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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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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Preliminary Proxy Subject to Completion dated April   , 2008

 

Biogen Idec Inc.

 

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

TO BE HELD ON [          ], 2008

 

TO OUR STOCKHOLDERS:

 

NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Biogen Idec Inc., a Delaware corporation, will be held at [          ] on [          ], [          ], 2008 at [          ] for the following purposes:

 

1. To elect four of the nominees identified in this Proxy Statement to our Board of Directors to serve for a three-year term ending at the Annual Meeting of Stockholders in 2011. Our Board of Directors’ nominees are Stelios Papadopoulos, Cecil B. Pickett, Lynn Schenk and Phillip A. Sharp.

 

2. To ratify the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2008.

 

3. To approve our 2008 Omnibus Equity Plan.

 

4. To approve our 2008 Performance-Based Management Incentive Plan.

 

5. To vote on a proposal from certain entities affiliated with Carl C. Icahn (the “Icahn Entities”) to amend the Amended and Restated Bylaws of Biogen Idec Inc. to fix the size of the Board of Directors at 12 members and remove the Board’s ability to change the size of the Board (the “Icahn Bylaw Proposal”).

 

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

 

Only Biogen Idec stockholders of record at the close of business on [          ], 2008 will be entitled to vote at the meeting.

 

Whether or not you expect to attend the meeting in person, we urge you to vote by telephone or by Internet using the instructions on your WHITE proxy card, or complete, sign, date and return the enclosed WHITE proxy card as promptly as possible in the postage-paid envelope provided. If you are a beneficial owner or you hold your shares in “street name,” please follow the voting instructions provided by your bank, broker or other nominee.

 

Please note that the Icahn Entities have provided notice that they intend to nominate their own slate of three nominees for election as directors at the annual meeting, submit the Icahn Bylaw Proposal and solicit proxies for use at the annual meeting to vote in favor of their own slate in opposition to Item 1 above and in favor of the Icahn Bylaw Proposal. We do not believe this is in your best interest. You may receive proxy solicitation materials from the Icahn Entities, including an opposition proxy statement and proxy card. OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ELECTION OF EACH OF THE BOARD’S NOMINEES ON THE ENCLOSED WHITE PROXY CARD AND URGES YOU NOT TO SIGN OR RETURN ANY PROXY CARD SENT TO YOU BY THE ICAHN ENTITIES. Even if you have previously signed a proxy card sent by the Icahn Entities, you have the right to change your vote by using the enclosed WHITE proxy card to vote by telephone, by Internet or by signing, dating and returning the enclosed WHITE proxy card in the postage-paid envelope provided. Only the latest dated proxy card you vote will be counted. We urge you to disregard any proxy card sent to you by the Icahn Entities.

 

If you have any questions or require any assistance with voting your shares, please contact:

 

INNISFREE M&A INCORPORATED
STOCKHOLDERS CALL TOLL FREE: 877-750-5836
BANKS AND BROKERS CALL COLLECT: 212-750-5833

 

Your vote is extremely important regardless of the number of shares you own. Please promptly use the enclosed WHITE proxy card to vote by telephone, by Internet, or by signing, dating and returning the WHITE proxy card in the postage-paid envelope provided.

 

BY ORDER OF OUR BOARD OF DIRECTORS

 

 

Susan H. Alexander
Secretary

 

Cambridge, Massachusetts

[          ], 2008

 

TABLE OF CONTENTS

 

Biogen Idec Inc.
14 Cambridge Center
Cambridge, Massachusetts 02142

 

PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON [          ], 2008
AT [          ]

 

We are sending you this Proxy Statement and the accompanying proxy card because the Board of Directors of Biogen Idec Inc. (“Biogen Idec” or the “Company”) is soliciting your proxy to vote at our annual meeting of stockholders (the “Annual Meeting”) to be held at [          ] on [          ], 2008 at [          ]. This Proxy Statement, along with the accompanying Notice of Annual Meeting of Stockholders, summarizes the purposes of the Annual Meeting and the information that you need to know to vote at the Annual Meeting.

 

Our 2007 Annual Report is being mailed with this Proxy Statement. The Notice of Annual Meeting, this Proxy Statement and our 2007 Annual Report are available online at http://investor.biogenidec.com.

 

The Company has received notice from certain entities affiliated with Carl C. Icahn, namely, Icahn Partners LP, Icahn Partners Master Fund LP, Icahn Partners Master Fund II LP, Icahn Partners Master Fund III LP and High River Limited Partnership (collectively, the “Icahn Entities”) of their intention to nominate Alexander J. Denner, Richard C. Mulligan and Anne B. Young (collectively, the “Icahn Nominees”) for election to the Company’s Board of Directors at the Annual Meeting. The Icahn Entities have also indicated their intention to submit a proposal (the “Icahn Bylaw Proposal”) to amend the Amended and Restated Bylaws of Biogen Idec (the “Bylaws”). The Icahn Bylaw Proposal consists of a series of amendments to the Company’s Bylaws which would eliminate the power of the Board of Directors to fix the number of directors and would fix the number of directors at 12 as more fully described below at page 23.

 

The Icahn Nominees have NOT been endorsed by our Board of Directors. We urge stockholders NOT to vote any proxy card that you may receive from the Icahn Entities. Our Board of Directors urges you to vote for “FOR” our nominees for director, Stelios Papadopoulos, Cecil B. Pickett, Lynn Schenk and Phillip A. Sharp.

