Biogen Idec (Nasdaq: BIIB) today commenced the mailing of proxy
materials encouraging shareholders to vote at the company´s
June 19, 2008 Annual Meeting for four highly regarded and accomplished
individuals nominated for election by the Board of Directors. In the
proxy materials, shareholders are advised by the Board to reject the
three director nominees proposed by Carl Icahn.
In a letter to shareholders accompanying the proxy materials, Chairman
Bruce R. Ross and Chief Executive Officer James C. Mullen note that
three of the Board´s nominees, Cecil B.
Pickett, Ph.D., Lynn Schenk and Phillip A. Sharp, Ph.D., have
contributed as directors to the growth and success of the company, and
Stelios Papadopoulos, Ph.D., a new nominee, is an investment banker with
a distinguished career in biotechnology.
The letter emphasizes three critical points for shareholders to consider
in determining their vote:
1. The Biogen Idec Board, including the three directors up for
re-election, has a track record of delivering value, as evidenced by the
company´s consistently strong financial
results and stock performance exceeding the Amex Biotechnology Index
(BTK) by 26% in the four-plus years since the Biogen Idec merger (as of
May 2, 2008).
2. Each of the Board´s four nominees is
committed to creating significant value for all shareholders and will
continue to pursue all options to do so.
3. Mr. Icahn has consistently promoted a single-minded agenda to sell
the company. The company believes that electing his slate will impair
the company´s efforts to deliver and drive
shareholder value.
The letter cautions shareholders not to "jeopardize
your company´s continued growth by electing to
your Board an Icahn faction committed only to a sale of the company
regardless of whether that is in your best interests as a shareholder." Shareholders are asked to "elect your Board´s
nominees who are committed to creating value for all owners and who are
open to all options to create shareholder value."
The full letter to shareholders follows:
May 8, 2008
Dear Fellow Shareholder:
Your vote at the June 19, 2008 Annual Meeting is critically important to
the future of your investment in Biogen Idec.
As you may know, Carl Icahn has launched a proxy contest to get his
hand-picked representatives elected to the Biogen Idec Board of
Directors.
We strongly urge you to vote for the four highly regarded and
accomplished individuals nominated by your Board. Please use the WHITE proxy card to vote today "“ by telephone, by
Internet or by signing, dating and returning the enclosed WHITE proxy card.
It is important that you carefully consider these three critical points:
1. Your Board, including the three directors up for re-election, has a
track record of delivering value, as evidenced by your company´s
consistently strong financial results and stock performance exceeding
the Amex Biotechnology Index (BTK) by 26% in the four-plus years since
the Biogen Idec merger.1
2. Each of your Board´s four nominees is
committed to creating significant value for all shareholders and will
continue to pursue all options to do so.
3. Mr. Icahn has consistently promoted a single-minded agenda to sell
the company. Electing his slate will impair our efforts to deliver and
drive shareholder value.
A PROVEN TRACK RECORD OF DELIVERING VALUE
Your Board has an exceptional record of creating value for all
shareholders. The proof is in the results (see chart 1 in accompanying
multimedia).
Your Board´s superior leadership has
benefited all shareholders:
Your Board has delivered on the revenue and earnings goals set at the
time of the 2003 merger of Biogen, Inc. and IDEC Pharmaceuticals
Corp., generating 14% compound annual revenue growth and 22% compound
annual non-GAAP earnings growth.
In 2007, Biogen Idec generated nearly $3.2 billion in revenues.
In the first quarter of 2008, we reported revenues of $942 million, up
32% from the same period last year, and non-GAAP diluted earnings per
share (EPS) of $0.83, up 41%.
Your company has grown into a true industry leader. Since the merger
its value has grown by more than $7 billion to $18.3 billion as of May
2, 2008. The stock price outperformed the industry over this four-year
period, rising 86% compared to 68% for the BTK, the industry benchmark
index. In the past year, the business gained even greater momentum with
the stock price increasing an impressive 30%, while the BTK fell 9% (see
chart 2 in accompanying multimedia).
