh, I don’t know, a few billion dollars.

It’s nice work if you can get it, this activist investing. But in case you missed it, here’s what’s been going on lately. Back in August, Icahn announced he had purchased 2.74 million shares of Biogen Idec, good for roughly a 1 percent stake. The stock perked up, but it had been looking good pretty much all year, given the company’s strong results and growth prospects (despite yesterday’s disappointing third-quarter results). The stock climbed steadily into the fall, reaching the mid-60s. Then, on October 12, Biogen’s board announced it would entertain offers for the company. Shares shot into the 80s, and suddenly, Boston-area biotech was awash in rumors: Icahn offered $23 billion himself for the company. Pfizer is going to buy it. Hey, wait, Genzyme would also make a good takeover target—in fact, Pfizer is going to buy it. On October 15, Genzyme’s stock jumped nearly 5 percent—but no one is certain whether that was because of Icahn or because virtually simultaneously with the takeover talk came good clinical-trial news for Genzyme’s leukemia drug Campath. Let’s call it a bit of both.

Time to step back and attempt to cut through this fog of rumors and speculation—to the extent that’s possible. We’ve spent the last few days scouring news reports, blogs, and other speculation, as well as talking to a few knowledgeable sources, to try to see a little more clearly into this matter. Firm conclusions are hard to reach, but below are some key points.

First is the very real possibility that Icahn actually holds much more than 1 percent of Biogen. It’s not 5 percent, because he hasn’t filed a 13D form that is required when an investor hits that level. But two good sources tell us his holdings are likely above what has been disclosed so far.

In any case, whether it’s 4.9 percent or 1 percent, when Icahn comes knocking, board members listen. At least at Biogen they did. We don’t know exactly what kind of communications Icahn had with Biogen or its directors, but it’s clear that it was his interest that spurred the company to officially entertain buyout offers. In yesterday’s third-quarter earnings call, Biogen CEO Jim Mullen said that the company wanted to get through the process as quickly as reasonable, but stressed there was no guarantee a sale would take place.

It’s been widely reported (apparently starting with the Wall Street Journal) that Icahn bid $23 billion for Biogen, but we haven’t confirmed it. Even assuming the figure is correct, not everyone is buying that Icahn’s serious. As Fortune noted, “Most observers believe Icahn instigated the company’s sale, then made the bid to gin up an auction atmosphere.” The Financial Times and Boston Globe columnist Steven Syre agreed. Wrote Syre, “But I’d bet buying Biogen is the last thing Icahn wants to do. The idea was to trigger other, higher offers from the big drug companies.”

But if not Icahn, who would buy the company? And is a deal really likely to take place, given the now hefty price tag Biogen would command with its stock trading in the high 70s or low 80s and a market cap of roughly $23 billion?

On the first question, Pfizer is the consensus choice as the most likely suitor—it’s in every report we found on the subject. But what about dark horses? The Financial Times, Fortune, and Sanford C. Bernstein & Co. analyst Geoffrey C. Porges (quoted by Bloomberg) also mentioned Sanofi-Aventis and GlaxoSmithKline. The FT threw in Novartis, Fortune added Wyeth to the list, the Boston Globe mentioned Johnson & Johnson, and a JPMorgan report listed … Next Page »

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Carl Icahn has offered $23 billion for Biogen Idec and believes that would be a good value; meanwhile Biogen partner Elan said it would not stand in the way of the sale, Bloomberg reported this morning. In the wake of Friday’s announcement that Biogen would consider selling under the right terms, Icahn is giving out more of his side of the story. Icahn told Bloomberg that Elan, Biogen’s partner on a key multiple sclerosis drug, Tysabri, would not attempt to act as a “poison pill” and stop the purchase.

“If an offer was made, Elan would not activate its change of control provision,” for Tysabri, Icahn said in the interview with Bloomberg. “That’s very important,” he added. “It opens the door a lot.”

Biogen Idec (NASDAQ: BIIB) announced after the market closed on Friday that it was evaluating the possibility of a sale and had received “expressions of interest” from several parties, including Icahn. A key to the company’s valuation is Tysabri, which some analysts believe could surpass $2 billion in sales in the three years, according to Bloomberg.

