UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.  )

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þ		Definitive Proxy Statement
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o		Soliciting Material Pursuant to §240.14a-11(c) or §240.14a-12

 

Biogen Idec Inc.

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

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April 25, 2007

 

Dear Stockholder:

 

You are cordially invited to attend the 2007 Annual Meeting of Stockholders of Biogen Idec Inc. to be held at 10:00 a.m. Eastern Time on Thursday, May 31, 2007 at the Boston Marriott Cambridge Hotel, Two Cambridge Center, Cambridge, Massachusetts 02142. For your convenience, we are also pleased to offer a webcast of the meeting open to the public and accessible at www.biogenidec.com.

 

We have enclosed the Notice of Annual Meeting, Proxy Statement and proxy card. At this year’s meeting, you will be asked to: (i) elect three directors and (ii) ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2007. Our Board of Directors recommends that you vote FOR both of these proposals. Please refer to the Proxy Statement for detailed information on the proposals. If you have any further questions concerning the meeting or these proposals, please contact our Investor Relations Department at (617) 679-2812. For questions relating to voting, please contact D.F. King & Co., Inc., our proxy solicitors, at (800) 859-8511 (toll-free within the U.S. and Canada) or (212) 269-5550 (outside the U.S. and Canada, call collect).

 

Whether you plan to attend the meeting or not, it is important that you promptly fill out, sign, date and return the enclosed proxy card in accordance with the instructions set forth on the card. This will ensure your proper representation at the meeting.

 

Sincerely,

 

James C. Mullen
Chief Executive Officer and President

 

 

YOUR VOTE IS IMPORTANT. PLEASE REMEMBER TO RETURN YOUR PROXY PROMPTLY.

Biogen Idec Inc.

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON MAY 31, 2007

 

TO OUR STOCKHOLDERS:

 

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Biogen Idec Inc., a Delaware corporation, will be held at 10:00 a.m. Eastern Time on Thursday, May 31, 2007 at the Boston Marriott Cambridge Hotel, Two Cambridge Center, Cambridge, Massachusetts 02142 for the following purposes:

 

1. To elect three members to our Board of Directors to serve for a three-year term ending at the Annual Meeting of Stockholders in 2010 and until their successors are duly elected and qualified or their earlier resignation or removal.

 

2. To ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2007.

 

3. To transact such other business as may be properly brought before the meeting and any adjournments.

 

Our Board of Directors has fixed the close of business on April 13, 2007 as the record date for the determination of stockholders entitled to notice of and to vote at the meeting and any adjournments. For 10 days prior to the meeting, a list of stockholders entitled to vote will be available for inspection at our executive offices located at 10 Cambridge Center, Cambridge, Massachusetts 02142. If you would like to review the list, please call our Investor Relations Department at (617) 679-2812.

 

All stockholders are cordially invited to attend the meeting. However, to ensure your representation, you are requested to complete, sign, date and return the enclosed proxy card as soon as possible in accordance with the instructions on the card. A return, postage-paid, self-addressed envelope is enclosed for your convenience.

 

BY ORDER OF OUR BOARD OF DIRECTORS

 

 

Susan H. Alexander
Secretary

 

Cambridge, Massachusetts

April 25, 2007

TABLE OF CONTENTS

 

Biogen Idec Inc.
14 Cambridge Center
Cambridge, Massachusetts 02142
(617) 679-2000

 

PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 31, 2007

 

We sent you this Proxy Statement and the accompanying proxy card because the Board of Directors of Biogen Idec Inc. is soliciting your proxy to vote at our Annual Meeting of Stockholders to be held at the Boston Marriott Cambridge Hotel, Two Cambridge Center, Cambridge, Massachusetts 02142 on Thursday, May 31, 2007 at 10:00 a.m. Eastern Time. This Proxy Statement, along with the accompanying Notice of Annual Meeting of Stockholders, summarizes the purposes of the meeting and the information that you need to know to vote at the meeting.

 

Our 2006 Annual Report to Stockholders and our 2006 Annual Report on Form 10-K, which includes our audited financial statements, are being mailed with this Proxy Statement, but are not part of this Proxy Statement. You can also find a copy of our Annual Report to Stockholders and our 2006 Annual Report on Form 10-K on the Internet through the electronic data system of the Securities and Exchange Commission, or SEC, called EDGAR at www.sec.gov or through the Investor Relations section of our website at www.biogenidec.com.

 

Each share of our common stock that you own as of the close of business on the record date of April 13, 2007 entitles you to one vote on each matter to be voted upon at the meeting. As of the record date, 342,193,475 shares of common stock were outstanding and entitled to vote. We are mailing this Proxy Statement and the accompanying proxy on or about April 25, 2007 to all stockholders entitled to notice of and to vote at the meeting. For 10 days prior to the meeting, a list of stockholders entitled to vote will be available for inspection at our executive offices located at 10 Cambridge Center, Cambridge, Massachusetts 02142. If you would like to review the list, please call our Investor Relations Department at (617) 679-2812.

 

Shares represented by valid proxies, received in time for the meeting and not revoked prior to the meeting, will be voted at the meeting. You can revoke your vote in the manner described in “How can I change my vote?”