COMMITTED TO CREATING VALUE FOR ALL SHAREHOLDERS
Your Board has nominated four highly regarded and accomplished
individuals. Cecil B. Pickett, Ph.D., Lynn Schenk and Phillip A. Sharp
Ph.D., have contributed as directors to the growth and success of your
company. Stelios Papadopoulos, Ph.D., a new nominee, is an investment
banker with a distinguished career in the biotechnology sector.
Each of these individuals is committed to building on the strong growth
momentum already underway at Biogen Idec. They, like the rest of your
Board, are open to all opportunities for continuing to build value and
will objectively evaluate all options for maximizing your investment in
Biogen Idec. That commitment includes considering a potential sale as
circumstances evolve.
Your Board conducted a thorough sale process last fall that resulted in
no offers to buy the company. This Board is focused on executing a
comprehensive strategic growth plan that does not rely on any single
event or single approach; rather its components include:
Growing the sales and markets for our approved products;
Advancing our robust product pipeline;
Continuing disciplined business-development efforts to enrich our
pipeline and product portfolio; and
Attracting and retaining top professionals, including medical and
scientific talent.
By focusing on executing our strategic plan and driving the business
forward, we intend to continue to grow revenues at a 15% compound annual
growth rate (CAGR) and non-GAAP diluted EPS at a 20% CAGR through 2010.
Our goals for 2010 are supported by our 2008 financial guidance, which
we raised on April 23 when we reported our outstanding first-quarter
results:
Total revenue growth of 20% over 2007;
Non-GAAP diluted EPS in the range of $3.25-$3.45, representing growth
consistent with our stated goal of achieving 20% non-GAAP EPS compound
growth through 2010.
WE BELIEVE ELECTING THE ICAHN FACTION WILL HARM SHAREHOLDER VALUE
After the receipt last fall of an offer for the company from Mr. Icahn
as well as other expressions of interest, the Board of Directors
determined it was appropriate to explore whether the sale of the company
could generate greater value for shareholders than continuing to execute
upon our business strategy as an independent company. Mr. Icahn chose
not to participate in the process.
Your Board, in consultation with management and independent advisors
developed and executed a sale process that was professional, objective
and thorough. In the end, market conditions were not right, and
definitive bids for the company were not made.
Despite those facts, Mr. Icahn and his nominees insist on advancing a
single-minded agenda of forcing a sale of the company. In light of the
results of the recent sale process, your Board has concerns about the
consequences of restarting a sale process at this time.
Pursuing such a single-minded strategy, especially within the six-month
timeframe that Mr. Icahn has publicly specified, poses a very real risk
to shareholder value and the strong growth momentum currently underway
at your company. The ongoing uncertainty of putting a perpetual "for
sale" sign on the company would harm our
efforts to attract and retain top professionals "“ including top medical and scientific talent "“ and our ability to execute strategic partnerships and licensing
agreements.
Over more than two decades, Mr. Icahn has waged a long string of proxy
fights, largely against underperforming companies. In stark contrast
Biogen Idec has been delivering strong performance and your company´s
prospects for growth have never been better. Even Mr. Icahn has said
that Biogen Idec is a "great company," and we agree.
Do not jeopardize your company´s continued
growth by electing to your Board an Icahn faction committed only to a
sale of the company regardless of whether that is in your best interests
as a shareholder.
We urge you to elect your Board´s nominees
who are committed to creating value for all owners and who are open to
all options to create shareholder value.
Please vote today to re-elect Cecil B. Pickett, Ph.D., Lynn Schenk and
Phillip A. Sharp, Ph.D., and elect Stelios Papadopoulos, Ph.D., to your
Board of Directors "“ by telephone, by
Internet or by signing, dating and returning the enclosed WHITE proxy card.
Sincerely
Bruce Ross, Chairman James Mullen, Chief Executive Officer
Your Vote Is Important, No Matter How Many Or How Few Shares You Own.
