Billionaire Investor Carl Icahn has filed suit against Biogen in a Delaware chancery court in order to force Biogen to turn over documents related to its failed sale of the company last year, according to a Reuters. Biogen was reported by Delaware Online to have lost $5 billion in market value as a result of its decision to abandon its plan to sell the company. Icahn is a major investor in Biogen, owning shares valued at $650 million, according to Delaware Online.
Reuters described Icahn’s complaint as follows:
[In his complaint] Icahn demanded the right to inspect documents and board meeting minutes to determine what the board of directors knew about the sale process, which Icahn claims Biogen deliberately sabotaged. According to the complaint, Icahn and his associates are demanding the documents in order to alert shareholders to any non-confidential information they discover about the performance of the board.
Xconomy provided some additional insight on the complaint as well:
Icahn’s complaint, filed in Delaware Chancery Court, repeats his earlier accusations that the confidentiality agreements prospective buyers were required to sign before they could talk to two key Biogen partners, Elan Pharmaceuticals and Genentech, were too restrictive. Both companies hold some change-of-control rights on key Biogen drugs—Elan on the multiple sclerosis and Crohn’s disease drug Tysabri, and Genentech on cancer-fighting Rituxan. Biogen’s restrictions on how suitors could talk to the companies, Reuters said Icahn charged in the complaint, “prevented any potential bidders from learning where Biogen’s third-party partners stood on exercising change-of-control options on key Biogen drugs.”
Biogen refused to hand over the documents when requested by Icahn on March 28th–a move which prompted the filing of the complaint. Xconomy reported on the reasons Biogen has given for its refusal:
Biogen refused to hand over the information that Icahn demanded in part because CEO Jim Mullen and the company already shared much of it at a JP Morgan conference in early January. . . . What’s more. . . .Icahn himself was a potential bidder on the company, and has already received much of the information he’s now seeking. “He has the information he says he’s looking for,” [says Naomi Aoki, a spokeswoman for Biogen], To disclose anything beyond what is already disclosed, which would include confidential internal documents, “we believe would compromise and negatively affect our ability to maximize value for shareholders in any future sale process,” she said.
So, you might wonder: who exactly is this billionaire investor Carl Icahn? The Boston Globe ran a good story on Icahn last August, which provides some background on Icahn and context to his fight with Biogen:
Icahn . . . . might be best known as a corporate raider who piloted TWA in 1985 and tried to grab Nabisco in 1996, often buys large stakes in companies and pushes them to make changes or find a buyer. Icahn, a former medical student, has also shown increasing interest in rattling the cages of biotechs and drug makers. He gradually accumulated shares in ImClone Systems, Inc.., a cancer drug developer in New York linked to the Martha Stewart insider trading scandal. Last year, Icahn finally took control of the company after a raucous shareholder battle and vowed to install his own management team.
In February, Icahn revealed he had taken a 1 percent stake in MedImmune, Inc., one of the country’s largest biotech firms. Shortly afterward, he threatened to start a shareholder fight to force the sale of the Maryland company, complaining about its "lackluster" performance. In April, MedImmune agreed to sell itself to drug maker AstraZeneca PLC for $15.6 billion. . . .Not all of his moves have paid off. In late 2004, Icahn disclosed he became the biggest shareholder in Blockbuster, Inc. and quickly pushed for changes at the movie rental chain to compete with online competition like Netflix, Inc. Since then, Blockbuster’s stock has fallen from about $10 a share to less than $5.
I have not had the opportunity to review a copy of Icahn’s complaint, but based on the reporting, it appears that the sole justification for this lawsuit is to obtain documents. It would be interesting to know what other claims, if any, are included in the complaint.
Will this suit succeed in forcing Biogen to be put up for sale once more? It seems very unlikely. So, what is Icahn going to accomplish by this lawsuit? While it is possible he will obtain the documents he is seeking, it is difficult to come up with any other real benefits that could result from his action. Is he hoping to come up with evidence of wrongdoing in order to take corporate decisionmakers on at an individual level? Or is this merely an act of aggression to encourage compliance with his wishes?
In all honesty, this suit leaves me scratching my head a bit. We will follow how it develops at the California Biotech Law Blog and keep you posted, as I am certain that many of you in the biotech world will want to take notes on Carl Icahn’s activites. The knowledge will likely be useful if and when he ever invests in your biotech company.
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