Biogen Idec Inc., the state's largest biotechnology company, is attempting to sell itself to a major pharmaceuticals company before the end of the year, according to analysts and other industry observers.
But Biogen Idec shares have fallen sharply over the last month on concern the Cambridge company won't fetch much of a premium - if it sells at all.
"The speculation is rampant," said Jennifer Chao, a biotechnology analyst at Deutsche Bank. "The day-to-day noise is extreme."
Yesterday, Biogen Idec's stock dropped as low as $69.04, the lowest it has traded since Oct. 12, when the company disclosed plans to consider outside bids. Biogen Idec shares closed at $70.83, up 95 cents, but still well below a high of $84.75 on Oct. 15, when investors were giddy about a possible sale.
Since then, some stock watchers have cautioned that Biogen Idec may not be able to find a buyer, because drug makers could find the company's stock too pricey, especially since some potential bidders sell drugs that compete with Biogen Idec's. In addition, some say Biogen Idec's relationships with Genentech and Elan Corp. could complicate a deal. Both companies have the option to purchase Biogen Idec's rights to key drugs in the event of a sale.
DealReporter, a news service that tracks mergers, reported yesterday that several potential bidders, including Roche and Sanofi Aventis, have dropped out of the bidding process. The media service quoted one anonymous observer as saying "there is talk now of a potential busted auction."
Chao is more optimistic about a potential sale. She said the company could fetch up to $30 billion, nearly one-third more than its current market value, if buyers are bullish on the future of Biogen Idec's multiple sclerosis drug Tysabri. Biogen Idec recently predicted 100,000 patients will be taking Tysabri by 2010, up from 17,000 today. But some stock watchers are nervous about Tysabri, because Biogen Idec temporarily yanked the drug off the market two years ago after it was linked to a rare brain disease. Biogen Idec says it hasn't seen the problem reoccur since it re-released the drug last year with additional guidance for doctors.
"It all depends on how comfortable [potential buyers] are with Tysabri," said William Tanner, an analyst with Leerink Swann & Co., who has an "outperform" rating on the stock. "If you don't believe it's going to be a big drug, then Biogen looks expensive."
Last month, Biogen Idec said it hired Goldman Sachs & Co. and Merrill Lynch & Co. to advise it on a potential sale, after receiving several expressions of interest, including one from billionaire investor Carl Icahn.
According to several industry observers, Biogen Idec asked companies to submit their initial, informal bids either by last week or this week. Depending on how many companies submit bids, Biogen Idec could enter formal negotiations with some or all of them.
So far, a number of major drug companies have been mentioned as potential bidders, including Pfizer Inc., GlaxoSmithKline, Novartis AG, Merck & Co., Johnson & Johnson, and Bristol-Myers Squibb, though it's unclear which of them - if any - have actually submitted bids.
Regardless, several observers said they understood Biogen Idec hopes to wrap up the sale process by year-end. Indeed, investment bankers typically have a strong financial incentive to strike an agreement before New Year's, because they could potentially receive a double bonus - both in the year the deal is announced and the following year, when the sale is ultimately consummated. A quick sale could also help ease concern for employees, who have been wondering about the future of the company. Biogen chief executive James Mullen recently called the process "unsettling" for workers.
"I think their idea is to enter a finished agreement as soon as possible, though there is a certain amount of due diligence that needs to be done first," Chao said.
But in a conference call with analysts on Oct. 23, Mullen cautioned the process could take months. And he reminded investors that Biogen Idec might ultimately decide to remain a stand-alone company.
Todd Wallack can be reached at twallack@globe.com.