If you have questions about how to vote your shares, or need additional
assistance, please contact the firm assisting us in the solicitation of
proxies:
INNISFREE M&A INCORPORATED|Stockholders Call
Toll-Free: (877) 750-5836Banks and Brokers Call Collect:
(212) 750-5833
IMPORTANT
We urge you NOT to sign any Gold proxy card sent to you by The Icahn
Parties. If you have already done so, you have every legal right to
change your vote by using the enclosed WHITE proxy card to vote TODAY"†by telephone, by Internet, or by signing, dating and returning the WHITE proxy card in the postage-paid envelope provided.
Safe Harbor
This letter to shareholders contains forward-looking statements, which
appear under the heading "Committed to
Creating Value for All Shareholders" above.
Forward-looking statements are subject to risks and uncertainties that
could cause actual results to differ materially from that which we
expect. Important factors that could cause our actual results to differ
include our continued dependence on our two principal products, AVONEX
and RITUXAN, the uncertainty of success in commercializing other
products including TYSABRI, the occurrence of adverse safety events with
our products, the consequences of the nomination of directors for
election to our Board by an activist shareholder, the failure to execute
our growth strategy successfully or to compete effectively in our
markets, our dependence on collaborations over which we may not always
have full control, possible adverse impact of government regulation and
changes in the availability of reimbursement for our products, problems
with our manufacturing processes and our reliance on third parties
fluctuations in our operating results, our ability to protect our
intellectual property rights and the cost of doing so, the risks of
doing business internationally and the other risks and uncertainties
that are described in Item 1.A. Risk Factors in our reports on Form 10-K
and Form 10-Q and in other periodic and current reports we file with the
SEC. These forward-looking statements speak only as of the date of this
letter, and we do not undertake any obligation to publicly update any
forward-looking statements, whether as a result of new information
future events, or otherwise.
Important Information
On May 8, 2008, Biogen Idec filed a definitive proxy statement with the
Securities and Exchange Commission (the "SEC")
in connection with the Company´s 2008 Annual
Meeting. Biogen Idec´s stockholders are
strongly advised to read the definitive proxy statement carefully before
making any voting or investment decision because the definitive proxy
statement contains important information. The Company´s
proxy statement and any other materials filed by the Company with the
SEC can be obtained free of charge at the SEC´s
web site at www.sec.gov or from Biogen Idec at http://investor.biogenidec.com.
The Company´s definitive proxy statement and
other materials will also be available for free by writing to Biogen
Idec Inc., 14 Cambridge Center, Cambridge, MA 02142 or by contacting our
proxy solicitor, Innisfree M&A Incorporated, by toll-free telephone at
(877) 750-5836.
Non-GAAP Information
GAAP financial presentations include significant purchase accounting
charges in 2003 and subsequent periods. Accordingly, we provide a "Ëœnon-GAAP´ perspective that removes these merger-related accounting impacts as well
as other charges. Our non-GAAP financial measures are defined as
reported, or GAAP, excluding (1) purchase accounting and merger-related
adjustments, (2) stock option expense and the cumulative effect of an
accounting change relating to the initial adoption of SFAS No. 123R and
(3) other items. We believe it is important to share these non-GAAP
financial measures with shareholders as they: better represent the
ongoing economics of the business, reflect how we manage the business
internally and set operational goals, and form the basis of our
management incentive programs. Accordingly, we believe investors´ understanding of the Company´s financial
performance is enhanced as a result of our disclosing these non-GAAP
financial measures. Non-GAAP net income and diluted EPS should not be
viewed in isolation or as a substitute for reported, or GAAP, net income
and diluted EPS.
