Biogen Idec Inc. (NASDAQ: BIIB) is set to report earnings on Friday morning.  What many investors probably want to know is if these results — or more importantly its guidance — show that this company will be an acquisition target by a larger rival.

Thomson Reuters (First Call) has estimates for last quarter at $0.92EPS and $1.09 billion in revenue.  The March quarter (Q1) estimatesare $0.98 EPS and $1.10 billion in revenue.  We are not sure if Biogen Idec will offer forecasts for 2009 but thoseestimates are listed as $3.96 EPS and $4.47 billion in revenue.

The key issue seems to be around the MS treatment Tysabri, which has been linked to the fatal brain disease PML.  But all media reports and allconcerns aside, this is still supposed to be the best MS treatment onthe market.  This is what we have heard first hand from family members of MSpatients and what we have read.  The black box warning has kept thedrug sales lower than they would have otherwise been. 

We have taken some heat for this stance, but we felt (and still feel)that the company mishandled the withdrawal of Tysabri and should havekept it on the market and been more aggressive.  The problem is thatthis was within the same era as the Merck and Pfizer drugs beingwithdrawn over patients deaths.

We have seen numbers of roughly 32,000 to 35,000 as the current Tysabripatient base.  It is our belief that this number would be 50,000patients if the PML cases were not publicized in the same manner.Before the cases started coming to light in 2005, and we previouslythought that company might be able to come closer to its goal of having100,000 patients using Tysabri.

Shares are $53.28 as of today’s close, and the 52-week trading range is$37.21 to $73.59.  There are currently an equal number of argumentswhich could make this worth much more than today’s value and the samethat could make it worth much less.

Pfizer (NYSE: PFE) is already buying Wyeth (NYSE: WYE).  Genentech(NYSE: DNA), a partner, is still for the time being under a tender fromRoche.  Glaxo SmithKline (NYSE: GSK) and Sanofi-Aventis (NYSE: SNY)have been mentioned as likely acquiring companies of "something" in thedrug or biotech sector.  And then there are Amgen (NASDAQ: AMGN),Celgene Corporation (NASDAQ: CELG), Gilead Sciences (NASDAQ: GILD), andGenzyme Corp. (NASDAQ: GENZ) which are all larger biotechs by marketcaps.

And we cannot forget about partner Elan Corp. plc (NYSE: ELN).

Most of the big drug companies have said they would rather do smallerdeals or denied that they are interested in making a huge acquisition.This company’s market cap is still over $15 billion and that is beforeany premium.  Our guess is that the stock would have to take an unduepunishment and stabilize with all of its franchises and pipelinesintact before a bidder would step in to acquire the company.  The debtto buy a company just comes at too high of a cost today.  That couldchange in weeks or months, but it is just a reality today.

There is one other thing that Biogen could consider.  It may be heresyand it would take it out of the "acquisition target" category for sometime.  But the company could go out and announce an acquisition of itsown.  Few have dared to consider this as a possibility.  We have noknowledge of such an action and would be just as surprised at theaction if it were to occur.  The company  has in the vicinity of$2.5 billion in cash, cash equivalents, and long-term investments.

Jon C. Ogg
February 5, 2009

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