Dublin, Ireland-based Elan told Bloomberg that it hired Lehman Brothers to help consider its options with regards to Tysabri, including restructuring the contract, selling its stake in the drug, buying out Biogen’s share, or leaving things as they are. The Irish drugmaker could also decide to work with any buyer, Bloomberg reported a Biogen spokeswoman as saying.

In after hours trading on Friday Biogen’s shares soared more than 12 points, or almost 18 percent, to $81.60. As of pre-market trading this morning the price had risen further, to $82.90. That was apparently its highest level since a three-for-one stock split in January of 2001.

Biogen CEO Jim Mullen has spoken in detail about innovation at his company and its prospects for future growth. See our interview with Mullen about innovation, and our story about his remarks on Biogen’s future prospects, in which he recently set a target of 15 percent compounded annual growth through 2010.

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Biogen Idec (NASDAQ: BIIB) stock surged nearly 6 percent yesterday, rising $3.66 to $66.53, as CEO Jim Mullen predicted strong growth throughout the decade at a major healthcare conference. But overshadowded by these main remarks was an interesting comment that Mullen made about Biogen’s future acquisition plans.

Yesterday I wrote about Mullen’s talk at the Thomas Weisel Partners Healthcare Conference in Boston—and about how the Biogen CEO fended off a question about Carl Icahn, who recently took a small stake in Biogen in a move many believe signals the famous investor’s intent to push for Biogen to be acquired. But this morning I went back through the audio of Mullen’s talk yesterday and glommed on to one other detail he mentioned—the possibility Biogen may be the one announcing a major acquisition in the not-terribly-distant future, and how that fit into the company’s recent moves.

Mullen noted that many analysts were taken by surprise by Biogen’s $3 billion Dutch auction stock buyback, which was completed in June. “I’ve heard a lot back from the Street, you know, ‘Boy we were expecting you to do some big acquisition out there,’” he said. Such a move would of course help Biogen fill its pipeline, and the company has acquired two companies in the last 16 months—San Diego-based Conforma, which developed cancer drugs, and Syntonix, of Waltham, MA, which was working on long-acting treatments for chronic diseases such as hemophilia. But both were relatively minor purchases of $150 million or less, and apparently many analysts expected a much bigger move this year.

To an audience consisting largely of analysts and investors, Mullen said “I wouldn’t discount the fact that we might do a large acquisition in the future.” However, he said that before deciding on the Dutch auction Biogen looked for an acquisition target that was a good strategic fit at a good valuation.”We haven’t found that combination, so I don’t think that’s going to occur in the very near future, and as such we thought a better allocation of the capital in the near term was the Dutch auction. So that’s one perspective. The second perspective is any one of these major acquisitions that we could do is going to require me to go back out and sell it to you guys. And if we need to raise equity, I’d rather raise equity at wherever we are today, $63, than $48 or something when we went out to do the Dutch auction. So we thought we were undervalued. I think so far that’s proven to be the case and we like the prospects going forward.”

You can sign up to hear the entire talk here.

Mullen will be speaking again on Monday at the Bear Stearns Healthcare Conference in New York. In today’s early trading, Biogen shares were off 73 cents, at $65.79.

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Riding a year of solid earnings and strong stock market gains, Biogen Idec CEO James Mullen today provided an upbeat outlook for the next few years, basically saying the good times for the biotech company were far from over. Foreseeing vigorous international expansion and a healthy pipeline that would enable Biogen (NASDAQ: BIIB) to expand into new markets, Mullen set the goal of achieving at least 15 percent annual growth in revenues through 2010. At the same time, he fended off talk of Carl Icahn’s recent purchase of Biogen stock.

“There’s no updates there,” he said in response to a question about Icahn after his presentation at the Thomas Weisel Partners Healthcare Conference this morning in Boston. “I have conversations with lots of investors all the time…It’s not policy really to try to then describe what those conversations are and what their investment thesis is. If Carl chooses to describe his investment thesis, I’ll leave that to him.”

Mullen was more than willing to share his positive outlook about Biogen, however. In advance of the meeting, the company reiterated the increased 2007 targets it announced in late July, when it predicted revenue growth of 16 to 18 percent for the year over its 2006 figures and earnings growth of at least that much.

At today’s conference Mullen then looked ahead to the next three years, setting the targets of 15 percent compounded annual topline growth in revenues, and 20 percent bottom line growth through 2010. The key items Mullen highlighted as evidence for his rosy forecast included:

—Solid continued performance of key existing drugs, including Biogen’s multiple sclerosis treatment Avonex, which had sales of $1.7 billion last year.

