If Biogen Idec Inc. is sold to a pharmaceuticals giant, as many biotech industry observers expect, it could spell the loss of yet another major corporate headquarters in Massachusetts, a blow to the state's prestige.
But the Cambridge company's sale probably wouldn't damage the economy, they add, since any potential buyer would likely want to use Biogen Idec as a powerful research engine to help create a new generation of cutting-edge drugs to sell worldwide.
"The fact that Biogen is being courted by so many companies speaks well for the firm," said Glen A. Comiso, life sciences director at the Massachusetts Technology Collaborative, a quasi-state economic development group. "If a purchase results in growth of the company's research here, then it will be great for this region. But until we know more details, the impact will be tough to tell."
Last week, Biogen Idec said it was essentially putting itself up for sale by hiring two investment firms to consider outside offers after receiving several "expressions of inter est," including one from billionaire investor Carl Icahn. The news set off a round of speculation about who might buy the company. Likely candidates include major pharmaceutical companies like Pfizer Inc., Sanofi-Aventis Group, Johnson & Johnson, and Novartis AG. The news has helped push Biogen Idec's stock to about $80 a share, near its record high.
Company executives will likely face additional questions about a possible sale this morning when Biogen Idec reports third-quarter financial results. The company is expected to report revenue of $804 million for the quarter, up 14 percent from the same period a year ago, on the strength of drugs designed to treat cancer, multiple sclerosis, and other serious diseases. Wall Street also is predicting the company will show a profit of 65 cents a share, up from 49 cents a year earlier. Going forward, Biogen Idec recently said revenue should grow at a rate of 15 percent and profits per share are expected to grow at 20 percent annually through 2010.
Locally, the company's decision to entertain offers has also sparked chatter about what a sale would mean for Massachusetts. Biogen Idec, the state's largest biotech company with a market value of nearly $23 billion, has 1,750 local employees. It's also one of the oldest biotechs and best known firms in the industry, founded in 1978 on the cusp of the commercial biotech revolution.
Robert Coughlin, the new president of the Massachusetts Biotechnology Council, said drug makers are increasingly acquiring or taking stakes in biotech companies to help fill their product pipelines as patents on their old drugs expire. When that happens, Coughlin said, drug companies typically maintain or even expand the biotech firms' research operations - the heart of what many or the area's biotech companies do.
"This could be a trend that lifts all boats," Coughlin said.
Indeed, in some cases, local biotechs have flourished after being acquired. Consider what happened to Genetics Institute Inc. after the Cambridge company was sold to American Home Products, now Wyeth, more than a decade ago. When Wyeth bought 60 percent of the company in 1992, Genetics Institute had 600 employees. When Wyeth bought the rest of it four years later, Genetics Institute had grown to around 1,000 employees, mostly in Cambridge and Andover.
Today, Wyeth has roughly 1,900 employees in Andover and another 850 in Cambridge, making it one of the state's top biotech employers and much larger than Genetics Institute ever was.
But because Wyeth is based in New Jersey, the company's local operations are less visible than some other biotechs based here, such as Biogen Idec or Vertex Pharmaceuticals Inc.
Still, it's possible Biogen Idec's name could be kept alive after a sale. For instance, British drug maker AstraZeneca PLC purchased Maryland biotech MedImmune for $15.6 billion in April, but has so far kept the MedImmune name. And Genentech, the California biotech pioneer, has kept its own corporate headquarters, 17 years after Swiss drug giant Roche Holdings bought a majority stake in the firm.
Of course, there's no guarantee Biogen Idec will even be sold.
Some analysts say Biogen Idec's relationship with Elan Corp. PLC and Genentech could complicate a deal.
Elan, an Irish company that partners with Biogen Idec on the multiple sclerosis drug Tysabri, says it has the right to acquire Biogen Idec's interest in the treatment in the event the company is sold. Icahn has claimed Elan won't interfere with a deal, but it has hired Lehman Brothers to advise on its options. Elan could potentially threaten to invoke its option unless it receives a hefty payment from any potential buyer.
Genentech says if a sale goes through, it has the right to bid on Biogen Idec's share of Rituxen, a treatment for non-Hodgkins lymphoma and rheumatoid arthritis. Genentech and Biogen Idec are already locked in arbitration over Genentech's claims that Biogen's acquisition of San Diego-based Idec in 2003 effectively marked a change in control, allowing Genentech to bid on Biogen Idec's share of Rituxen. Biogen Idec claims Genentech failed to assert its buyback rights within the 90-day window required under the agreement. But if a major drug company buys Biogen Idec, it would almost certainly constitute a change of control.
Meanwhile, some potential buyers already own drugs that compete with Biogen Idec, possibly reducing their interest in buying the company. For instance, Pfizer, considered the most likely buyer, has a multiple sclerosis treatment called Rebif that competes with Avonex.
"If I were a Biogen employee, I wouldn't be worried yet," said David P. Southwell, chief financial officer for Sepracor Inc., the Marlborough company that makes the insomnia drug Lunesta.
But some analysts are convinced a sale is likely, given that Biogen Idec has said there is interest.
Citigroup analyst Yaron Weber predicts there is an 80 percent chance of sale.
"Given that this company offers a complete global biologics infrastructure with sizable revenues, we anticipate that several serious buyers will emerge to take advantage of this rare opportunity to bolster their revenue lines and pipelines," Weber wrote in a research report.
If Biogen Idec is scooped up, Southwell said, the impact could vary greatly depending on the buyer. Pfizer, he said, is known as the "grim reaper" of the drug industry. Because Pfizer has its own research centers and sales force, he said, it often guts much of the operations of companies it buys. But he also noted that another potential buyer, French drug maker Sanofi-Aventis, would likely want to preserve Biogen Idec's operations to use it as a beachhead to build its presence in the United States.
Todd Wallack can be reached at email@example.com.