GAAP EPS Reconciliation for 2010 Goals On a reported basis
calculated in accordance with accounting principles generally accepted
in the U.S. (GAAP), the Company aims to grow GAAP EPS from 2007 through
2010 at a 25% CAGR. The long-term non-GAAP EPS goal excludes the impact
of purchase accounting, merger-related adjustments, stock option
expense, and their related tax effects. In order to reconcile long-term
GAAP and non-GAAP EPS figures, the Company has excluded the following
items for 2008 through 2010 from our non-GAAP EPS goal provided above:
Purchase accounting charges, including amortization of acquired
intangible assets and IPR&D, is estimated to be $760-$800 million for
already completed transactions;
Stock option expense due to FAS 123R is estimated to be in the range
of $80-$90 million;
Tax benefit of $220-$240 million related to the pre-tax reconciling
items.
Because the Company cannot predict with certainty the nature or the
amount of non-operating or unusual charges through 2010, it has made no
assumption regarding new purchase accounting charges in this GAAP EPS
goal. The Company may incur charges or realize income through 2010 which
could cause actual results to vary from the goal.
GAAP EPS Reconciliation for 2008 Guidance
Non-GAAP diluted EPS in the range of $3.25-$3.45 representing growth
consistent with the Company´s stated goal of achieving 20% non-GAAP
EPS compound annual growth through 2010.
GAAP diluted EPS in the range of $2.28-$2.48.
In order to reconcile the 2008 GAAP and non-GAAP EPS guidance, we have
excluded the following items from non-GAAP diluted EPS guidance
provided above:
- Purchase accounting charges, including amortization of acquired
intangible assets and IPR&D, are estimated to be $340 million pre-tax
or approximately $0.92 per diluted share after-tax, for already
completed transactions;
- Stock option expense due to SFAS 123R in 2008 is estimated to be
approximately $20 million pre-tax (including approximately $4 million
in R&D and approximately $16 million in SG&A), or approximately $0.05
per diluted share after-tax.
Since the Company cannot predict with certainty the nature or the amount
of non-operating or unusual charges for 2008, we have made no
assumptions regarding other such charges in this GAAP guidance. The
Company may incur charges or realize gains in 2008 that could cause
actual results to vary from this guidance.
GAAP Net Income and EPS Reconciliation for 2003-2007 The
reconciliation between GAAP and non-GAAP net income and diluted EPS for
the years 2003 through 2007 can be found in the table below and is taken
from Annual Reports, 10-K filings and earnings press releases (FY
2003-2007).
= = = = = = = = = = =
Three Months Ended March 31, 2008
- - - - - -
EARNINGS PER SHARE
2008
2007
- - - - - -
- - - - - -
GAAP earnings per share - Diluted
$
0.54
$
0.38
- - - - - -
Adjustment to net income (as detailed below)
0.29
0.21
- - - - - -
Non-GAAP earnings per share - Diluted
$
0.83
$
0.59
- - - - - -
- - - - - -
- - - - - -
An itemized reconciliation between net income on a GAAP basis and
net income on a non-GAAP basis is as follows (in millions):
- - - - - -
- - - - - -
GAAP net income
$
163.1
$
131.5
- - - - - -
Adjustments:
- - - - - -
R&D: Stock option expense
2.7
3.0
- - - - - -
R&D: FIN 46 consolidations of Cardiokine and Neurimmune
0.8
-
- - - - - -
SG&A: Restructuring
-
0.1
- - - - - -
SG&A: Stock option expense
3.1
6.1
- - - - - -
Amortization of acquired intangible assets
74.8
59.9
- - - - - -
In-process research and development related to the contingent
consideration payment in 2008 associated with Conforma acquisition
and the acquisition of Syntonix in 2007
25.0
18.4
- - - - - -
Other income, net: FIN 46 consolidations of Cardiokine and Neurimmune
(0.8
)
-
- - - - - -
Income taxes: Income tax effect of reconciling items
(18.4
)
(16.6
)
- - - - - -
- - - - - -
Non-GAAP net income
$
250.3
$
202.4
- - - - - -
*The GAAP figures reflect: 2004-2007 "“ the
combined Biogen Idec; 2003 "“ a full year of
IDEC Pharmaceuticals and 7 weeks of the former Biogen, Inc. (for the
period 11/13/03 through 12/31/03). Numbers may not foot due to rounding.
