Icahn gains support in Biogen Idec proxy battle
Advisers back two dissident candidates for board seats
Billionaire investor Carl Icahn, who is waging a proxy battle with Cambridge biotechnology company Biogen Idec Inc., has won the unexpected backing of an influential advisory firm for two of the four dissident candidates he nominated for the company's board.
The recommendation by RiskMetrics Group, a firm that counsels institutional investors such as mutual funds and pension funds, may help Icahn gain representation on the 13-member board of Biogen Idec. But with management winning support from two other proxy advisers, Proxy Governance and Glass Lewis & Co., a stock analyst said he doubted Icahn will succeed in his plan to break up Biogen Idec.
"It's quite unlikely Mr. Icahn will gain control of the board of the company," said Geoffrey Porges, biotech analyst with New York investment firm Sanford C. Bernstein & Co. "Most investors I've talked to are not impressed with the cohesiveness of his proposal."
In particular, Porges noted that Icahn last year agitated for a sale of Biogen Idec, best known for its multiple sclerosis drug Avonex. But earlier this month, in a filing with the Securities and Exchange Commission, he proposed dividing the company into two parts: a neurology company that as a separate entity, would have had $2.93 billion in 2008 sales, and a cancer company that would have had $1.17 billion in sales.
"It's difficult to reconcile that the same investors who've been advocating selling Biogen Idec whole sale to a pharmaceutical company are now advocating the company should be split up," Porges said.
Icahn and Alexander J. Denner, managing director of the holding company Icahn Partners LP in New York, didn't return phone calls yesterday. In their SEC filing, they wrote, "Separating Biogen assets will enhance shareholder value, as management focus should improve and disparate assets appeal to different buyers."
Biogen Idec executives declined to discuss the proxy contest, which will be decided at the company's annual meeting next Wednesday at the American Academy of Arts and Sciences in Cambridge.
But in a "fight letter" to shareowners yesterday, Biogen Idec urged a vote for management-backed directors and defended the company's "exceptional performance" over the past year, including a 34 percent increase to $3.66 in per-share earnings and a 29 percent increase to $4.1 billion in revenues. The letter contended that Icahn's proposal to split the company in two would create operational inefficiencies, impose meaningful direct and indirect costs on both companies, and eliminate cross-therapeutic opportunities.
"This misguided proposal demonstrates that Mr. Icahn and his nominees do not understand what has made Biogen Idec a global leader in its industry and are the wrong individuals to represent your interests," the company's leaders warned shareholders in the letter.
A slate of candidates nominated by Icahn, who owns about 4.5 percent of Biogen Idec's shares, was overwhelmingly rejected by Biogen Idec shareholders at their annual meeting last year. At the time, RiskMetrics, then called ISS, backed Biogen Idec management in rejecting the Icahn slate. This year, the proxy advisory firm endorsed two of Icahn's picks, Denner and Harvard Medical School professor Richard C. Mulligan. It declined to back two other Icahn nominees, Thomas F. Deuel and David Sidransky.
RiskMetrics, in a report released over the weekend, said it concluded "that the dissident has met its burden of proving that some change to the board is warranted." But the firm stopped short of endorsing Icahn's plan to divide Biogen Idec into two companies.
"We have no opinion on whether a split-up of Biogen ultimately would maximize long-term shareholder value, but we do believe that the board should, on an ongoing basis and with an open mind, seriously evaluate all strategic alternatives," the report said.
Robert Weisman can be reached at weisman@globe.com. 
