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Ebb & Flow

Dashing the hopes of buysiders, Biogen Idec (BIIB) said it had not received any definitive offers and would remain independent. The announcement came after market close on Wednesday and BIIB plunged $17.97 (24%) to $57.91 on Thursday, erasing more than $5 billion in extra market cap that was still remaining in expectation of a takeout.

The shares had run up since July 2 when BIIB completed its $3 billion share buyback, followed by aggressive long-term guidance from management and stock purchases by financier Carl Icahn. Then the company officially said it was considering being acquired after the market closed on Friday, Oct. 12. The frenzy peaked the next Monday, when the shares closed at $82.51.

Now BIIB has returned to near its price prior to the entire string of events. On Friday, BIIB closed at $58.79, down $16.15 (22%) for the week.

Speculation was rampant on the Street as to why the company didn't close a deal. Kurt von Emster of MPM BioEquities argued that BIIB made itself too expensive when it announced it was evaluating strategic alternatives.

"There was purported interest when the stock was trading in the $50s," he noted. But once BIIB hit the $80s, "at that level they priced themselves out of a deal."

Another buysider agreed, noting that BIIB was requiring bids in the $75-$85 a share range.

This buysider, who requested anonymity, said the bidding had made it into a second round with four bidders. But potential buyers had to agree not to negotiate directly with BIIB's two key partners: Genentech (DNA) and Elan (ELN). The inability of the potential acquirers to address the change of control provisions with BIIB's partners was the core problem, the buysider said (see BioCentury, Oct. 22).

BIIB and DNA market Rixutan rituximab for non-Hodgkin's lymphoma (NHL), rheumatoid arthritis (RA) and multiple sclerosis (MS), while BIIB and ELN sell Tysabri natalizumab for MS.

Several buysiders suggested the acquisition saga might not be at an end, with expectations running high that Icahn will weigh in again.

"This is Act I," said von Emster. Now that the price has reset, he suggested there might be renewed interest by potential acquirers.

MPM BioEquities is the hedge fund of MPM Capital, which manages a strategic investment fund for BIIB that was established in 2004 and funded with $65 million over three years.

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