 

We are not responsible for the accuracy of any information provided by or relating to the Icahn Entities contained in any proxy solicitation materials filed or disseminated by, or on behalf of, the Icahn Entities or any other statements that they may otherwise make. The Icahn Entities choose which stockholders receive their proxy solicitation materials.

 

Each share of our common stock that you own as of the close of business on the record date of [          ], 2008 (the “Record Date”) entitles you to one vote on each matter to be voted upon at the Annual Meeting. As of the Record Date, [          ] shares of common stock were outstanding and entitled to vote. We are mailing this Proxy Statement and the accompanying WHITE proxy card on or about [          ], 2008 to all stockholders of record as of the Record Date, entitled to notice of and to vote at the Annual Meeting. For 10 days prior to the Annual 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.

 

Please note that attendance at the meeting will be limited to stockholders of Biogen Idec as of the Record Date (or their authorized representatives). If your shares are held by a bank, broker or other nominee, please bring to the meeting your bank or broker statement evidencing your beneficial ownership of Biogen Idec stock to gain admission to the meeting. Stockholders who plan to attend the meeting must present valid photo identification. Stockholders of record will be verified against an official list available at the registration area. The Company reserves the right to deny admittance to anyone who cannot adequately show proof of share ownership as of the Record Date.

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

 

Our Board of Directors is asking for your proxy. Giving us your proxy means that you authorize us to vote your shares at the Annual Meeting in the manner you direct on the WHITE proxy card. You may vote for all, some, or none of our director nominees. You may also vote for or against the other item(s) or abstain from voting. If you sign and return the enclosed WHITE proxy card but do not specify how to vote, we will vote your shares in favor of our director nominees, for the ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accounting firm, for our 2008 Omnibus Equity Plan, for our 2008 Performance-Based Management Incentive Plan and against the Icahn Bylaw Proposal.

 

If your shares are held through a bank, broker or other nominee, please follow the instructions provided by your bank, broker or other nominee.

 

It is important that your shares are represented at the Annual Meeting, whether or not you attend the Annual Meeting in person.

 

To make sure that your shares are represented, we urge you to vote as soon as possible by telephone or by Internet by following the instructions on the WHITE proxy card or by signing, dating and returning the WHITE proxy card in the postage-paid envelope provided.

 

If you are a registered stockholder (also called a “record holder”), there are four ways to vote:

 

 

If your shares are held in a brokerage account in your broker’s name (this is called “street name”), please follow the voting instructions provided by your bank, broker or other nominee. In most cases, you may submit voting instructions by telephone or by Internet to your bank, broker or other nominee, or you can sign, date and return a WHITE voting instruction form to your bank, broker or other nominee. If you provide specific voting instructions by telephone, by Internet, or by mail, your bank, broker or other nominee must vote your shares as you have directed.

 

At the Annual Meeting, we will pass out ballots to anyone who wishes to vote in person. If you hold your shares in “street name,” you must request a legal proxy from your bank, broker or other nominee to vote by ballot at the Annual Meeting.

 

The Icahn Entities have provided notice that they intend to nominate their own slate of three nominees for election as directors at the Annual Meeting, submit the Icahn Bylaw Proposal and solicit proxies for use at the Annual Meeting to vote in favor of their own slate in opposition to Item 1 above and in favor of the Icahn Bylaw Proposal. You may receive proxy solicitation materials from the Icahn Entities, including an opposition proxy statement and proxy card. OUR BOARD OF DIRECTORS URGES YOU NOT TO SIGN OR RETURN ANY PROXY CARD SENT TO YOU BY THE ICAHN ENTITIES. Even if you have previously signed a proxy card

sent by the Icahn Entities, you have the right to change your vote by following the instructions on the WHITE proxy card to vote by telephone or by Internet or by signing, dating and mailing the enclosed WHITE proxy card in the postage-paid envelope provided. Only the latest dated proxy card you vote will be counted. We urge you to disregard any proxy card sent to you by the Icahn Entities.

 

If you hold your shares in more than one account, you will receive a WHITE proxy card for each account. To ensure that all of your shares are voted, please use the WHITE proxy card to vote by telephone or by Internet or complete, sign, date and return a WHITE proxy card for each account.

 

As previously noted, the Icahn Entities have provided notice that they intend to nominate their own slate of three nominees for election as directors at the Annual Meeting, submit the Icahn Bylaw Proposal and solicit proxies for use at the Annual Meeting to vote in favor of their own slate in opposition to Item 1 above and in favor of the Icahn Bylaw Proposal. As a result, you may receive proxy cards from both the Icahn Entities and the Company. To ensure stockholders have the Company’s latest proxy information and materials to vote, the Board of Directors expects to conduct multiple mailings prior to the date of the Annual Meeting, each of which will include a WHITE proxy card regardless of whether or not you have previously voted. Only the latest dated proxy card you vote will be counted.

 

OUR BOARD OF DIRECTORS URGES YOU NOT TO SIGN OR RETURN ANY PROXY CARD SENT TO YOU BY THE ICAHN ENTITIES. Even if you have previously signed a proxy card sent by the Icahn Entities, you have the right to change your vote by re-voting by telephone or by Internet or by signing, dating and returning the enclosed WHITE proxy card in the postage-paid envelope provided. Only the latest dated proxy card you vote will be counted. We urge you to disregard any proxy card sent to you by the Icahn Entities.

