Back to the drawing board

Biogen Idec executives and representatives for Carl Icahn said yesterday they planned to meet and work with each other in the near future. (Mark Lennihan/Associated Press/File 2007)

It was over before it began.

After months of campaigning and badgering, billionaire investor Carl Icahn's slate of three directors challenging company nominees at Biogen Idec Inc. came up on the short end of a shareholder vote yesterday, and it didn't appear to be a close contest.

Biogen Idec executives opened the polls at the Cambridge company's annual meeting yesterday morning, and one of Icahn's nominees, Alex Denner, was at a microphone conceding defeat in less than five minutes. Votes cast before the meeting made it clear to both sides how the balloting would shake out. Biogen Idec disclosed the preliminary success of its board candidates in writing the minute the meeting adjourned.

The outcome may not have been a sure thing, but it was predictable. Once advisory services used by big institutional shareholders had recommended voting with management at Biogen Idec, a successful challenge by outsiders became very difficult.

Beyond that, Icahn didn't deserve to win. Dissident shareholders put managers on trial in the market and try to build a case that proves greed, incompetence, self-dealing, or some other outrage that costs shareholders serious money. It usually takes convincing evidence to secure a conviction. The case against Biogen Idec executives ended in an acquittal.

Most of Icahn's peripheral issues with Biogen Idec were not compelling, and some, like his purported interest in improving employee morale, seemed phony. His big argument - that Biogen Idec had rigged a bidding process for the company so no one would bite - raised questions, but he provided no damning evidence.

Icahn is one of the most powerful individuals in the investment world, feared for good reason in boardrooms. The man who morphed from 1980s greenmailer into a more populist stock market activist today has made staggering sums for himself and other investors by identifying problems dragging down the value of companies and demanding action to fix them.

Icahn won big by leaning on companies like oil and gas explorer Kerr-McGee Corp., which was forced to buy back nearly a third of its stock and later put itself up for sale. He pushed Motorola Inc. to buy back stock and split off its cellphone business with different results (Motorola shares traded at a 52-week low yesterday).

Of course, Icahn garners the most headlines today in his assault on the management of Yahoo Inc. for its stiff-arm to suitor Microsoft Corp. and a $47.5 billion takeover offer that has come and gone. He launched a proxy fight to replace the board and has the support of many shareholders who think Yahoo chief Jerry Yang worked against their interests in his dealings with Microsoft.

Icahn is no stranger to biotechnology stocks, but his track record with them is checkered. The industry seemed like an ideal place to search for acquisition targets. Analysts believe big drug companies, with lots of cash but very few products in the pipeline, would be anxious to spend big and buy biotech companies with drugs in development to solve the problem. Reality has turned out to be more complicated.

Icahn started buying shares of ImClone Systems Inc. nine years ago and got control of the board in 2006. The company, which developed the cancer drug Erbitux, put itself up for sale that year but took itself off the market. His fund owns more than 13 percent of the company, and he's made money in the shares, but he almost certainly had a different outcome in mind.

Icahn did much better with a relatively modest investment in MedImmune Inc. last year. He bought about 1 percent of the company and threatened to campaign for a sale of the company over supposedly lackluster performance. Two months later, executives agreed to sell the company to AstraZeneca for $15.6 billion.

Now he's spinning his wheels with Biogen Idec, a company that would seem to fit into the big picture of giant drug companies buying biotech firms for their products.

Biogen Idec has three real commercial drugs that generate more than $3 billion in annual sales and a portfolio of new candidates in later stages of development. Chief executive Jim Mullen told shareholders yesterday that Biogen Idec's new product pipeline has never been stronger.

Biogen Idec's stock isn't cheap, but it's not excessive either. The shares trade at about 17 times earnings expected for this year.

But Biogen Idec has some baggage, too. Two of its big products come with business partners that complicate the picture. Biogen Idec's warhorse Avonex drug keeps selling, but someone is always predicting its commercial decline.

And then there's Tysabri, a drug with a lot of potential and a history that scares investors. Rare but serious medical complications prompted Biogen Idec to take Tysabri off the market for a time, though it now predicts 100,000 patients will use it within the next two years. But Tysabri's past problem, which crushed Biogen Idec stock at the time, remains a wild card.

Nothing is going to change soon at Biogen Idec. Its managers have reasonable growth goals and deserved reputations for creating shareholder value. Their company probably won't be sold, and they aren't going anywhere.

Neither is Icahn. He has sold out of some investments before, but the record suggests Icahn won't walk away from Biogen Idec anytime soon.

Biogen Idec executives and Icahn's representatives both said yesterday they planned to meet and work with each other in the near future. Good thing, too. For now and the foreseeable future, they're stuck with each other.

Steven Syre is a Globe columnist. He can be reached at syre@globe.com.