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Will Turnover at Biogen Mean Victory for Icahn?


CEO James Mullen will step down after a tumultuous tenure.

It's been a rough decade for Biogen Idec (BIIB), but a fresh start is coming for the biotech now that James Mullen, its president and chief executive officer, has announced that he will be retiring in June. It's likely that Carl Icahn is already celebrating.

"I have had the opportunity to work with many talented and dedicated colleagues over the past 21 years, and I am proud of all that we have accomplished together," said Mullen in a statement to the press. "I look forward to helping the company make the transition to a new leader and enter the next chapter of its success."

Mullen, 51, has been part of the company for more than 20 years, but he took the helm just seven years ago. Throughout his time manning Biogen he has been at odds with one of the biotech's largest shareholders, the activist investor and billionaire Carl Icahn. The two have publicly traded blows for years over how the company should be run and who should be on the board of directors.

Icahn is infamous for putting his money and his two cents into the companies that he invests in -- the billionaire has made headlines with high profile proxy fights over the years, winning some and losing others. His objective is to force change, turn the companies around, and take a profit. Icahn could not be reached for comment; his office said he is currently traveling.

In 2007, Biogen, prompted by Icahn, announced it was looking for a bidder to buy the company, but the search ended without any definitive offers. It took itself off the market, but received further resistance from Icahn who felt more offers would arise. In 2008, the savvy investor unsuccessfully nominated his own slate of board members for Biogen. Yet, after a slew of setbacks at the company, Icahn finally got seats for two of his nominees.

It's been far from sunshine and roses for Biogen, which manufactures treatments for rheumatoid arthritis, lymphoma, and multiple sclerosis, during Mullen's tenure. Aside from the drama with its largest shareholder, its once-promising product, multiple sclerosis drug Tysabri, has been in and out of the news for causing a rare and often deadly brain disease called progressive multifocal leukoencephalopathy. Tysabri, which is co-marketed by Elan (ELN), was taken off the market in 2005 after several PML cases surfaced, but was later re-introduced with far more strict safety and marketing guidelines. The company is now pursuing the development of a test called assays that would determine the risk of PML in potential Tysabri patients. The drug is currently one of the most effective treatments for MS on the market.

Biogen shares trade for less today than they did at the start of 2005.

Yet, Tysabri and Icahn were just two of Mullen's many woes over the last seven years. The CEO was slammed by one of Biogen's other investors, HealthCor Management, in October for selling off $85 million-worth of the company's stock. The hedge fund was upset over Mullen's compensation; Forbes lists Mullen as the fourth-highest paid executive within the drugs and biotechnology sector with total compensation of $24.8 million for 2008.

"We anticipate that Mr. Mullen's successor will be more focused on improving Biogen's research and development productivity and efficiency," said HealthCor in a statement to Reuters.

Usually an executive departure means upheaval and unease at a company, but this may be a sigh of relief for investors. Analysts say it's time to buy the stock. Biogen gained in early trading on the news of Mullen's departure, although it has since retreated.

Analysts at Leerink Swann say that large-cap biotechs, particularly Biogen and Gilead (GILD), are under-owned and will have pipeline news in 2010 that will drive the stocks. "We believe Biogen's valuation already reflects Tysabri decline, so success with the assays should drive meaningful upside from current levels. We reiterate our Outperform rating and mid-high $50s valuation," said Leerink's Josh Schimmer in a note to investors.

Many investors hope this departure means that the sale of the company will be imminent, but only time will tell. As for Icahn, victory may not come swiftly. Although Biogen shares jumped in early trading after the news of Mullen's departure, they lost their gains by the afternoon.

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