 

If you have any questions, or need assistance voting, please contact our proxy solicitor:

 

Innisfree M&A Incorporated
Stockholders Call Toll Free: 877-750-5836
Banks and Brokers Call Collect: 212-750-5833

 

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

 

 

Only your latest vote, in whatever form, will be counted.

 

Under the rules that govern brokers who have record ownership of shares that they hold in “street name” for their clients who are the beneficial owners of the shares, brokers have the discretion to vote such shares on discretionary, or routine, matters but not on non-discretionary, or non-routine, matters. Broker non-votes generally occur when shares held by a broker nominee for a beneficial owner are not voted with respect to a proposal because the broker nominee has not received voting instructions from the beneficial owner and lacks discretionary authority

to vote the shares. Brokers normally have discretion to vote on routine matters, such as uncontested director elections and ratification of independent registered public accounting firms, but not on non-routine matters, such as contested director elections or stockholder proposals (i.e. the Icahn Bylaw Proposal). For brokerage accounts that are sent proxy materials by the Icahn Entities, all items on the proxy card will be considered non-routine matters. Thus, if your shares are held in “street name” and you do not provide instructions as to how your shares are to be voted, your broker will not be able to vote your shares on these important matters. We urge you to provide instructions to your broker so that your votes may be counted on these important matters. You should vote your shares by following the instructions provided on the WHITE voting instruction form and returning your WHITE voting instruction form to your broker to ensure that your shares are voted on your behalf.

 

If you are a record holder and do not vote by telephone or by Internet or by signing and returning a proxy card, your shares will not be voted.

 

If you are the beneficial owner of shares held in “street name” by a bank, broker or other nominee, as the record holder of the shares, your bank, broker or other nominee is required to vote those shares in accordance with your instructions. We urge you to provide instructions to your bank, broker or other nominee so that your votes may be counted on these important matters. You should vote your shares by following the instructions provided on the WHITE voting instruction form and returning your WHITE voting instruction form to your bank, broker or other nominee to ensure that your shares are voted on your behalf.

 

If you do not give instructions to your broker, your broker will be entitled to vote your shares with respect to “discretionary” items but will not be permitted to vote your shares with respect to “non-discretionary” items (those shares are treated as “broker non-votes”). Proposals 3, 4 and 5 are “non-discretionary” items. If the Icahn Entities solicit proxies, then all items on the agenda will be “non-discretionary” items for those brokerage accounts solicited by the Icahn Entities. If your shares are held in “street name” and the Icahn Entities provide you with proxy solicitation materials through your broker, but you do not provide instructions as to how your shares are to be voted in the election of directors, your broker will not be able to vote your shares. We urge you to provide instructions to your broker so that your votes may be counted on these important matters. You should vote your shares by following the instructions provided on the WHITE voting instruction form and returning your WHITE voting instruction form to your bank, broker or other nominee to ensure that your shares are voted on your behalf.

 

A majority of our outstanding shares of common stock as of the Record Date must be present at the Annual Meeting to hold the Annual 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 Annual Meeting. Shares that are present and entitled to 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 Annual Meeting will be adjourned until we obtain a quorum.

 

 

 

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

 

We will publish final voting results in our Quarterly Report on Form 10-Q for the second quarter of 2008, which we plan to file with the Securities and Exchange Commission (“the SEC”), by August 9, 2008. 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.

 

Important Notice Regarding the Availability of Proxy Materials for Annual Meeting of Stockholders To Be Held at [          ] on [          ], 2008: The Notice of Annual Meeting, this Proxy Statement and our 2007 Annual Report are available online at http://investor.biogenidec.com.

 

Our Board of Directors currently consists of 12 members, divided into three classes of four, each serving staggered three-year terms, as follows:

 

 

The terms of our Class 2 directors expire at this meeting. Thomas F. Keller will not stand for re-election in accordance with our Corporate Governance Principles policy on retirement of directors. If re-elected, Messrs. Pickett and Sharp and Ms. Schenk, together with Stelios Papadopoulos, Ph.D., our new nominee for Class 2 director, if elected, will hold office until the Annual Meeting of Stockholders in 2011 and until their successors are duly elected and qualified unless they resign or are removed. Dr. Papadopoulos was recommended to the Corporate Governance Committee by one of our current independent directors and the nomination of Dr. Papadopoulos was unanimously approved by our Board of Directors.

 

If any of our nominees is unable or unwilling to accept nomination or election, the shares represented by the enclosed WHITE 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. All nominees have consented to serve if elected. OUR BOARD OF DIRECTORS RECOMMENDS THE ELECTION OF STELIOS PAPADOPOULOS, CECIL B. PICKETT, LYNN SCHENK AND PHILLIP A. SHARP.

 

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 2 Directors — Terms Expire in 2008

 

 

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. Mr. Ross, who is not an employee, has served as our Chairman of the Board since December 2005. In 2007, our independent directors met without management present nine 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.

 

  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 as of April 17, 2008 and the number of times that each committee met in 2007 are set forth in the following table:

 

 

Our Board of Directors met 16 times in 2007. 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 2007. If Dr. Papadopoulos is elected to the Board of Directors, he is expected to join the Finance and Audit Committee in place of Dr. Keller, who is retiring after the Annual Meeting. Upon Ms. Leaming’s appointment to the Board in January 2008, she joined the Finance and Audit Committee in place of Mr. Young, who joined the Transaction Committee. We expect that Ms. Leaming will become chair of the Finance and Audit Committee upon Dr. Keller’s retirement.