—Growth of Biogen’s international business from less than a third of sales today to more than 40 percent by 2010.

—Expansion of the cancer treatment Rituxan (which is jointly marketed by Biogen and Genentech in the U.S.) into autoimmune diseases.

—A bullish future for Tysabri, an MS treatment that was pulled from the market months after its 2004 launch over safety concerns. The drug was reintroduced last year, and is going strong, according to Mullen. “This has the ability to bring a whole new set of patients back into this marketplace,” he said, later adding, “We think that’s going to become the number one program in MS.”

—A strong pipeline that includes 15 products in Phase 2 trials or beyond that address both existing and new markets, including: MS, neuropathic pain, Parkinson’s disease, lupus, rheumatoid arthritis, congestive heart failure, and hemophilia. “We believe that the pipeline we’ve now assembled and can move forward with reasonable industry success rate can continue to propel that growth beyond 2010,” Mullen said.

It wasn’t until the Question & Answer period that the subject of Carl Icahn came up. Earlier this year, Icahn purchased nearly 1 percent of Biogen stock and last month the Federal Trade Commission granted approval for him to increase that stake. Speculation has been rampant that the famed investor and corporate raider sees Biogen as undervalued and might try to force a sale to a major pharmaceutical maker.

Today’s questioner didn’t even mention Icahn by name, but only asked only about Mullen’s “conversations with your new shareholder.”

“I presume you’re talking about Carl Icahn,” Mullen replied. He then issued his remark about letting Icahn speak for himself.

Biogen’s shares were up $3.30 (more than 5 percent) to $66.17 in early trading this morning.

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Jim Mullen is being a little reflective. A CEO’s job goes through a couple of phases as a company grows, he says. “The first bridge you walk over is the day that you don’t know the name of everybody in the company. Once that day happens, suddenly all the very informal interactions, they just have to become different.” Then comes the time when the firm reaches around 700 employees. You’ve given up on knowing everybody’s name. And the sheer complexity of the business, the number of projects, the geographic distribution of operations, reach “a point where you actually have to put in more professional processes or you don’t know what’s going on anymore.”

As one of the world’s largest and most successful biotechnology companies, Biogen Idec (NASDAQ: BIIB) has long ago passed such milestones, and so has Mullen, its CEO. Now, though, the company is at a new juncture, as are other leading biotechs. Here’s the dilemma: with some 20,000 employees, Biogen is too big to be super-nimble like the startups nipping at its heels. But it’s too small to match the R&D operations and other assets of a 100,000-person-strong pharmaceutical company. Worse, Big Pharma is encroaching on biotech’s turf. Until recently, traditional drugmakers have done mostly small-molecule work, with biotech specializing in large molecules. Now, Pharma is increasingly thinking big molecules. So, the newer challenge in biotech is to figure out how to leverage your strengths to avoid being squeezed out. Or, put another way, how can you be innovative about being innovative?

That’s one of the key topics I explored in a conversation with Mullen last week. Yesterday I wrote about his take on the state of the biotech industry and the major challenges it faces. Today I’ll focus more on what Biogen is doing to make sure it comes out on top.

First a few impressions of Mullen. He’s pretty laid back, with a ready smile and quick sense of humor. He’s tall—basketball tall. He came to Biogen in 1989, from SmithKline Beckman (now GlaxoSmithKline). He rose through the ranks and took over as CEO in 2000. He retained the CEO title after the merger with IDEC Pharmaceuticals in 2003. Main impression: approachable. Other words I’ve heard to describe him include down-to-earth, pragmatic, practical, strategic.

Which should be a major asset, because it takes an ever-more-complex strategy to stay innovative in today’s climate. In fact, you pretty much have to change your definition of innovation. It doesn’t necessarily have to come from within, for one thing—and so a critical question is how do you tap into outside innovation, so that your company shares in the fruits of other people’s advances rather than falling victim to them?