GAAP Net Income EPS Reconciliation for Q1 2008 The reconciliation
between GAAP and non-GAAP net income and diluted EPS for the first
quarter of 2008 can be found in the table below and is taken from Annual
Reports, 10-K filings and earnings press releases.
= = = = = = = = = = =
Condensed Consolidated Statements of Income "“ Operating Basis
FY 2003
FY 2004
FY 2005
FY 2006
FY 2007
- - - - - -
GAAP diluted EPS
(4.92
)
0.07
0.47
0.63
1.99
- - - - - -
Adjustment to net income (see below)
6.14
1.38
1.10
1.62
0.75
- - - - - -
Effect of FAS128 and ETIF 0306
-
(0.05
)
-
-
-
- - - - - -
Non-GAAP diluted EPS
1.22
1.40
1.57
2.25
2.74
- - - - - -
GAAP Net Income ($M)
(875.1
)
25.1
160.7
217.5
638.2
- - - - - -
Revenue "“ Pre-merger Biogen product
royalty and corporate partner revenue
1,173.1
-
-
-
-
- - - - - -
COGS "“ Fair value step up of inventory
acquired from Biogen and Fumapharm
231.6
295.5
34.2
7.8
-
- - - - - -
COGS "“ Pre-merger Biogen cost of sales
(179.2
)
-
-
-
-
- - - - - -
COGS "“ Royalties related to Corixa
1.8
-
-
-
-
- - - - - -
COGS "“ Amevive divesture
-
-
36.4
-
-
- - - - - -
R&D "“ Pre-merger Biogen net R&D
(301.1
)
-
-
-
-
- - - - - -
R&D "“ Severance and restructuring
-
3.1
20.3
0.3
1.2
- - - - - -
R&D "“ Sale of plant
-
-
1.9
-
-
- - - - - -
SG&A "“ Pre-merger Biogen SG&A
(346.7
)
-
-
-
-
- - - - - -
SG&A "“ Merger related and purchase
accounting costs
-
-
-
0.1
-
- - - - - -
SG&A "“ Severance and restructuring
13.2
9.3
19.3
2.0
0.6
- - - - - -
Amortization of intangible assets primarily related to Biogen merger
33.2
347.7
302.3
267.0
257.5
- - - - - -
In-process R&D related to the Biogen Idec merger, acquisitions of
Conforma, Syntonix, and Fumapharm, and consolidation of Cardiokine
Neurimmune and Escoubloc
823.0
-
-
330.5
84.2
- - - - - -
Loss/(gain) on settlement of license agreements with Fumedica and
Fumapharm
-
-
-
(6.1
)
-
- - - - - -
(Gain)/loss on sale of long lived assets
-
-
111.8
(16.5
)
(0.4
)
- - - - - -
Other income, net: Pre-merger Biogen
32.9
-
-
-
-
- - - - - -
Other income, net: Consolidation of Cardiokine and Neurimmune and
gain on sale of long lived assets
-
-
-
-
(72.3
)
- - - - - -
Write down of investments
-
12.7
-
-
-
- - - - - -
Charitable donations and legal settlements
30.7
-
-
-
-
- - - - - -
Income taxes "“ Effect of reconciling items
(205.8
)
(195.4
)
(145.2
)
(70.3
)
(65.5
)
- - - - - -
Stock option expense
-
-
-
44.5
35.6
- - - - - -
Non-GAAP Net Income
431.7
498.0
541.7
776.8
879.1
- - - - - -
About Biogen IdecBiogen Idec creates new standards of care in
therapeutic areas with high unmet medical needs. Founded in 1978, Biogen
Idec is a global leader in the discovery, development, manufacturing
and commercialization of innovative therapies. Patients in more than 90
countries benefit from Biogen Idec´s significant products that address
diseases such as lymphoma, multiple sclerosis, and rheumatoid arthritis.
For product labeling, press releases and additional information about
the company, please visit www.biogenidec.com.1