 

Financial Experts

 

Our Board of Directors has determined that each of Lawrence C. Best and Nancy L. Leaming, both members 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 Heidrick & Struggles 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 2009 Annual Meeting of Stockholders, a stockholder must give timely notice in writing to our Secretary at our principal executive offices 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 an exception to our retirement policy for Thomas F. Keller that allowed him to serve his entire current term. Accordingly, Dr. Keller will retire at our 2008 Annual Meeting of Stockholders.

 

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. Three of our directors were unable to attend our 2007 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 2007 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 corporate internal 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 2007, 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 2007 Annual Report on Form 10-K for the fiscal year ended December 31, 2007 related to its audit 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 fiscal year ended December 31, 2007 for filing with the SEC.

 

The Finance and Audit Committee of the Board of Directors

 

Thomas F. Keller (Chair)
Lawrence C. Best
Nancy L. Leaming
Robert W. Pangia

 

Our Finance and Audit Committee has selected PricewaterhouseCoopers LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2008. PricewaterhouseCoopers served as our independent registered public accounting firm in connection with the audit for the fiscal year ended December 31, 2007. 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, 2007 and December 31, 2006, and fees billed to us by PricewaterhouseCoopers for other services provided during 2007 and 2006:

 

 

Audit fees are fees for the audit of our 2007 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 and planning 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 audit 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.

 

The Finance and Audit Committee annually reviews and pre-approves the audit, audit-related, tax, and other permissible non-audit services that can be provided by the independent auditor. Any proposed services exceeding these levels or amounts will require separate pre-approval by the Finance and Audit Committee, although the Chief Accounting Officer can approve up to an additional $50,000 in the aggregate per calendar year for categories of services that the Finance and Audit Committee has pre-approved. In addition, any pre-approved services for which no pre-approved cost level has been set or which would exceed the pre-approved cost by an amount that would cause the aggregate $50,000 amount to be exceeded, must be separately pre-approved by the Finance and Audit Committee.

 

In addition, 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 2007 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, 2008.

 

We are asking stockholders to vote to adopt the Biogen Idec Inc. 2008 Omnibus Equity Plan (the “2008 Omnibus Equity Plan”) that will provide stock-based compensation to our employees. The following summary of the material features of the 2008 Omnibus Equity Plan may not contain all the information you may wish to know. We encourage you to review the entire text of the 2008 Omnibus Equity Plan, which is attached as Appendix A to this proxy statement.

 

OUR BOARD OF DIRECTORS HAS APPROVED THE 2008 OMNIBUS EQUITY PLAN AND RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE APPROVAL OF THE 2008 OMNIBUS EQUITY PLAN.

 

The 2008 Omnibus Equity Plan will allow our Compensation and Management Development Committee (the “Compensation Committee”) to make grants of stock options, restricted stock, restricted stock units and other stock-based awards to employees. The purpose of these stock awards is to attract and retain the top talent needed to effectively compete in our industry, strongly align employee and stockholder interests and closely link compensation with both Company and employee performance. As discussed in our Compensation Discussion and Analysis, equity compensation is a key element of total compensation at Biogen Idec, and the 2008 Omnibus Equity Plan will allow us to offer an essential component of that total compensation package to attract and retain key employees and motivate superior results with long-term incentive awards.

 

The key features of the proposed 2008 Omnibus Equity Plan are as follows:

 

 

In this discussion, run rate is defined as shares granted annually as a percentage of total shares outstanding. The run rate of awards granted under our employee equity plans in 2007 was 1.1% of our total outstanding stock.

 

Stock overhang is defined as: (shares granted but not yet exercised + shares available to grant under employee equity plans) divided by (total common shares outstanding at year-end + shares granted but not yet exercised + shares available to grant under employee equity plans). The stock overhang was 10.5% at December 31, 2007. The stock overhang would be approximately 14.4% if the 2008 Omnibus Equity Plan is approved.

The 2008 Omnibus Equity Plan is designed to reflect prevailing corporate governance and executive compensation best practices. The following is a summary of its key terms and provisions:

 

 

Eligibility

 

Only employees of Biogen Idec and our affiliates are eligible to receive awards under the 2008 Omnibus Equity Plan. We currently grant equity to all employees upon hire and upon promotion. Additionally, all employees are eligible to receive annual merit-based equity grants; these awards are highly differentiated based on individual employee performance. We currently have approximately 4,300 employees.

 

Awards

 

Awards under the 2008 Omnibus Equity Plan will be either performance-based and designed to comply with Section 162(m) of the Code (“Section 162(m)”) or will be awards that are not intended to comply with Section 162(m). The Compensation Committee has the discretionary authority to determine the size of an award, whether it will be tied to meeting performance criteria and whether it will be settled in the form of stock and/or cash. The 2008 Omnibus Equity Plan specifies in the definition of Performance Criteria, on page A-12 in Appendix A, various financial and operational criteria that the Compensation Committee may use in establishing criteria for performance-based awards.

 

Adjustments

 

The Compensation Committee may make appropriate adjustments in outstanding awards and the number of shares available for issuance under the 2008 Omnibus Equity Plan, including the individual limitations on awards, to reflect changes to our stock, such as stock dividends, stock splits, reverse stock splits, recapitalizations, distributions to stockholders other than stock or normal cash dividends, material changes in accounting practices, or any other event, if it determines that adjustments are appropriate to avoid distortion in the operation of the 2008 Omnibus Equity Plan and to preserve the value of awards made under the 2008 Omnibus Equity Plan.