 

If your shares are registered directly in your name through our stock transfer agent, Computershare Trust Company, N.A., or you have stock certificates, you may vote:

 

 

If your shares are held in “street name” (held in the name of a bank, broker or other nominee), you must provide the bank, broker or other nominee with instructions on how to vote your shares and can do so as follows:

 

 

 

You may revoke your proxy and change your vote at any time before the meeting. You may do this by:

 

 

If your shares are registered in your name, they will not be voted unless you vote in the manner described under “How do I vote?”

 

If your shares are held in street name and you do not provide instructions on how to vote in the manner described under “How do I vote,” the bank, broker or other nominee has the discretionary authority to vote your shares on “Proposal 1 — Election of Directors” and “Proposal 2 — Ratification of the Selection of our Independent Registered Public Accounting Firm.”

 

We encourage you to provide voting instructions. This ensures your shares will be voted at the meeting in the manner you desire. Because banks and brokers have the discretionary authority to vote on both proposals, there will not be any broker non-votes at the meeting.

 

You may receive more than one proxy card or voting instruction form if you hold shares of our common stock in more than one account, which may be in registered form or held in street name. Please vote in the manner described under “How do I vote?” for each account to ensure that all of your shares are voted.

 

A majority of our outstanding shares of common stock as of the record date must be present at the meeting to hold the meeting and conduct business. This is called a quorum. Shares voted in the manner described under “How do I vote?” will be counted as present at the meeting. Shares that abstain or do not vote on one or more of the matters to be voted upon are counted as present for establishing a quorum.

 

If a quorum is not present, we expect that the meeting will be adjourned until we obtain a quorum.

 

 

 

We do not know of any other matters that may come before the meeting. If any other matters are properly presented to the meeting, the persons named in the accompanying proxy intend to vote, or otherwise act, in accordance with their judgment.

 

We will announce preliminary voting results at the meeting. We will publish final voting results in our Quarterly Report on Form 10-Q for the second quarter of 2007, which we plan to file with the Securities and Exchange Commission by August 9, 2007. You may request a copy of the Form 10-Q by writing to Investor Relations, Biogen Idec Inc., 14 Cambridge Center, Cambridge, Massachusetts 02142. You will also be able to find a copy on the Internet through the SEC’s electronic data system called EDGAR at www.sec.gov or through the Investor Relations section of our website at www.biogenidec.com.

 

Our Board of Directors is soliciting your return of the proxy card accompanying this Proxy Statement. Our directors, executive officers and other employees may also solicit proxies by telephone, fax, e-mail, Internet and personal solicitation. They will not receive any additional compensation for such solicitation. We will bear the cost of soliciting proxies, including expenses in connection with preparing and mailing this Proxy Statement. We will also reimburse banks, brokers and other nominees representing stockholders who hold their shares in street name for their expenses in forwarding proxy material to such stockholders. We have hired D.F. King & Co., Inc. to act as our proxy solicitor for the meeting at a cost of approximately $8,500.

 

Our Board of Directors currently consists of twelve members, divided into three classes of four, each serving staggered three-year terms, as follows:

 

 

The term of our Class 1 directors expires at this meeting. Alan Belzer and Mary L. Good will not stand for re-election in accordance with our Corporate Governance policy on retirement of directors. If re-elected, Messrs Mullen and Ross, together with our new nominee for Class 1 director if elected, will hold office until the Annual Meeting of Stockholders in 2010 and until their successors are duly elected and qualified unless they resign or are removed. Marijn E. Dekkers, our new nominee for Class 1 director, was recommended to the Company by Egon Zehnder International, the search firm engaged by our Corporate Governance Committee to identify potential candidates for our Board of Directors.

 

If any nominee is unable or unwilling to accept nomination or election, the shares represented by the enclosed proxy will be voted for the election of such other person as our Board of Directors may recommend. We know of no reason why any nominee would be unable or unwilling to accept nomination or election. OUR BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF JAMES C. MULLEN, BRUCE R. ROSS AND MARIJN E. DEKKERS.

 

Prior to the merger with Biogen, Inc. in November 2003, we were known as IDEC Pharmaceuticals Corporation. References to “our” or “us” in the following biographical descriptions include Biogen Idec and the former IDEC Pharmaceuticals Corporation.

 

Information about our Nominees for Election as Class 1 Directors — Terms Expire in 2010

 

 

Corporate Governance Principles and Related Documents.  Our Corporate Governance Principles are posted on www.biogenidec.com in the “Company” section under “Corporate Governance.” Also posted on www.biogenidec.com under “Corporate Governance” are the charters of the Compensation and Management Development, Corporate Governance, Transaction and Finance and Audit Committees of our Board of Directors and our Finance and Audit Committee Practices which describe the key practices utilized by the Finance and Audit Committee in undertaking its functions and responsibilities.

 

Director Independence.

 

 

Meetings of Independent Directors; Lead Director.  Independent directors are required to meet without management present twice each year. Independent directors may also meet without management present at such other times as determined by our Chairman of the Board (if a non-employee director), the lead director (in the absence of a non-employee Chairman of the Board) or if requested by at least two other directors. In 2006, our

independent directors met without management present 10 times. Our Chairman of the Board (if a non-employee director) presides at such meetings and performs such other functions as the Board of Directors may direct, including advising on the selection of committee chairs and advising management on the agenda of meetings of the Board of Directors. In the absence of a non-employee Chairman of the Board, the chair of our Corporate Governance Committee serves as the lead director and, with respect to meetings of our independent directors, performs the functions otherwise assigned to the Chairman of the Board.

