George Scangos Named Biogen Idec’s CEO: Will Activist Shareholders Be Placated?

Jul. 1.10 | About: Biogen Inc. (BIIB)
Geoge Scangos from Exelixis (NASDAQ:EXEL) was officially named CEO of Biogen (NASDAQ:BIIB), replacing James Mullen who retired June 8 under pressure from the board. He has biologics experience from Bayer and has been an R&D head. However, he is probably best known as a dealmaker. At Bayer he drove a large in-licensing deal, while his tenure at Exelixis has been marked by a proliferation of out-licensing agreements with large Pharmaceutical companies. He has also initiated multiple reorganization efforts at Exelixis. And while he heads a relatively small biotech, he is well known throughout the industry, sitting on the board of Anadys Pharmaceuticals and holding roles at major universities.
Biogen is noted to have one of the best late stage pipelines of the large cap biotechs. Even so, the company has been in tumult since Carl Icahn pushed the company to put itself up for sale in 2007. The failed sale and poor performance from MS drug Tysabri eventually led to Mr. Mullen’s ouster. With only four marketed products, Biogen is heavily dependent on its MS franchise of Avonex and Tysabri, the two accounted for 73% of 2009 sales.
Revenue growth has been anemic, primarily due to a slowdown in sales of Avonex. Converting patients to the next-generation PEGylated-Avonex will be a top priority once that drug is approved. While Mr. Scangos lacks experience in manufacturing and sales, he lead a company that at one time had close to a thousand employees and had operations on two continents. This should provide him some background in running a large corporation. With three quarters of its sales in MS and a late stage pipeline also geared toward that indication, Biogen intends to stay focused on MS, at the same time, it has diversified its pipeline with indications in neurology, oncology, and immunology. His scientific background and deep knowledge in oncology should be useful here.
Biogen recently lost out in a bidding war for Facet Biotech to Abbott (NYSE:ABT), which offered a bid 54% higher than that of Biogen. With this, Biogen lost full development rights to the promising MS drug, daclizumab, as well as an early stage oncology compound. Mr. Scangos’ expert deal making will likely come in handy when it comes time for Biogen to do its next deal. One can be certain the two parties will not be this far apart on their valuations.
When Mr. Scangos spoke with analysts yesterday, he talked about bringing a sense of urgency to the company. Biogen needs that. Activist investors are pushing for results. The company needs to start growing its revenues faster- and no more high profile pipeline blowups. Mr. Scangos certainly has deep boardroom support: Carl Icahn is a major shareholder in Exelixis and de facto Biogen board member, Stelios Papadopoulos, chairs the board at Exelixis. This is a chance for Mr. Scangos to really make a name for himself.
Disclosure: No Positions