Idec Chief Exec Defends Biogen Merger Decision
William Rastetter says it would bring cost savings, broaden the scope of products and take the U.S.-centered company global.
Idec Chief Exec Defends Biogen Merger Decision
By Denise Gellene, Times Staff Writer
Today, Idec Pharmaceuticals Corp. of San Diego is expected to complete its $5.7-billion stock acquisition of Biogen Inc. of Cambridge, Mass. The combined company, Biogen Idec Inc., would rank as the world's third-largest biotechnology concern, behind Amgen Inc. and Genentech Inc.
Some analysts have questioned the deal, which would unite companies that each are largely dependent on a single popular drug. Idec's Rituxan, for non-Hodgkin's lymphoma, and Biogen's Avonex, for multiple sclerosis, both generate more than $1 billion in annual sales, but the growth of those sales is slowing.
The two firms' shares fell in June when the deal was announced and have not recovered. Shareholders will vote on the merger today.
But Idec and Biogen contend that their combined research-and-development budgets will lead to faster drug development and allow them to bid on promising drug candidates in the works at smaller biotechs. Biogen Idec has promised investors that by 2010 it will double the number of drugs in its development pipeline through licensing deals; the two firms have 10 drugs in clinical trials now. Biogen Idec also has pledged average annual growth in earnings per share of 20% through 2010.
Biogen Chairman and Chief Executive James C. Mullen would become CEO of the new company, and Idec Chairman and Chief Executive William H. Rastetter would be executive chairman.
This week, The Times talked with Rastetter in his San Diego office.
Question: Why does this deal make sense, and how will you show investors that it does?
Answer: What this merger allows us to do is take Idec's research and development budget from $150 million in 2004 to $600 million [next year]. It takes us from oncology into neurology and dermatology. It takes us from a U.S.-centered company to being a company with operations in 17 countries. It takes us from being small to being much closer to the sweet spot. We are going to show Wall Street over time that this is a winner.
Q: Why would a small company choose to license a promising drug candidate to Biogen Idec instead of its much larger rivals, Amgen or Genentech?
A: I am delighted to compete for opportunities with Amgen and Genentech. They are not any better than we are. We've got $2 billion in cash on our balance sheet — that's plenty of powder. We've got about as much experience in biologics manufacturing, and with the opening of our Oceanside plant we've got a lot more capacity. Those two guys don't intimidate us.
Q: When did it become clear to you that Idec needed to merge with another biotech company?
A: I don't think Idec or Biogen needed to merge. It was a matter of looking at our organizations and understanding how much more effectively we can spend our dollars. Our Oceanside plant can replace a European plant Biogen was planning. They have operations in Europe that we were planning to put in. By cutting out the stuff we don't have to do, we can save $300 million between now and 2007. If you allocate that to R&D, that is another $75 million each year.
cont... |