 

Code of Business Conduct.  All of our directors, officers and employees must act ethically, legally and with integrity at all times and are required to comply with our Code of Business Conduct as well as our other policies and standards of conduct. Our Code of Business Conduct, which includes the code of ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller and persons performing similar functions, is posted on www.biogenidec.com under “Corporate Governance.” Disclosure regarding any amendments to the code of ethics provisions of our Code of Business Conduct will, if required, be included in a Current Report on Form 8-K within four business days following the date of the amendment, unless website posting of amendments is permitted by NASDAQ rules. Under our Corporate Governance Principles, our Board of Directors is not permitted to grant any waiver of any ethics policy (including the code of ethics provisions of our Code of Business Conduct) for any of our directors or executive officers.

 

Committees

 

Our Board of Directors has four standing committees: a Compensation and Management Development Committee, a Corporate Governance Committee (includes nominating functions), a Finance and Audit Committee, and a Transaction Committee.

 

 

Composition of Committees and Information about Meetings

 

The composition of the standing committees of our Board of Directors and the number of times that each committee met in 2006 are set forth in the following table:

 

 

Our Board of Directors met 12 times in 2006. No director attended fewer than 75% of the total number of meetings of our Board of Directors and the committees on which he or she served during 2006. We expect that after Mr. Belzer and Ms. Good retire from the Board of Directors at our 2007 Annual Meeting of Stockholders, Mr. Ross will leave the Compensation and Management Development Committee and the Transaction Committee and become the Chair of the Corporate Governance Committee, Mr. Young will leave the Finance and Audit Committee and join the Transaction Committee and become the Chair of the Compensation and Management Development Committee, and Ms. Schenk will join the Compensation and Management Development Committee.

 

Financial Expert

 

Our Board of Directors has determined that Lawrence C. Best, a member of our Finance and Audit Committee, is an “audit committee financial expert” as defined in SEC regulations and, as noted previously, is an independent director under the NASDAQ rules.

 

Information About our Nominating Processes

 

Our Corporate Governance Committee is responsible for leading the search for individuals qualified to become members of the Board of Directors, including review of candidates recommended by stockholders. Our Corporate Governance Committee has the authority to retain a search firm to assist in performing this role and has currently retained Egon Zehnder International to identify potential candidates that possess the desirable attributes and competencies for service on our Board of Directors and to facilitate the recruitment and nomination of candidates favored by the Committee. Stockholders may recommend nominees for consideration by our Corporate Governance Committee by submitting the names and supporting information to: Corporate Secretary, Biogen Idec Inc., 14 Cambridge Center, Cambridge, Massachusetts, 02142. Any such recommendation should include at a minimum the name(s) and address(es) of the stockholder(s) making the recommendation and appropriate biographical information for the proposed nominee(s). Candidates who are recommended by stockholders will be considered on the same basis as candidates from other sources. For all potential candidates, our Corporate Governance Committee will consider all factors it deems relevant, including at a minimum those listed under “Director Qualification Standards” below. Director nominations are recommended by our Corporate Governance Committee to our Board of Directors and must be approved by a majority of independent directors.

 

In addition, our Bylaws contain provisions that address the process by which a stockholder may nominate an individual to stand for election to our Board of Directors at an annual meeting of stockholders. In order to nominate

a director candidate for election at our 2008 Annual Meeting of Stockholders, a stockholder must give timely notice in writing to our Secretary and otherwise comply with the provisions of our Bylaws. To be timely, our Bylaws provide that we must have received a stockholder’s notice not less than 90 days and not more than 120 days in advance of the anniversary of the date our proxy statement was released to the stockholders in connection with the previous year’s annual meeting. However, in the event that no annual meeting was held in the previous year or the date of the annual meeting has been changed by more than 30 days from the date contemplated at the time of the previous year’s proxy statement, we must receive a stockholder’s notice not later than the close of business on the later of (i) the 90th day prior to such annual meeting and (ii) the 7th day following the day on which public announcement of the date of such meeting is first made. Information required by the Bylaws to be in the notice includes the name, contact information and share ownership information for the candidate and the person making the nomination and other information about the nominee that must be disclosed in proxy solicitations under Section 14 of the Securities Exchange Act and the related rules and regulations under that Section. Our Corporate Governance Committee may also require any proposed nominee to furnish such other information as may be reasonably required to determine the eligibility of such proposed nominee to serve as our director.

 

Director Qualification Standards

 

Our directors should possess the highest personal and professional ethics and integrity, understand and be aligned with our core values, and be committed to representing the long-term interests of our stockholders. Our directors must also be inquisitive and objective and have practical wisdom and mature judgment. We endeavor to have a Board of Directors representing diverse experience at strategic and policy-making levels in business, government, education, healthcare, science and technology, and the international arena.

 

Our directors must be willing to devote sufficient time to carrying out their duties and responsibilities effectively, and should be committed to serve on our Board of Directors for an extended period of time.

 

We ask directors who also serve in full-time positions with a company not to serve on more than two boards of public companies in addition to our Board of Directors (excluding their own company) and other directors not to serve on more than six boards of public companies in addition to ours.