 

Exercise of Stock Options and Stock Appreciation Rights

 

The exercise price of stock options and base value of SARs granted under the 2008 Omnibus Equity Plan may not be less than the fair market value of our common stock on the date of grant, and the term may not be longer than 10 years. The Compensation Committee will determine at the time of grant when each award becomes exercisable, but the minimum vesting period for time-based awards must be equal increments over three years. Payment of the exercise price of a stock option may be in cash, common stock owned by the participant or such other consideration, including a cashless exercise, or by a combination of these payment methods. We may require that the participant remit an amount in cash or common stock sufficient to satisfy tax withholding requirements. Similar provisions will govern awards of SARs, which entitle the holder upon exercise to receive common stock or cash equal to the excess of the fair market value of the underlying shares on the date of exercise over the base value of the SAR.

 

Vesting of Restricted Stock

 

Awards of restricted stock and RSUs vest, and the related restrictions lapse, based on either the conclusion of a specified period of continuous employment or upon the satisfaction of pre-established performance conditions approved by the Compensation Committee. For time-based awards, the minimum vesting period is in equal increments over three years, although we may make time-based awards of up to 500,000 shares that vest earlier than

this minimum schedule. We primarily reserve these shares for purposes such as our qualified sub-plan for France, which is described above.

 

Effect of Corporate Change in Control or Corporate Transaction

 

In the event of a specified corporate transaction or a change in control, as described below, the 2008 Omnibus Equity Plan provides for various adjustments to outstanding awards depending upon the circumstances. These adjustments may include assumption and substitution of our awards by the acquirers, or cash payment of the value of the awards.

 

If the transaction is a corporate change in control, the exercisability or vesting of each outstanding award is automatically accelerated, and awards requiring exercise will remain exercisable for the balance of their original term. For this purpose, a corporate change in control generally means a sale of more than 50% of the voting power of our stock (other than in a merger) or a change in membership of a majority of the board of directors without the approval of the incumbent board.

 

If the transaction is a corporate transaction, certain participants designated by the Compensation Committee who terminate employment for certain reasons within two years following the corporate transaction are eligible to receive accelerated vesting of their awards, and awards requiring exercise will generally remain exercisable for one year. In order to be eligible, the designated participants must have terminated employment as a result of an involuntary employment action within two years following the corporate transaction. A corporate transaction includes a consolidation, merger or similar transaction, a sale of substantially all of our assets or a liquidation or dissolution. In general, an involuntary employment action means that we have terminated the participant’s employment without cause or the participant has resigned because of a material reduction in authority, duties and responsibilities; a reduction in base pay or target bonus opportunity; or a relocation of the participant’s principal office by more than 100 miles roundtrip.

 

Termination, Death and Retirement

 

Generally, unvested awards held prior to termination by reason of death or disability will vest upon death or disability, and awards requiring exercise generally will remain exercisable for one year. If a participant retires (defined as termination after age 55 with at least 10 years of service), a portion of the unvested awards will become vested, and awards requiring exercise generally will remain exercisable for three years. If a participant terminates for cause, all awards, whether vested or unvested, terminate immediately. If a participant terminates for reasons other than death, disability, retirement or for cause, upon termination unvested awards will terminate automatically and vested awards requiring exercise generally will remain exercisable for six months.

 

Administration

 

The Compensation Committee will administer the 2008 Omnibus Equity Plan. It will select employees who shall receive awards, determine the number of shares, and establish the terms, conditions and other provisions of the awards. The Compensation Committee may interpret the 2008 Omnibus Equity Plan and establish, amend and rescind any rules relating to it. The Compensation Committee may delegate all or part of its responsibilities to anyone it selects.

 

Amendments

 

Subject to certain limitations, the Compensation Committee may amend, suspend or terminate the 2008 Omnibus Equity Plan or any portion thereof at any time, subject to such stockholder approval as the Committee determines to be necessary or advisable.

 

The following is a summary of the material U.S. federal income tax consequences generally applicable to us and to participants from the issuance and exercise of stock option awards to a U.S. employee. Note that there may be state, local, foreign and other taxes applicable to participants in the plan which are not described below.

The grant of a stock option does not result in taxable income to the option holder or in a tax deduction for us. An employee exercising an incentive stock option, or ISO, has no taxable income upon exercise for regular income tax purposes, but may be subject to the alternative minimum tax. We do not receive a tax deduction upon the exercise of an ISO. Upon the exercise of a nonqualified stock option, the employee has ordinary income equal to the excess of the fair market value of the shares acquired on the date of exercise over the option exercise price (the spread at exercise), and a corresponding deduction is available to us.

 

An employee who disposes of shares acquired upon exercise of an ISO within one year following the date of exercise or within two years from the date of grant will have income, taxable at ordinary income rates, equal to the spread at exercise (or, with limited exceptions, to the gain on sale, if less), and a corresponding deduction will be available to us.

 

With limited exceptions, an ISO exercised more than three months following termination of the participant’s employment will be treated for tax purposes as a nonqualified stock option, as will ISOs granted to any employee to the extent that, in the aggregate, they first become exercisable in any calendar year for stock having a fair market value (determined as of the time of grant) in excess of $100,000.

