Biogen, Idec agree to merge in stock deal

Biogen Inc., the fourth largest pharmaceutical company in the U.S., and Idec Pharmaceutical Corp. have agreed to merge in a stock deal that will bring into the same fold two "blockbuster" drugs with sales of $1 billion each annually, the two announced Monday. The merged company will be called Biogen Idec Inc.

Under terms of the deal, each share of Biogen common stock will be exchanged for 1.150 shares of Idec common stock, with Idec shareholders owning 50.5 percent of the combined company's shares and Biogen shareholders owning 49.5 percent. Biogen, with 2,700 employees worldwide, is based in Cambridge, Massachusetts, and Idec, with 1,000 employees globally, is in San Diego. The combined company will have headquarters in Cambridge, and will maintain a center for oncology in San Diego and a center focused on immunology in Cambridge. The merged company also will have operations in Europe, Canada, Australia and Japan.

The combined company will have in its product portfolio Biogen's Avonex, used to treat relapsing multiple sclerosis with sales of more than $1.1 billion last year, and Idec's Rituxan, used to treat certain B-cell non-Hodgkin's lymphomas. Idec shares sales profits from Avonex with other pharmaceutical companies involved in marketing that drug, which last year brought in $1.48 billion.

The benefits of the merger will be felt immediately, company executives said Monday in a conference call, noting that the two will share manufacturing facilities. The merger will create a company with critical "scale and mass," said William Rastetter, chairman and chief executive officer (CEO) of Idec, who will be executive chairman of Biogen Idec.

The merged company will have a research and development budget of more than $550 million annually, Rastetter said. It will have 1,000 employees in research and development, with 400 of those in discovery research.

The deal means that the combined company will be able to "grow in a leap overnight," said James Mullen, Biogen chairman and CEO, who will be CEO of the merged company. The combined company will have pro forma 2002 revenue of $1.55 billion and more than $1.5 billion in net cash, executives said during the conference call.

"In many ways we're coming together and building on each other's strengths," said Peter Kellogg, Biogen chief financial officer, who will retain that title in the merged company.

The boards of directors of both companies have approved the merger, which still must be approved by shareholders of Biogen and Idec, and must also receive regulatory approval. The merger is expected to be final by the end of the third quarter or early in the fourth quarter.

The merged company will not only focus on developing its own drugs but will also continue to seek partnerships and licensing deals, executives said.

Biogen currently has six products being tested in human clinical trials, while Idec has four in trials, including three that are in Phase II. Biogen has biological bulk manufacturing facilities in Cambridge and Research Triangle Park, North Carolina, and a large-scale manufacturing plant in Research Triangle Park to make bulk protein, which the company said is one of the largest cell culture facilities globally. Idec is building a biologics manufacturing facility in Oceanside, California, and recently completed a biologic facility for clinical trials.

Biogen is the world's oldest independent biotech, emerging out of a 1978 meeting of scientists including Phillip Sharp of the Massachusetts Institute of Technology and Walter Gilbert from Harvard University, both of whom are Nobel Prize winners. Idec was founded in 1985 to develop monoclonal antibodies.