 

Our Board of Directors does not believe that arbitrary term limits on directors’ service are appropriate, nor does it believe that directors should expect to be re-nominated. Regular evaluations are an important determinant for continued tenure. Our Corporate Governance Principles provide that directors should offer their resignation in the event of any significant change in their personal circumstances, including a change in their principal job responsibilities or any circumstances that may adversely affect their ability to carry out their duties and responsibilities effectively. Our directors are also expected to offer their resignation to the Board of Directors effective at the annual meeting of stockholders in the year of their 75th birthday. In connection with the merger, we made exceptions to our retirement policy for Mary L. Good and Thomas F. Keller that allow them to serve their entire current terms. Accordingly, Dr. Good will retire at our 2007 Annual Meeting of Stockholders and we expect that Dr. Keller will retire at our 2008 Annual Meeting of Stockholders. In addition, Alan Belzer will retire at our 2007 Annual Meeting of Stockholders in accordance with the retirement policy.

 

Stockholder Communications to the Board

 

Generally, stockholders who have questions or concerns should contact our Investor Relations Department at (617) 679-2812. However, stockholders who wish to address questions or concerns regarding our business directly with the Board of Directors, or any individual director, should direct questions in writing to Biogen Idec Inc., Attention: General Counsel, 14 Cambridge Center, Cambridge, Massachusetts, 02142 or by e-mail to stockholder.letter@biogenidec.com. Questions and concerns will be forwarded directly to the appropriate director or directors.

 

Attendance at Annual Meetings

 

We expect all of our directors and director nominees to attend our annual meetings of stockholders. All but one of our directors attended our 2006 Annual Meeting of Stockholders.

 

The Finance and Audit Committee’s role is to act on behalf of the Board of Directors in the oversight of all aspects of Biogen Idec’s financial reporting, internal control and audit functions. The Finance and Audit Committee has the sole authority and responsibility to select, evaluate, compensate and replace our independent registered public accounting firm. The roles and responsibilities of the Finance and Audit Committee are set forth in the written charter adopted by the Board of Directors, which is posted on www.biogenidec.com under “Corporate Governance”. Management has primary responsibility for the financial statements and the reporting process, including the systems of internal controls.

 

In fulfilling its oversight responsibilities, the Finance and Audit Committee reviewed and discussed with management the audited consolidated financial statements contained in Biogen Idec’s 2006 Annual Report on Form 10-K. The Finance and Audit Committee discussed with PricewaterhouseCoopers LLP, Biogen Idec’s independent registered public accounting firm, the overall scope and plans for its audit. The Finance and Audit Committee met with PricewaterhouseCoopers, with and without management present, to discuss the results of its examination, management’s response to any significant findings, its observations of Biogen Idec’s internal controls, the overall quality of Biogen Idec’s financial reporting, the selection, application and disclosure of critical accounting policies, new accounting developments and accounting-related disclosure, the key accounting judgments and assumptions made in preparing the financial statements and whether the financial statements would have materially changed had different judgments and assumptions been made, and other pertinent items related to Biogen Idec’s accounting, internal controls and financial reporting. The Finance and Audit Committee also discussed with representatives of Biogen Idec’s internal corporate audit staff their purpose and authority and their audit plan.

 

The Finance and Audit Committee also reviewed and discussed with PricewaterhouseCoopers the matters required to be discussed with the Finance and Audit Committee under generally accepted auditing standards (including Statement on Auditing Standards No. 61). In addition, the Finance and Audit Committee discussed with PricewaterhouseCoopers the independence of PricewaterhouseCoopers from management and Biogen Idec, including the written disclosures in the letter received from PricewaterhouseCoopers required by the Independence Standards Board Standard No. 1. The Finance and Audit Committee has determined that the provision of non-audit services to Biogen Idec by PricewaterhouseCoopers is compatible with its independence.

 

During 2006, the Finance and Audit Committee provided oversight and advice to management in connection with Biogen Idec’s system of internal control over financial reporting in response to the requirements set forth in Section 404 of the Sarbanes-Oxley Act of 2002 and related regulations. In connection with this oversight, the Finance and Audit Committee reviewed a report by management on the effectiveness of Biogen Idec’s internal control over financial reporting. The Finance and Audit Committee also reviewed PricewaterhouseCoopers’ Report of Independent Registered Public Accounting Firm included in Biogen Idec’s 2006 Annual Report on Form 10-K for the fiscal year ended December 31, 2006 related to its audit of the effectiveness of internal control over financial reporting and management’s assessment of the effectiveness of internal control over financial reporting.

 

In reliance on these reviews and discussions, the Finance and Audit Committee recommended to the Board of Directors that the audited consolidated financial statements be included in Biogen Idec’s Annual Report on Form 10-K for the year ended December 31, 2006 for filing with the Securities and Exchange Commission.

 

The Finance and Audit Committee of the Board of Directors

 

Thomas F. Keller (Chair)
Lawrence C. Best
Robert W. Pangia
William D. Young

PROPOSAL 2

 

Our Finance and Audit Committee has selected PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2007. PricewaterhouseCoopers served as our independent registered public accounting firm in connection with the audit for the fiscal year ended December 31, 2006. If our stockholders do not ratify the selection of PricewaterhouseCoopers as our independent registered public accounting firm, our Finance and Audit Committee will reconsider its selection. Representatives of PricewaterhouseCoopers will attend the meeting, have the opportunity to make a statement if they so desire, and be available to respond to appropriate questions.