 

The above is only a summary of the Biogen Idec Inc. 2008 Omnibus Equity Plan, a copy of which is attached as Appendix A to this proxy statement.

 

OUR BOARD OF DIRECTORS RECOMMENDS A STOCKHOLDER VOTE FOR THE APPROVAL OF THE 2008 OMNIBUS EQUITY PLAN.

 

We are asking stockholders to approve the Biogen Idec Inc. 2008 Performance-Based Management Incentive Plan (the “Incentive Plan”). The following summary of the material features of the Incentive Plan may not contain all the information you may wish to know. We encourage you to review the entire text of the Incentive Plan, which is attached as Appendix B to this proxy statement.

 

OUR BOARD OF DIRECTORS HAS APPROVED THE INCENTIVE PLAN AND RECOMMENDS THAT STOCKHOLDERS VOTE FOR THE APPROVAL OF THE INCENTIVE PLAN.

 

Performance-based compensation is a key element of our compensation philosophy. Accordingly, all Biogen Idec employees are eligible for some form of cash incentive program, the underlying purpose of which is to attract and retain persons of outstanding abilities, stimulate efforts to bring about exceptional operating performance and to provide highly differentiated rewards to employees based on their contributions to this performance.

 

Compensation paid to our named executive officers is subject to limits on tax deductibility under Section 162(m), unless it meets the “performance-based” requirements of that section. We are proposing the Incentive Plan so that compensation paid to these officers under it can qualify for the performance-based compensation exception and thus allow us the full federal tax deduction permitted for such compensation.

 

In addition to the benefit to the Company of a tax deduction for incentive compensation, as we discuss in our Compensation Discussion and Analysis, incentive compensation tied to performance metrics is a key feature of our philosophy of executive compensation. The Incentive Plan is expected to operate in the same manner as our existing incentive plan, which is described in detail in the Compensation Discussion and Analysis.

 

The Incentive Plan is designed to reflect prevailing corporate governance and executive compensation best practices. The following is a summary of its key features:

 

Administration

 

The Compensation Committee, comprised entirely of “outside directors” for purposes of Section 162(m), will administer the Incentive Plan. It has discretionary authority, subject only to the express provisions of the Incentive Plan, to interpret the Incentive Plan; determine eligibility for and grant awards; determine, modify or waive the terms and conditions of any award; prescribe forms, rules and procedures; and otherwise do all things necessary to carry out the purposes of the Incentive Plan. The Compensation Committee must exercise its discretion consistent with qualifying awards for the performance-based compensation exception under Section 162(m).

 

Determination of Awards; Section 162(m) Requirements

 

Awards under the Incentive Plan must be funded solely on account of the attainment of one or more objective performance goals. These goals must be adopted in each performance period no later than the latest time permitted by Section 162(m) (generally, for performance periods of one year or more, no later than 90 days after the commencement of the performance period and, for periods of less than one year, before 25% of the performance period has elapsed). The Compensation Committee is not permitted to waive the achievement of the applicable performance goals, except in the cases of death or disability or where the waiver will not jeopardize the tax treatment of other awards under Section 162(m).

 

The performance goals that the Compensation Committee establishes must be based on one or more objectively determinable measures of performance. These measures are listed in the Incentive Plan in the definition of Performance Criteria, on page B-2 in Appendix B. The Compensation Committee may provide that any of the performance criteria applicable to an award will be adjusted in an objectively determinable manner to reflect events (for example, but without limitation, acquisitions or dispositions) occurring during the performance period that affect the applicable performance criteria.

 

No incentive awards will be paid unless the Compensation Committee certifies in writing that the applicable performance criteria have been attained, and such determination will be final and conclusive. No award may be granted under the Incentive Plan after the first meeting of our stockholders held in 2013 until the performance measures have been approved by our stockholders in accordance with the requirements of Section 162(m), unless such grant is made contingent upon such approval.

 

The Compensation Committee has no discretion to increase the amount of a participant’s incentive award as determined under the applicable formula, but it may in its sole discretion reduce an incentive award otherwise payable to a participant, on the basis of Company and/or specific individual goals, which may be based on objective or nonobjective factors related to the Company’s and/or the participant’s performance.

 

Termination of Employment

 

If a participant’s employment terminates during a performance period due to death or disability, a pro rata amount of any target incentive award (based on the participant’s service in the applicable performance period up to the termination date) will be paid as soon as practicable within the earlier of ninety (90) days of the termination of employment or March 15 of the year following the calendar year in which the employment terminated.

 

Amendment, Suspension and Termination

 

While it is our intent to continue the Incentive Plan indefinitely, the Compensation Committee has the right to amend, modify or terminate the Incentive Plan, any incentive program under the Incentive Plan or any participant’s participation in the Incentive Plan at any time or on such conditions as the Compensation Committee shall deem appropriate; provided, however, that once the Compensation Committee has established the performance goals underlying an incentive award and except as provided elsewhere in the Incentive Plan, the Compensation Committee may not change either such performance goals or the formula for determining whether such goals were met. No amendment requiring stockholder approval may be made without obtaining such approval. An award may be reduced or revoked if the participant engages in certain detrimental activity.

 

The above is only a summary of the Incentive Plan, a copy of which is attached as Appendix B to this proxy statement.

 

OUR BOARD OF DIRECTORS RECOMMENDS A STOCKHOLDER VOTE FOR THE APPROVAL OF THE 2008 PERFORMANCE-BASED MANAGEMENT INCENTIVE PLAN.

