Biogen-Idec (BIIB): Buyback indicates no takeover

From Notable Calls

Baird has some interesting comments on Biogen-Idec (NASDAQ: BIIB) after the co announced an aggressive $3B stock repurchase program that if executed in full could boost EPS by 3-5% for 2007-2010 by firm's calculations. This program comes on top of the existing 20M share buyback that is currently authorized.

Under the terms of the modified "Dutch Auction", holders can tender shares for a price between $47 and $53; BIIB will determine the lowest price within that range that allows the firm to purchase up to 57M shares, or 16% of current outstanding stock.

However, much market speculation has circulated as to BIIB's take-out potential in recent days. Firm thinks this transaction may serve to detract from such a scenario. It appears to be fashionable now for large-cap biotechs to institute aggressive share repurchase programs (as they are largely viewed as indicative of management's confidence in the underlying business).

However, they think this circumstance may see a more muted investor response (given the background of significant take-out speculation preceding thisannouncement). Maintains Neutral and $56 tgt.

Notablecalls: Looking at the call volume in BIIB over the past week or so, it really makes me think something is going on. Yet, the huge buyback indicates just the opposite. Who do you believe? The call buyers or the management? My bet's on the management. Taking a quick short above the $50 level (prefer $50.50) may yield some profit today. Think about all the buyers that would just love to cash in. Would play it small, though. Tight leash, too.

For more calls go to http://notablecalls.blogspot.com/

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