 

The following table shows fees for professional audit services billed to us by PricewaterhouseCoopers for the audit of our annual consolidated financial statements for the years ended December 31, 2006 and December 31, 2005, and fees billed to us by PricewaterhouseCoopers for other services provided during 2006 and 2005:

 

 

Audit fees are fees for the audit of our 2005 and 2006 consolidated financial statements included in our Annual Reports on Form 10-K, reviews of consolidated financial statements included in our Quarterly Reports on Form 10-Q, review of the consolidated financial statements incorporated by reference into our Registration Statement on Form S-8 which was filed in February 2007, and other statutory audit fees in overseas jurisdictions.

 

Audit-related fees are fees that principally relate to assurance and related services that are reasonably related to the performance of the audits and reviews of our consolidated financial statements, including employee benefit plans and special procedures required to meet certain regulatory requirements, and assistance with due diligence in connection with potential acquisitions.

 

Tax fees are fees for tax compliance, expatriate tax services, planning and advisory services other than those that relate specifically to the audits and reviews of our consolidated financial statements and internal control over financial reporting.

 

All other fees are fees that principally relate to procedures performed in connection with one of our collaboration agreements, and educational resources.

 

Our Finance and Audit Committee has considered whether the provision of the non-audit services by PricewaterhouseCoopers described above is compatible with maintaining its independence and has determined that the provision of such services is compatible with maintaining PricewaterhouseCoopers’ independence.

 

Our Finance and Audit Committee has the sole authority to approve the scope of the audit and any audit-related services as well as all audit fees and terms. Our Finance and Audit Committee must pre-approve any audit and non-audit services provided by our independent registered public accounting firm. Our Finance and Audit Committee will not approve the engagement of the independent registered public accounting firm to perform any services that the independent registered public accounting firm would be prohibited from providing under applicable securities laws or NASDAQ requirements. In assessing whether to approve the use of our independent registered public accounting firm to provide permitted non-audit services, our Finance and Audit Committee tries to minimize relationships that could appear to impair the objectivity of our independent registered public accounting firm. Our

Finance and Audit Committee will approve permitted non-audit services by our independent registered public accounting firm only when it will be more effective or economical to have such services provided by our independent registered public accounting firm than another firm. Our Finance and Audit Committee has delegated pre-approval authority for non-audit services to the chair of our Finance and Audit Committee within the guidelines discussed above. The Chairman of the Finance and Audit Committee is required to inform our Finance and Audit Committee of each decision to permit our independent registered public accounting firm to perform non-audit services at the next regularly scheduled Finance and Audit Committee meeting.

 

Our Finance and Audit Committee pre-approved all of the services provided by PricewaterhouseCoopers during 2006 in accordance with this policy.

 

THE FINANCE AND AUDIT COMMITTEE OF OUR BOARD OF DIRECTORS RECOMMENDS RATIFICATION OF THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR ENDING DECEMBER 31, 2007.

 

The following table and notes provide information about the beneficial ownership of our outstanding, common stock as of March 15, 2007 by:

 

 

Except as otherwise noted, the persons identified have sole voting and investment power with respect to the shares of our common stock beneficially owned. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and includes voting and investment power with respect to the shares. Shares subject to exercisable options include options that are currently exercisable or exercisable within 60 days of March 15, 2007.

 

 

 

 

 

Section 16(a) of the Securities Exchange Act requires our executive officers, directors and greater-than-ten-percent stockholders to file initial reports of ownership and changes of ownership. As a practical matter, we assist our directors and executive officers by monitoring transactions and completing and filing Section 16 forms on their behalf. Based solely on information provided to us by our directors and executive officers, we believe that, during 2006, all such parties complied with all applicable filing requirements except for (i) a Form 3 required to be filed when Hans Peter Hasler became an executive officer of the Company on October 13, 2006, which was filed on November 22, 2006 due to an administrative error, and (ii) a Form 4 covering grants of restricted stock units on October 2, 2006 to Cecil Pickett, President, Research and Development, which was filed on January 5, 2007 due to an administrative error.

 

Introduction and Corporate Governance

 

Our Compensation and Management Development Committee (which is referred to in this section of this Proxy Statement as the “Committee” or as the “Compensation Committee”) oversees and administers our executive compensation programs. The Committee’s complete roles and responsibilities are set forth in the written charter adopted by the Board of Directors, which can be found at www.biogenidec.com under “Corporate Governance.” The Board of Directors selected the following four individuals to serve on the Committee for 2006: Bruce R. Ross (Chair), Alan Belzer, Alan B. Glassberg and Mary L. Good. Each of these individuals satisfies the independence requirements of NASDAQ.

 

The Committee meets at regularly scheduled times during the year and on an ad hoc basis as business needs necessitate. In 2006, the Committee met for five regularly scheduled meetings and held one ad hoc meeting. As part of his duties as the Committee Chair, Bruce R. Ross reports on Committee actions and recommendations to the Board of Directors. In addition to the assistance provided by Biogen Idec’s internal Compensation and Benefits group, the Committee has retained Watson Wyatt Worldwide (“Watson Wyatt”) as outside advisors to the Committee. Watson Wyatt reports directly to the Committee and provides guidance on matters including trends in executive and non-employee director compensation, the development of specific executive compensation programs and other matters as directed by the Committee. Watson Wyatt does not provide any other services to Biogen Idec.