 

On January 24, 2008, the Company received notice from the Icahn Entities, the beneficial owners of 10,485,904 shares, or 3.57%, of the Company’s common stock as of such date, of their intention to present to the Company’s stockholders the following proposal to amend the Company’s Bylaws at the Annual Meeting:

 

 

Under Article V of our certificate of incorporation, no amendment or supplement to the Bylaws adopted by the Board of Directors can conflict with any amendment adopted by the stockholders. Therefore, if the Icahn Bylaw Proposal were adopted by the stockholders of the Company, the Board of Directors would no longer have authority to amend such provisions of the Bylaws and thus would no longer have the ability to fix the number of directors.

 

Under the current Bylaws of the Company, the Board of Directors has the flexibility to add or remove director positions if it determines that such addition or removal would be in the best interests of the Company and its stockholders. Recruiting qualified candidates is a challenging and time-consuming process, and the Board of Directors believes that it is in the best interests of the Company’s stockholders to retain the ability of the Board of Directors to either increase the size of the Board of Directors to add a highly-qualified candidate if such a candidate becomes available or decrease the size of the Board of Directors in a year when no such candidate is readily available.

 

The Board of Directors believes that retaining the ability to increase or decrease the size of the Board of Directors or appoint any particular person to the Board of Directors, if appropriate, is in the best interests of the Company’s stockholders.

 

If you return a signed WHITE proxy card without providing voting instructions, your shares will be voted against the Icahn Bylaw Proposal.

 

OUR BOARD OF DIRECTORS RECOMMENDS A STOCKHOLDER VOTE AGAINST THE ICAHN BYLAW PROPOSAL.

 

The following table and accompanying notes provide information about the beneficial ownership of our outstanding common stock as of April 7, 2008 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 SEC 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 April 7, 2008. Shares subject to restricted stock units, or RSUs, include RSUs that vest within 60 days of April 7, 2008.

 

 

 

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 2007, all such parties complied with all applicable filing requirements except for Forms 5 required to be filed on February 14, 2005 and February 14, 2006 to report shares that were gifted to the Burt A. Adelman Irrevocable Insurance Trust by Burt Adelman’s Grantor Retained Annuity Trusts. The gifts, made in 2004 and 2005, were reported on a Form 5 filed on February 14, 2008.

 

Introduction and Corporate Governance

 

Our Compensation and Management Development Committee (which is referred to in this section of the 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 directors to serve on the Committee until the 2007 Annual Meeting: Bruce R. Ross (Chair), Alan Belzer, Alan B. Glassberg and Mary L. Good. Each of these individuals satisfied the independence requirements of NASDAQ. After Alan Belzer and Mary L. Good retired from board service on May 31, 2007, the Board of Directors selected the following directors to serve on the Committee beginning June 1, 2007: William D. Young (Chair), Marijn E. Dekkers, Alan B. Glassberg and Lynn Schenk. 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 2007, the Committee met for five regularly scheduled meetings and held five ad hoc meetings. As part of his duties, the Committee Chair 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. During 2007, a Watson Wyatt affiliate provided actuarial services with respect to our pension plan in Germany; this service was a continuation of a pre-existing business relationship between our German affiliate and a company that was acquired by Watson Wyatt. Other than this matter, Watson Wyatt does not provide any other services to Biogen Idec. Biogen Idec does not retain the services of another consultant to advise management on executive compensation matters.

 

Executive Compensation Philosophy and Objectives

 

Our compensation program for the named executive officers (the individuals named in the Summary Compensation Table) is designed and implemented based on our pay-for-performance compensation philosophy. We place significant emphasis in all of our compensation programs on performance-based pay and on highly differentiated awards based on individual performance and potential to contribute to the long-term success of the Company. We want and need the best people to be excited and motivated to work at Biogen Idec and we believe our compensation program is a key factor in attracting and retaining this talent.

 

Our compensation, benefits and other workplace programs (our “total compensation framework”) have been selected and designed in the context of the following objectives:

 

 

What is our compensation program designed to reward?

 

The compensation program rewards financial, strategic and operational performance that is achieved in a manner consistent with the Company’s policies and values. Our success in meeting our compensation objectives depends heavily on our performance management system.

 

How do goal-setting and performance assessment influence our compensation decisions?

 

Establishing clear goals is critical to ensuring that our compensation program rewards each executive based on his or her success relative to specific objectives. Our goal-setting process involves first setting Company goals that are linked to our Board-approved business plan, and then setting individual goals that are designed to support achievement of those Company goals. The Company and individual goals that we set and measure performance against each year can be grouped into the following categories:

 

 

The goals we set are consistent with the objectives and milestones of our long range plan and reflect the expected degree of difficulty of attainment of those goals and our competitive business environment. In determining the objectives for our long range plan and annual goals, we consider the following factors: analyst projections for our Company’s performance; analyst projections for our peers’ performance; the broader economic picture; our past variance to targeted performance; our peers’ past performance on key financial and operational metrics; and our Board of Directors’ expectations. We set challenging goals for the Company and our executives. For example, our 2007 revenue goal exceeded analyst consensus and our 2008 revenue and earnings per share (EPS) goals both exceeded the analyst consensus for Biogen Idec at the time we set those goals.

