Biogen Idec Inc.

1985–2003

Biogen Idec Inc., formed through the 2003 merger of Biogen Inc. and IDEC Pharmaceuticals Corporation (Idec), is a biotechnology company focused on developing treatments for cancer and autoimmune and inflammatory diseases. The company's portfolio of approved drugs includes Rituxan and Zevalin, both of which treat B-cell non-Hodgkin's lymphoma. Biogen Idec also markets Amevive, a drug to treat psoriasis, and the best-selling treatment for relapsing multiple sclerosis, Avonex. Based in Cambridge, Massachusetts, the company maintains facilities and offices in San Diego and abroad. Biogen Idec operates throughout Europe and in Canada, Japan, and Australia.

Origins

Idec began the long and difficult journey of taking a drug from discovery to market in 1985. The company was founded in San Francisco to develop and to commercialize drugs to treat immune system cancers and autoimmune and inflammatory diseases, a costly, time-consuming, and risky undertaking for a start-up biotechnology company. Ahead, Idec faced the daunting task of developing an effective drug and shepherding it through the numerous regulatory stages required to gain approval from the U.S. Food and Drug Administration (FDA). The process would take years to complete, and it would require vast sums of capital, promising to drain the financial reserves of any but the largest pharmaceutical concerns. Idec's success would hinge on the effective mixture of science and business, two disciplines that often were at odds with one another. The demands of science called for time and money for research and development, while the demands of business called for revenues and profits. As Idec began its journey in 1985, the company would have to find a way to satisfy both its scientific and business needs.

Much of Idec's initial work centered on monoclonal antibodies as a way to treat non-Hodgkin's lymphoma, specifically B-cell lymphoma, a cancer of the immune system afflicting approximately 240,000 people in the United States. Monoclonal antibodies were used to bind to specific cells, such as tumor cells, and either deplete or suppress the targeted cells, leaving the healthy cells unharmed. Although monoclonal antibodies were known for their discriminatory ability to damage targeted cells, Idec's scientists employed a plan-B strategy in treating non-Hodgkin's B-cell lymphomas, working on a product to reduce total B cell levels, thereby eliminating a patient's normal and malignant B cells. The approach was based on clinical studies demonstrating that normal, healthy B cells regenerated within months. The other part of Idec's research and development efforts focused on treating autoimmune and inflammatory diseases, afflictions such as rheumatoid arthritis, psoriasis, and multiple sclerosis. Monoclonal antibodies also worked well in combating autoimmune and inflammatory diseases, succeeding by their ability to target specific cells.

Idec scientists labored for years developing monoclonal antibodies, chewing through millions of dollars as they performed their pioneering work. Not surprisingly, a scarcity of funds plagued the company early on, a problem that would hound Idec for years. In 1991, in a bid to alleviate some of the financial pressure it was experiencing, the company completed an initial public offering of stock, debuting on the NASDAQ. The proceeds from the stock offering provided some help, enabling the company to progress toward its first major hurdle. In 1993, Idec began Phase I clinical trials with a monoclonal antibody product it had given the temporary name IDEC-C2B8. Phase I trials were concluded before the end of the year, paving the way for the start of Phase II trials. Once Phase II trials were concluded, the end of the regulatory approval process was in sight, but Idec's management team, led by Dr. William H. Rastetter, faced a formidable problem. Idec did not have the money to pay for Phase III trials.

In 1994, the company collected $7.4 million in revenue and posted a loss of $18 million.

1986–1997

Idec's string of annual losses had inflicted a heavy toll on the company. Its financial performance in the years leading up to its most profound crisis offered a glimpse at the precarious financial state of the company. In 1994, the company collected $7.4 million in revenue and posted a loss of $18 million. Idec lost another $17.2 million in 1995 on revenues of $23.6 million, its tenth straight year of recording an annual loss. Since its inception, Idec had racked up more than $80 million in losses, leaving it dangerously short of cash as it reached the critical Phase III patient study portion of the FDA approval process. By 1995, the company had enough money to stay afloat for perhaps two more years, but it did not have enough money to pay for Phase III trials. It was at this juncture of the company's development when a company-saving agreement was forged.

1995 Agreement with Genentech

Idec's chief executive officer, William Rastetter, joined the company in 1986, roughly a decade after earning his doctorate in chemistry from Harvard University. After spending seven years on the faculty at the Massachusetts Institute of Technology, Rastetter joined a company named Genentech, Inc., one of the largest biotechnology companies in the world. Rastetter served in various capacities at Genentech, directing the company's Biocatalysis and Chemical Sciences groups and serving as the director of corporate ventures at the company. It was through Genentech's intervention that Idec was able to continue conducting clinical trials on IDEC-C2B8. The two companies signed a collaboration agreement in March 1995 that provided the funding for the further development of IDEC-C2B8, a drug that would become known as Rituxan. During the next several years, Genentech invested approximately $60 million on Rituxan's development, getting in return a majority of the sales and profits Rituxan would generate if it earned FDA approval.

FDA Approval of Rituxan in 1997

Idec ceded the bulk of the financial spoils of its development efforts, but the partnership with Genentech kept the Rituxan project moving forward. Phase III trials were concluded in February 1997, and with the help of Genentech's regulatory expertise, the company filed for final approval from the FDA. In November 1997, after 12 years of work, the company received welcome news. The FDA greenlighted Rituxan, making it the first monoclonal antibody to be approved as a cancer therapeutic.

