Big Biotech M&A: Waiting for the Casus belli

Carl "who-says-Icant?" Icahn is doing his level best to recoup his losses on Biogen Idec by getting the damn thing sold.

This time he’s trying, with God-knows-what leverage, to install three of his own directors onto the Biogen board. We presume that they’ll try to convince the other independent directors to try the auction process again – this time without the ill tasting, if not altogether poisonous, pill inserted by CEO Jim Mullen.

We reported on that pill here (before anyone else, we should add).

Biogen insisted that bidders for the company follow a staged process—submitting binding bids before talking with either Genentech or Elan, its partners, respectively, on Rituxan and Tysabri. That didn’t go over too well, particularly in the case of Elan, which has a right (and would immediately get the money from any number of private-equity backers) to buy back the fast-growing Tysabri.

A Biogen buyer would have to negotiate with Elan in order to get Tysabri – and it wouldn’t know the price (assume: very, very high) until after it had offered one to Biogen (which also would have to be very, very high). Sure, it could back out of a Biogen deal if it couldn’t wrap up something palatable with Elan – but why go through all the shenanigans in the first place?

So now Icahn is starting the process again. Which leads us to wonder: isn’t there a more straightforward solution for the potential Biogen buyers out there?

Not likely, given the Europe-of-1914 interlocking map of pharmaceutical contracts today.

Elan owns a buyback right to Tysabri. So theoretically, a company could buy Elan – and then buy Biogen. No good—on the change of control in Elan, Biogen would have the right to buy out Tysabri. Which could then of course trigger a bid for Biogen…

That’s a pretty expensive strategy. Particularly because much of Elan’s value is in Wyeth’s hands. Wyeth owns a big chunk of Elan’s most valuable project—indeed perhaps the most valuable project in the entire industry, bapineuzumab – potentially the first-ever disease-modifying Alzheimer’s drug, which is set to report out Phase II results in the middle of this year. Wyeth isn’t getting much benefit from its position, because it’s been in a stock-market funk since the regulatory stumbles of its three late-stage primary-care pipeline projects (bifeprunox, bazedoxifene and Pristiq).

So one could theoretically buy Wyeth on the cheap to get Elan to get Biogen.

All of which is palpably ridiculous. Of course, who’d have believed you if you’d told someone in 1913 that all of Europe would soon be torn apart because one deranged Serbian killed the Austrain heir to throne?

Good luck, Carl.