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Published: September 30, 2009
Carl Icahn is up to his usual tricks.
The "activist investor" has been involved in an attempt to gain
control of the board of directors at Biogen Idec (Nasdaq:
BIIB), a leading biotechnology company. His end game is to
force a sale of the company. If he is successful, it could mean
big gains for shareholders.
And more than a few bucks for himself. Icahn is one of those
guys Wall Street loves to hate.
In July, Biogen CEO Phillip Sharp said he would retire from the
board even though his seat wasn't up for reelection until 2011.
Sharp, a Nobel laureate who co-founded the company, had served
on the board since 1982.
Icahn nominated three candidates for four open seats in 2008 but
failed to win a single one. In February 2009, Icahn nominated
four new candidates at the next round of elections. This time he
won two seats. Sharp's retirement created another vacant spot.
It also removed a strong voice of opposition to Icahn's plans.
Then came news that Cecil Pickett, head of Biogen's research and
development division, would retire and leave the board Oct. 5.
The company had said in March that Pickett would step down as
head of R&D.
Pickett fell into Icahn's crosshairs in May, saying the company
had "failed leadership," citing specifically a "lack of R&D
focus."
With Pickett gone, Icahn now has an even better chance to make
changes at the company. Another vacant board seat filled by an
ally is an obvious advantage, but the R&D vacancy also presents
an opportunity.
One of Icahn's main arguments during his first attempt to seat
his own board members was that Biogen hadn't brought a new drug
to market in five years. If the company can show it is serious
about developing new drugs, now would be the chance to prove it.
Sales of Tysabri, one of Biogen's top-selling multiple sclerosis
drugs, are growing, but concerns about side effects could hurt
sales.
Last week, Biogen launched a bid
to buy Facet Biotech (Nasdaq:
FACT). The two companies are
working on a multiple sclerosis
treatment that hasn't yet reached
the market. If Biogen can earn more
from its drug pipeline after the
Facet merger and renew its focus on
R&D, the company would increase its
appeal as a takeover target.
Icahn will continue to push his R&D
agenda -- there's little doubt about
that. And there's even less doubt he
will try to use the vacant board
positions to seat his own members.
If either happens, the takeover case
for Biogen looks even better.
This is how Icahn operates. If he
isn't able to convince the company
to bend to his will outright, he
engages in a war of attrition. And
Icahn appears to be winning this
one.
The bright side for investors is
that Carl Icahn's track record
speaks for itself. With an estimated
net worth of $14 billion, Icahn uses
all of the means at his disposal to
unlock value for shareholders. When
Icahn is involved, it's not uncommon
for a company to be sold, broken up
into smaller pieces or to announce a
share buyback.
If Icahn garners enough support, the
big drug companies could come
knocking with a lucrative offer in
the not-too-distant future. For
investors willing to bet on another
Icahn deal, these shares are very
tempting.
--Brad Briggs
Staff Writer
Street Authority.com |
