Biogen entertains offers

Biogen's share price has nearly doubled to more than $82 since mid-April, based largely on takeover speculation. Potential suitors should avert their eyes from that frothy valuation, which equates to 26 times estimated 2008 earnings and values Biogen at about $23.5bn. But Mr Icahn, who expressed interest in buying Biogen himself to get the ball rolling, is betting clear-headedness will not prevail. The world's drug giants are frantically searching for new treatments to offset revenue losses from blockbuster drug patent expirations. Biogen's size would give a buyer immediate scale in the biotech field. This is the sort of a potential panacea AstraZeneca used to justify the more than 50 per cent premium it paid in April for MedImmune.

The $15.6bn MedImmune buyout, which Icahn also helped spur, was widely viewed as too expensive, and has battered AstraZeneca's stock. At current prices, a takeover of riskier Biogen could be even more foolhardy. There are worries that Biogen's expectations for the number of patients who will use its Tysabri multiple sclerosis drug are too optimistic, particularly because it has been linked to a few deaths. Biogen splits its profits on Tysabri and auto-immune drug Rituxan with rival companies. Its competition is strengthening. And its pipeline, while strong, has yet to produce a clear winner.

With so many unknowns, potential buyers such as Pfizer, Sanofi, Novartis and GlaxoSmithKline may be wise to wait for the fog to lift - or at least for Biogen's share price to cool.