 

Executive Compensation Philosophy and Objectives

 

Our compensation program for the individuals named in the Summary Compensation Table (the named executive officers) is designed and implemented based on our pay-for-performance compensation philosophy. We strive to adhere to this philosophy by significantly differentiating the pay and rewards of our executive officers based on their demonstrated performance and potential to contribute to the long-term success of the Company. Competing for talent in the rapidly changing and increasingly competitive biotechnology industry is both challenging and critical to our success. We want and need the best people to be excited and motivated to work at Biogen Idec, and to understand that their rewards are driven by the Company’s performance and by their individual contributions to Company performance. The quality of the Company’s talent is a key driver of long-term stockholder value. Establishing and maintaining executives’ long-term commitment to Biogen Idec is critical to the development of our product pipeline, as development of new products often takes ten years or more, and time to market is critical to our business success.

 

We have established a total rewards framework that supports our compensation philosophy through the following objectives:

 

 

Our success in meeting the objectives of our compensation philosophy depends heavily on our performance management system. In 2006, we revised our performance management system, and used that revised system for compensation decision-making in early 2007. Through this revised performance assessment process, which is based on the use of relative ranking and overall performance ratings, coupled with our use of differentiated compensation

linked to these rankings and overall performance ratings, we ensure that the Company’s top performers and those with the highest potential receive the greatest rewards.

 

What is our compensation program designed to reward?

 

The compensation program is designed to reward superior financial, strategic and operational performance that is achieved in a manner consistent with the Company’s values. Results and how the results are attained are both critically important. Our executive officers are assessed and ranked on the basis of demonstrated results relative to pre-established goals, as well as demonstrated competencies and behavioral attributes.

 

Compensation Program Elements and Pay Level Determination

 

What factors are considered in determining the amounts of compensation?

 

Each year, the Committee reviews and determines base salaries, annual incentive targets and payments, and long-term incentive targets and awards for all executive officers. For 2006, the base salary, annual cash incentive and long-term incentive award determinations for the Chief Executive Officer were approved by all independent (non-employee) directors.

 

As part of this review process, the CEO presents to the Committee a detailed individual assessment of each executive officer’s performance over the prior year, as well as recommended compensation actions for each executive officer. The performance assessments for executive officers include performance relative to established goals, overall leadership effectiveness, impact across the organization and performance and impact relative to other executive officers.

 

Formal goal setting is critical to ensuring that our compensation program rewards each executive based on his or her success relative to the specific objectives for his or her role. All Biogen Idec employees are subject to annual goal setting, as well as written mid-year and annual performance reviews. The key metrics we use to measure performance differ by individual, but can be grouped into the following categories:

 

 

To understand external competitiveness, the Committee reviews a comprehensive report prepared by Biogen Idec’s Compensation and Benefits group and Watson Wyatt, comparing each executive officer’s compensation level and mix to information for comparable positions derived from both compensation surveys and an analysis of the executive compensation disclosures found in proxy statements of a group of publicly traded biotechnology and pharmaceutical companies. In addition, Watson Wyatt also provides the Committee with an analysis of CEO pay that includes a tally sheet and employment agreement analysis.

 

The Committee considers the totality of the information presented (including external competitiveness, the performance review, Company performance, progress towards strategic objectives and internal equity) and applies its knowledge and discretion to determine the compensation for each executive officer.

 

In 2006, Biogen Idec generally targeted its compensation at the median of our market peers, which are defined in the next section. The actual compensation level for each executive officer may be above or below median depending on factors such as Company performance, individual performance, criticality of position, skills/capabilities, overall impact/contribution, experience in position, “premiums” initially required to attract the executive and internal equity.

 

What external market peer group is used for comparison, and how is it established?

 

Biogen Idec’s peer group is comprised of: (1) a named set of companies for which executive compensation data from public filings is compiled and analyzed; and (2) a somewhat broader set of companies participating in benchmark compensation surveys from which executive compensation data is compiled and analyzed.

 

The named peer group is reviewed annually by the Committee for appropriateness, considering such factors as size (e.g., revenue and market capitalization), complexity (e.g., multiple marketed products), geographic scope of operations (e.g., global versus domestic-only presence), etc. As an example of the peer group review process, in 2006, the Committee removed four companies from the peer group (Merck & Co., Abbott Laboratories, Baxter International and Becton Dickinson) and added one (Forest Laboratories). These changes improved the balance of the peer group relative to our criteria. The named peer group for 2006 includes:

 

 

The compensation surveys used in analyzing our external competitiveness include data from a broader set of biotechnology and pharmaceutical companies. We believe that this broader set of companies is representative of our competitive market for executive officers. These compensation surveys provide reliable data to complement the data collected from executive compensation disclosures of our named peer group.

 

What is each element of compensation and why is it paid?

 

Biogen Idec’s executive compensation program is comprised of the following four elements (discussed in detail below), each of which serves an important role in supporting Biogen Idec’s pay-for-performance philosophy and in realizing our compensation program objectives:

 

 

While the general mix of the elements is considered in the design of our total compensation program, the Committee does not target a specific mix of pay in either its program design or in its compensation determinations. By design, our executive officers have more variability than non-executives in their compensation, to more closely tie their compensation to the Company’s overall performance.