Biogen’s annual R&D budget now tops $750 million. It has more than 700 scientists working on discovering and developing new drugs, based mostly in Cambridge and a San Diego facility acquired in the merger with Idec. This internal innovation machine, focusing chiefly on neurology, oncology, and immunology, is nothing to sneeze at. But Mullen and I focused our conversation on Biogen’s newer strategies to cultivate external sources of innovation. Small companies pose a serious threat, he says. When it comes to being nimble, “They will beat big biotech and big Pharma pretty much every day. It won’t look pretty, but…they’ll get to the essential point of knowledge creation faster.” His quandary, in his words: “How do you capture that? And can you capture that and still have it in-house?”

On the latter question, Mullen’s answer is yes—and no. What he calls the “bigger experiment” in the company’s innovation strategy does not involve trying to replicate a startup-type environment, which “I think is impossible to create inside a big company.” Rather, it centers on building more relationships and stronger relationships with other companies and outside researchers, and then trying “to nurture those, monitor those, and capitalize on those when those things are appropriate.”

Acquisitions
This effort takes several forms. One is acquisition. Biogen has acquired two firms in the last 15 months. One was Conforma, a privately held San Diego-based company, specializing in developing cancer drugs, that Biogen purchased for $150 million (plus incentives) in May 2006. Then, this January, Biogen announced it was paying up to $120 million for Syntonix, of Waltham, MA, which develops long-acting treatments for chronic diseases such as hemophilia.

What’s especially interesting about these acquisitions is the different way Biogen approached each company. Conforma was immediately integrated into Biogen’s San Diego operations. “I’d have to say we retained most of the key people,” says Mullen. “The programs have moved along at a nice pace. That experiment worked.”

With Syntonix, Biogen took a completely different approach: it left the entire firm pretty much alone. Mullen says the strategy was to integrate the financials and the IT infrastructure, and to help the Syntonix staffers access Biogen resources. But that was it. “You see anybody from corporate, lock the door,” is how he describes his instructions to the Syntonix team. “And that’s worked, so far, really well,” he says. “It’s early days, [but] we’ve lost nobody. In fact we found more value there than we thought we’d bought.”

Biogen the VC
Acquisition, of course, is just a piece of the puzzle. Another piece is a $100 million venture capital fund called New Ventures that Biogen created in San Diego about three years ago to invest in early-stage companies. It was a good time to launch such an effort, Mullen says. “There was a time in the ’90s when if you could spell ‘gene’—and you could spell it any way you wanted—you could walk down Wall Street and get a hundred million dollars,” he quips. Around 1999, he says, the biotech bubble burst. “The consequence of that was the window for IPOs got very small, and that’s really persisted to this day.”

That, in turn, has made traditional VCs more reticent to back biotech startups, he says, leaving the door open for Biogen’s fund, which currently has about $50 million invested. Unlike a venture firm, Biogen isn’t just looking to make as much money as possible, but to strengthen its drug war chest and strategic position. Both Conforma and Syntonix started out as Biogen venture investments. For a variety of reasons, says Mullen, “we decided we’d rather own than rent.”

A twist on the venture capital idea is Biogen’s incubator, which I wrote about last month. To quote myself, “The incubator is not a venture arm looking to spawn great new companies. It’s more like a farm system, backing promising ideas that might some day be called up to the big leagues: namely, Biogen.” Basically, Biogen gives startups one-stop funding, lab space, business support, and more—with the intention of buying the company if the work pans out. As Mullen describes it, “Instead of going to VCs for money, bring your project here, set it down, we’ll figure out how to support it…find out whether there’s something there or not.”

Open for Deals
In addition to these activities, Biogen, like every other drugmaker, enters into many alliances. Mullen says he’s pleased with how competitive the company has been on joint development efforts, like the three-product deal with California-based PDL BioPharma (NASDAQ: PDLI) back in 2005 (when the firm was known as Protein Design Labs) or a smaller alliance with fellow Cambridge firm Alnylam (NASDAQ: ALNY) last September.

Biotech can be a strange business, Mullen says. You get a product approved, and almost instantly all the value of that drug might be figured into the stock price. If something goes wrong, as it did with Tysabri, which was withdrawn from the market in 2005 just a few months after it was approved (it has since been reinstated), the stock—and the CEO—can get hammered.

“I’ve been up and down the roller coaster four or five times on the stock price,” says Mullen. The best way to cope, he says: “you’ve got to keep your eye on what generates sustainable value.” Finding new ways to cultivate external innovation, while balancing those against in-house development and all the other details of running a company, are ever-more-important components of that strategy.

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