1993–2003

Rituxan, which offered an alternative to chemotherapy, quickly became the leading treatment for non-Hodgkin's lymphoma. The drug's success, even with the majority of the financial rewards going to Genentech, dramatically improved Idec's finances and its standing within the biotechnology community. With what quickly became the leading treatment for B-cell non-Hodgkin's lymphoma to its name, the company gained global recognition as a skillful pioneer in the industry. Further, the embrace of Rituxan by the medical community enabled the company to record its first annual profit in 1998, beginning what became a string of profitable years for Idec.

With Rituxan proving to be a market winner, Idec focused on the next drug it intended to commercialize. In 1993, the same year the company began Phase I trials with Rituxan, Idec began clinical studies of a drug that would become known as Zevalin. Zevalin, a therapeutic designed to treat B-cell non-Hodgkin's cancer as well, was a radioimmunotherapy product, one that, as Business Week noted in its October 29, 2001 issue, added "a second line of defense" to Rituxan. As Zevalin passed through various regulatory phases, the drug demonstrated an ability to kill malignant cells with radiation, promising to give Idec two products to combat the sixth leading cause of cancer death. In September 2001, the FDA's advisory panel voted 13 to two to recommend Zevalin for treating non-Hodgkin's lymphoma patients. The FDA, which rarely ruled against the recommendation of its advisory committee, approved Zevalin in February 2002, making it the first radioimmunotherapy to enter the market. Unlike with Rituxan, Idec was not forced to strike a partnership with another company to bring Zevalin to market, which meant the company could collect all the sales and profits generated by its new cancer treatment. In a February 25, 2002 interview with the San Diego Business Journal, Rastetter offered his reaction to Zevalin's approval by the FDA. "It feels good," he said. "We have our first product that we have [taken] 100 percent ourselves from the discovery to the marketplace."

By the time Zevalin was approved, Rituxan had become a phenomenal force in the pharmaceutical industry. In 2002, the drug generated $1.47 billion in sales, but Idec, because of its agreement with Genentech, collected only $370 million of the total. With Zevalin, the company hoped to register another success, one that would be enjoyed entirely by itself, but Idec was not depending solely on Rituxan and Zevalin to guarantee its financial health. The company was working on other drugs to develop a product pipeline that would provide a steady stream of new pharmaceuticals. In the fall of 2002, Rastetter met with Jim Mullen, the chief executive officer of another biotechnology firm, Cambridge, Massachusetts-based Biogen, Inc. The pair discussed working together to develop treatments for autoimmune disorders, but their conversation led to a relationship far deeper than a collaborative agreement.

Biogen Merger Announcement in 2002

When Rastetter and Mullen began working on a licensing agreement for future drug development, they realized the complementary nature of their technologies. Within a space of months, Rastetter and Mullen began hashing out an agreement to merge their companies, a union that would combine Idec's expertise in developing cancer treatments with Biogen's expertise in developing Avonex, the first multiple sclerosis product to achieve $1 billion in sales, and Amevive, a psoriasis treatment. The merger was announced in June 2002, a stock-for-stock transaction valued at approximately $6.5 billion. The announcement sparked widespread interest, ranking as the largest biotechnology merger between two independent companies. The union promised to create the third largest biotechnology company in the world, trailing only Amgen Inc. and Genentech. The greatest advantage gained by merging the companies was the enormous size of the combined organization, which would have far more money to spend on research and development and would realize cost savings from shared manufacturing facilities. "There's been a trend over the last two to three years in biotech where companies are looking for girth, they're looking for mass," an industry analyst commented in a June 24, 2003 interview with Investor's Business Daily. "What does girth give you?," the analyst asked. "It can make growth more difficult, but on the upside it creates a more diversified company."

2001–2004

The merger of Idec and Biogen was completed in November 2003, creating a new company named Biogen Idec Inc. Under the terms of the transaction, Idec shareholders owned 50.5 percent of the combined company, while Biogen shareholders were given a 49.5 percent interest in the new company. Biogen was roughly three times larger than Idec in terms of sales and number of employees, but technically Idec acquired Biogen because of a change-of-control provision in Idec's agreement with Genentech. Despite the technical aspect of the merger, a dominant strain of Biogen was seen in the merged company. Biogen Idec adopted Cambridge as its headquarters, the headquarters of Biogen Inc. For leadership, the title of chief executive officer was awarded to Jim Mullen, while Rastetter assumed the role of executive chairman. These two executives took charge of a company with annual sales estimated at $1.5 billion, the same figure the pair had available to spend on promoting the development of the new company. A new, powerful player in the business of biotechnology had emerged, one whose origins sprang from the roots of two small biotechnology start-ups that had hit the jackpot in drug development.

In the wake of the merger, the industry waited and watched to see if the marriage of two of the rising stars in biotechnology created a company superior to its two parts. Undoubtedly though, the company figured as a heavyweight in the biotechnology industry. In 2004, Biogen Idec began moving some operations into a sprawling campus near San Diego in Oceanside, a construction project begun by Idec in 2001. The six-building, $400 million complex befitted one of the industry's premier players. That same year the company posted sales of $2.21 billion. In the years ahead, the company intended to use its "girth" to develop a diverse portfolio of therapeutic products to rival the remarkable success of Idec's Rituxan and Biogen's Avonex, two products to inspire future generations of Biogen Idec researchers.