 

Base Salary

 

We pay our executive officers base salaries to provide a baseline level of compensation that is both competitive with the external market and commensurate with each employee’s past performance, experience, responsibilities and skills. The Company generally targets base salaries around the median of our external market peers. In making its base salary determinations, the Committee takes into account the internal and external factors described above. Base salary increases from 2005 to 2006 for our named executive officers averaged 8.6% and ranged from 4% to 14%.

 

Annual Cash Incentive Plan

 

We maintain an annual cash incentive program, the purpose of which is to motivate and reward the attainment of annual Company and individual financial, strategic and operational goals. For all participants, annual incentive opportunities, which are expressed as a percentage of base salary, are targeted generally at the median of our external market peers. Actual incentive awards can range from 0% to 225% of targeted levels, as described further below, depending on the degree of Company and individual performance attainment relative to pre-established goals for that particular year. Based on Company and individual attainment and an executive’s base salary relative to market, total cash compensation may be above or below market median.

 

The Committee establishes and approves all Company goals based on recommendations made by management. Individual performance goals for executive officers are recommended by Mr. Mullen and approved by the Committee, with those for Mr. Mullen approved by all independent directors. Individual performance goals include metrics linked to driving attainment of the Company goals.

 

For 2006, we selected measures that were intended to strike a balance among financial, strategic and operational performance. We believe that a balance of performance goals most effectively aligns management incentives with enhancement of long-term stockholder value. Our goals are established by taking into consideration the long range business plan, expected degree of difficulty, competitive environment, macroeconomic factors, Wall Street analyst expectations, historical variance analysis, prior year performance and Board of Directors’ expectations. For 2006, the following were the specific Company goals, weighting and degree of attainment, as approved by the Committee:

 

 

Notes to table:

 

 

 

Individual cash incentive payments are determined using the following calculation:

 

Company Multiplier x Individual Multiplier x Incentive Target (%) x Annual Base Salary

 

The plan provides for a range of payout from 0% to 150% for the Company Multiplier and from 0% to 150% for the Individual Multiplier, so that maximum performance on each multiplier would result in a payout of 225% of target (150% x 150% = 225%). The Individual Multiplier reflects attainment of the individual performance goals discussed earlier in this section. Based on the results described in the preceding table, the 2006 Company Multiplier was approved by the Committee at 111%. Based on performance against their individual goals, combined with the 111% Company Multiplier, our named executive officers received awards that ranged from 94% to 145% of target.

 

Long-term Incentives

 

A long-term incentive (LTI) opportunity is provided to all employees to foster a culture of ownership, align compensation with stockholder interests and promote long-term retention and affiliation with the organization. Each year, the Committee determines the types of awards to be used for delivering long-term incentives. In doing so, the Committee considers the ability of each type of award to achieve key compensation objectives (such as employee retention, motivation and attraction), the needs of the business, competitive market practices, dilution and expense constraints, as well as tax and accounting implications.

 

For 2006, the Committee evaluated various program designs and approved a program awarding stock options and restricted stock units for our executive officers. Stock options promote stockholder alignment and accountability and are qualified as performance-based pay under Internal Revenue Code Section 162(m). Our stock option grants vest evenly over the four-year period following grant. Restricted stock units promote retention by maintaining some level of value to recipients based on the stock price at any point in time. Restricted stock units granted in conjunction with our annual merit award process vest evenly over the three years following grant. In addition to their strong retention value, we feel that restricted stock units support an ownership mentality, encouraging our executives to act in a manner consistent with the long-term interests of the Company and its stockholders.

 

To help in assessing the external market, Biogen Idec sponsored (and Watson Wyatt administered) a custom survey of LTI, in which most of the companies in our named peer group participated. To augment this data, in 2006 the Committee reviewed publicly available data for our named peer group in terms of long-term compensation value and expense and aggregate share usage among Biogen Idec’s peers. Based on these external factors, as well as Company performance and analyses of accounting cost implications and employee retention, for 2006 the Committee approved LTI grant guidelines that were generally at the market median in terms of dollar value.

 

In determining the level of LTI awards to grant in 2007, the Committee followed a process similar to that employed in 2006. The Committee approved targeted LTI award values for 2007 that are comparable to the targeted

LTI award values in 2006. Based on competitive analysis, our 2007 LTI guidelines are between the median and 75^th percentile of our peers in terms of value.

 

As with other compensation elements, actual LTI awards vary significantly based on individual performance and position level. The award guidelines approved by the Committee are segmented by overall performance rating, ensuring that top performing employees receive larger awards than those with average performance. We feel that the use of a strong performance management system combined with the retention attributes of restricted stock units allows us to effectively retain those employees who have the potential to make the greatest contributions to our long-term success.

 

Establishing a consistent annual grant pattern has allowed us to develop a schedule of events for setting our annual grant date and grant price. These events include incorporating the results of our internal performance reviews and ranking, as well as our external analyses that include a review of peer equity practices and the results of the custom survey of LTI described earlier. Since 2004, we have made our annual merit equity grant in February of each year. The date of each annual merit grant is the date upon which the Committee approves the individual grants, with the exception of grants to the CEO, for whom grants require Board of Directors approval and are thus granted on the date of that approval. Consistent with our historical LTI grant practice, the exercise price of stock options granted as part of the annual merit grant is the closing price of Biogen Idec stock on the date of grant.

