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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: derekb.lowe@gmail.com Twitter: Dereklowe

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In the Pipeline: Don't miss Derek Lowe's excellent commentary on drug discovery and the pharma industry in general at In the Pipeline

In the Pipeline

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December 14, 2007

Biogen's Not For Buying. For Now.

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Posted by Derek

So a month after putting itself on the market, Biogen Idec has decided to take itself back off. This is, I’d say, good news for the company’s employees, since many of them stood to be redundant after a sale. That would especially apply to the company’s medicinal chemists, because even though they have some good people there, anyone buying Biogen probably isn’t interested in their small-molecule expertise.

And I think it’s good news for the biotech industry in general. I think any industry benefits from having a lot of firms competing with each other, trying different ideas and approaches, and keeping each other on their toes in the areas where they overlap. A big consolidation in the biotech field would cut down on what we might as well call its genetic diversity, at least until new companies sprang up with their own ideas.

For whom is this bad news? Well, for starters, how about people who bought into the stock at the elevated levels of the last couple of months? Somebody was holding that bag when the news broke last night, and they must have realized that this would be one of those days. BIIB had been trading at about $75 the day before. It opened at around $54, and staggered in at $58. It's now back to slightly below where it was trading before this whole thrill ride started - but at the height of the takeover talk back in October, it broke $80 for a bit. So, the first paragraph of this blog aside, there must have been a lot of Biogen employees holding company stock and options who got burned yesterday. I hope some of them sold over the past few weeks.

Today’s deflation is also bad news for anyone who stepped into some of the other speculative biotech stocks (Genzyme, for example, down today). You can be sure that the usual suitors (led by Pfizer) looked over this deal and some of the others carefully, fingered their wallets, and thought better of the whole thing. That has to make you wonder if some of the other buyout candidates should be commanding the prices that they’ve been. BIIB has the complication that its largest drugs are also tied up in outside collaborations, making the whole takeover idea more expensive, but still. . .

How about Carl Icahn? I assume that he was hedged against this sort of thing – it would be interesting to see how many put option contracts were open on the stock, for example, or what the short interest was. Icahn and his people have surely been doing this sort of thing way too long to get caught too badly when a potential deal falls through. And if he was really sure that the company was undervalued, hey, now’s the time to pick up some more shares.

So, now we wait until the next round of speculation. Many of the large companies in the industry still probably need to shore up their portfolios, and we’ll surely have a recurrence of Merger and Acquisition fever. And that brings up another set of people that are unhappy about todays’s news: the investment bankers. All those fees. . .those fees. . .they just evaporated. My condolences, guys. Right.

Comments (3) + TrackBacks (0) | Category: Business and Markets


COMMENTS

1. Kevin on December 14, 2007 7:19 PM writes...

The losses carried over to Elan, who stood to benefit from new terms for their Tysabri agreement if Biogen was purchased.

http://www.bloomberg.com/apps/news?pid=20601085&sid=aMtDEnB_lNRo&refer=europe

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2. drew at bionextreview on December 15, 2007 6:26 PM writes...

I don't think that anyone was suprised when the CEO of Merck told the WSJ health blog that they weren't interested in BIIB. The insiders have been saying all along that the Biogen was overpriced and their deals are spread too thin, what role Carl Icant played in whole affair is up for speculation. I think its important for main street investors to step back and try to understand the M&A "fever" going on right now. Its not entirely as simplistic as activist shareholders are making it out to be, and blindly getting behind a biotechnology "trend" without careful study of the science legal and financial situation will often lead to exactly this kind of share inflation.

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3. anon on December 17, 2007 6:22 AM writes...

"You can be sure that the usual suitors (led by Pfizer) looked over this deal and some of the others carefully, fingered their wallets, and thought better of the whole thing."

There's a massive credit crunch where cash is king and emperor. It's got nothing to do with Biogen (or anyone else); no matter who's for sale, if you've got cash; cash is massively more valuable.

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