Shareholders of Cambridge, MA-based Biogen Idec (NASDAQ: [[ticker:BIIB]]) will have their say today on whether or not they want billionaire investor Carl Icahn’s nominees to shake things up in the boardroom.
The votes will be tallied at the company’s annual meeting being held at 9 am Eastern time today at the American Academy of Arts & Sciences in Cambridge. This election puts four of Biogen’s 13 director slots up for grabs, between nominees from Icahn and the company. Winners will get a three-year term.
This year’s proxy contest has been a rematch of sorts, after Icahn failed in his bid to gain seats on the board at last year’s election. This time around, Icahn delivered a much more hard-hitting case about the need for change, accusing the company of “failed leadership” and suggesting it ought to consider splitting in two to gain greater focus. Icahn cited a number of flaws he sees in the company’s current operation, including: Biogen’s rising expenses; botched marketing of its top multiple sclerosis drugs; inability to develop any new drugs since 2004; and a stock performance that has lagged its peers. This argument helped sway the most influential firm that advises investors on proxy elections—RiskMetrics Group—to recommend two of Icahn’s four nominees, Alex Denner and Richard Mulligan.
That was the biggest victory of the contest for Icahn so far, but Biogen has scored its points as well. The company’s slate of nominees won recommendations from the two other main proxy advisory firms—Glass Lewis & Co. and Proxy Governance. Biogen shot back quickly at Icahn’s ideas in its presentations to investors, disclosed with the SEC last month. It said that physicians are regaining confidence in its fastest-growing MS drug, natalizumab (Tysabri) after some safety scares last year, that its pipeline is full of promising drugs, and that splitting the company in two would actually raise expenses and make it more difficult to develop drugs with broad potential for both cancer and autoimmune diseases. Icahn’s ideas, the company said, “would destroy shareholder value.”
Dissidents in elections like these always are fighting an uphill battle, because many companies like Biogen stagger their election terms in a way that makes it impossible for a majority of directors to be voted out in a single election. But not many investors have the kind of bully pulpit or famous name recognition of Icahn, which enable him to tackle highly-skilled corporate PR head-on.
But it’s difficult even for Icahn, so he’s supporting a second proposal to make the company reincorporate in North Dakota instead of Delaware—partly because he helped craft new laws in North Dakota that make it easier for activists like himself to mount successful proxy fights, as described in this interesting Bloomberg News feature.
One thing that certainly helps dissidents in any proxy fight is shareholder resentment over the fact that a stock has been dragging down their portfolio.
On that score, Biogen would have to be considered favored to win heading into today. The company’s stock price closed yesterday at $52.32, down 14 percent from the same day a year ago. That’s nothing to write home about, but