 

In addition to the annual merit grant of LTI awarded to Mr. Mullen in 2006, he also received a special grant of performance-based restricted stock units, with vesting tied to operating expense and cash flow performance during 2006 and subject to Board approval of results. As performance exceeded the financial targets, the Committee recommended, and the independent directors approved, vesting of the full grant of the restricted stock units in February 2007.

 

Tax-deductibility of Compensation

 

Section 162(m) of the Internal Revenue Code of 1986, as amended, limits to $1 million the amount a company may deduct for compensation paid to its CEO or any of its other four named executive officers. This limitation does not, however, apply to compensation meeting the definition of “qualifying performance-based” compensation.

 

Management works with the Committee to assess alternatives to preserve the deductibility under Section 162(m) of compensation payments to the extent reasonably practicable, consistent with our compensation policies and as determined to be in the best interests of Biogen Idec and its stockholders. For 2006, the stock options and performance-based restricted stock unit awards were designed to meet the requirements for tax-deductible compensation.

 

While certain Company and individual performance goals included in our cash incentive plan require judgment by the Committee to determine results, we believe that these goals are key drivers of our success and that they support our desire to significantly differentiate awards between individuals based on their performance and contributions. Based on this design, our cash incentive plan payments made in 2007 for the 2006 plan year are not considered “qualifying performance-based” compensation under Section 162(m).

 

For 2007, the Company has adopted changes to our annual cash incentive plan that will enable us to maximize tax deductibility of plan awards paid to our named executive officers. Maximum cash incentive awards under the 2007 plan year will be determined for each named executive officer based on our non-GAAP net income for the year. The actual award to each executive will be less than or equal to this maximum funded amount, and will be determined based on the annual cash incentive plan described above.

 

Under the incentive plan approved by the Company’s stockholders, we limit tax-deductible performance-based incentive payments to a total of $3,500,000 per executive per year.

 

Perquisites and Personal Benefits

 

In addition to participating in the benefit programs provided to all other employees (for example, medical, dental, vision, life and disability insurance, employee stock purchase plan), we provide certain perquisites and additional benefits to executives. These supplemental benefits and perquisites include:

 

 

Retirement Plans

 

We maintain a Supplemental Savings Plan, or SSP, which covers executive officers and certain other highly compensated and/or management employees. The SSP replaced our prior deferred compensation plan, as well as the Biogen, Inc. Voluntary Executive Supplemental Savings Plan. Employees whose base salary and annual cash incentive for the year exceed a specified limit under section 401(a)(17) of the Internal Revenue Code ($220,000 in 2006; $225,000 in 2007) receive a restoration match on the portion of their base salary and annual cash incentive that exceeds this tax law limit. The restoration matching contribution equals six percent of such excess compensation. This feature is intended to replace the amount of matching employer contributions that the participant would otherwise have been eligible to receive under our 401(k) plan but for this tax law limit. Participants become vested in the matching contributions at a rate of 25% per year, until they are fully vested after four years of service. Participants become fully vested in the matching contributions if their employment ends by reason of death or disability, or in the event of a change in control of the Company, regardless of the number of years of service. In addition, participants in the SSP who are senior director level or higher, or who are designated as eligible by our Compensation Committee, may make voluntary salary reduction contributions of up to 80% of their base salary and 100% of their annual cash incentives to the SSP, and thereby defer income taxes on such amounts until distribution from the SSP.

 

Accounts are maintained for each participant reflecting deferrals, matching contributions and increases or decreases based on the performance of notional investments selected by the employee, or on a default investment if the employee does not make a selection. The notional investment options include the mutual funds available under the 401(k) plan, as well as a fixed rate option, which earns a rate of return determined each year by the Company’s Retirement Committee (8% in 2006 and 2007). The excess of the interest rate above 120% of the applicable federal long-term rate, compounded quarterly, earned by our named executive officers under the SSP during 2006 is set forth in the Summary Compensation Table.

 

Post-termination Compensation and Benefits

 

We have a program in place under which all of our executives receive severance benefits if they are terminated without cause (and, in Mr. Mullen’s case, if he terminates for good reason) or following a corporate transaction or a change in control. The benefits they receive depend on their position (or, in Mr. Mullen’s case, are included in his employment agreement). We provide these arrangements because we believe that some severance arrangements, as well as protection in the event of a corporate transaction or change in control, are necessary in a competitive market for talent to attract and retain high quality executives. In addition, the change in control benefit allows the executives to maintain their focus on the business during a period when they otherwise might be distracted. The terms of these arrangements and the amounts payable under them are described below under “Potential Payments Upon Termination or Change in Control.”

 

The Compensation and Management Development Committee (the “Committee”) furnishes the following report:

 

The Committee has reviewed and discussed the Compensation Discussion and Analysis with Biogen Idec management. Based on this review and discussion, the Committee recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.

 

Submitted by,

 

Bruce R. Ross, Chairman

Alan Belzer

Alan B. Glassberg

Mary L. Good

 

The following table shows the compensation paid to or earned by the named executive officers during the fiscal year ended December 31, 2006.

 

 

 

Notes to Summary Compensation Table

 

 

 

 

 

 

The following table shows additional information regarding all grants of plan-based awards made to our named executive officers for the year ended December 31, 2006.

 

 

Notes to 2006 Grants of Plan-Based Awards Table

 

 

 

 

 

The following table summarizes the equity awards we have made to each of the named executive officers that were outstanding as of December 31, 2006.