 

We have a rigorous performance management system that integrates goal-setting, self-assessment and manager-based assessment of performance and leadership competencies. We believe that results and how those results are attained are critically important. We assess our executive officers based on their demonstrated results relative to their goals and the competencies and behavioral attributes they demonstrate, such as overall leadership effectiveness, impact across the organization and performance and impact relative to the Company’s other executive officers. The output of our performance management process is a relative ranking of our executives and the assignment of overall performance ratings that are used for compensation decision-making. Because we significantly differentiate compensation based on the rankings and overall performance ratings of executives, we ensure that the highest rewards are delivered to our highest performers.

 

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 grants for all executive officers. The base salary, annual cash incentive and long-term incentive grant determinations for the Chief Executive Officer (CEO) are approved by all independent (non-employee) directors.

 

As a key input to this process, the CEO prepares and discusses with the Committee a detailed assessment of each executive officer’s performance over the prior year, as described above, and the recommended compensation actions for each executive officer.

To understand external competitiveness, the CEO and the Committee review a comprehensive report jointly prepared by Biogen Idec’s Compensation and Benefits group and Watson Wyatt, comparing the level and mix of compensation of each executive officer other than the CEO relative to comparable positions at our peers. The data for comparable positions is drawn from compensation surveys and an analysis of the executive compensation disclosures found in proxy statements of our peers (listed in the next section). Separately, Watson Wyatt provides the Committee with a competitive analysis of CEO pay; a CEO compensation tally sheet and employment agreement analysis; and a CEO pay-for-performance analysis that compares actual payments relative to performance at our Company and at each of our peers. Each of these analyses are considered by the Committee in recommending the CEO’s compensation to the Board of Directors.

 

In 2007, Biogen Idec targeted cash compensation (base salary and target bonus opportunity) at the median of our peers. Our employee benefit programs (such as our medical, dental and savings plans) provide value that, in total, is between the median and 75^th percentile of our peers and our target long-term incentive grant values for 2007 were also between the median and 75^th percentile of our peers. The actual compensation for each executive officer may be above or below the targeted position relative to our peers 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. Our guidelines set targets for at-goal individual and Company performance, and have ranges that scale rewards above and below target for individual and/or Company performance that exceeds or falls below our goals and expectations. The CEO considers these guidelines, external competitiveness, internal equity and individual and Company performance in recommending to the Committee the compensation actions for the executive officers.

 

The Committee considers all of these factors as part of the information presented, including external competitiveness, the individual performance assessments, Company performance, progress towards strategic objectives and internal equity, discusses the CEO’s recommendations with the CEO and Watson Wyatt and applies its knowledge and discretion to determine the compensation for each executive officer.

 

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

 

Biogen Idec obtains and analyzes peer group information from public filings and executive compensation data reported by peer companies to benchmark compensation surveys.

 

At the request of the Committee, Watson Wyatt annually reviews our peer group and reports its findings and recommendations. The Committee reviews the recommended peer group for appropriateness, considering such factors as size (e.g., revenue and market capitalization), business comparability (e.g., research-based with multiple marketed products) and geographic scope of operations (e.g., global versus domestic-only presence). Our peer group includes biotechnology and pharmaceutical companies, as we compete in each of these sectors to hire and retain our executives. Based on the 2007 peer group review, the Committee added two companies to the peer group (Celgene and Cephalon). These changes improved the balance of the peer group relative to our criteria. The peer group adopted in May 2007 includes:

 

 

Our compensation decisions during 2007 were based on the peer group before the addition of Celgene and Cephalon. Beginning in 2008, MedImmune will no longer be part of our peer group as a result of its acquisition by AstraZeneca in 2007.

 

For each of our peers, we analyze the Compensation Discussion and Analysis and other data filed during the prior year to identify those named executive officers whose positions are comparable to those held by our executive officers. We then compile and analyze the data and information for each comparable position relative to that for our executive officers. Our analysis includes the rewards program structure and design, as well as the value of the compensation.

We also use the Towers Perrin U.S. CDB Pharmaceutical Executive Compensation Database (“Towers Perrin”) and the SIRS Executive Compensation Survey (“SIRS”) in analyzing the competitiveness of executives’ compensation. All of our peers except Sepracor participated in the Towers Perrin survey and all of our peers except Bristol-Myers Squibb, Cephalon and Eli Lilly participated in the SIRS survey. Benchmark compensation surveys are critical to assessing competitive practices and levels of compensation, as the data available in our peers’ public filings addresses only a limited number of our executive positions. We carefully selected these two benchmark compensation surveys based on the number of our peers who participate in the surveys, the number of positions reported by the surveys that are comparable to our executive positions and the standards under which the surveys are conducted, including methodologies, provisions to ensure confidentiality and quality assurance practices.

 

While the Towers Perrin and SIRS benchmark compensation surveys report long-term incentive data, differences between the surveys in methodology and reporting result in long-term incentive data that is not comparable between the sources. To overcome these methodology differences, we separately benchmark long-term incentive practices and values via a custom survey conducted on behalf of Biogen Idec by Watson Wyatt. This custom survey provides us with robust data regarding long-term incentive practices and grant values throughout our peers and allows us to overcome the methodological differences between the Towers Perrin and SIRS surveys. All of our peers except Celgene, Bristol-Myers Squibb, Forest Laboratories and MedImmune participated in this custom survey in 2007.

 

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

 

The Committee determines the elements of our executive compensation program and has selected the following elements (discussed in detail below) to promote our pay-for-performance philosophy and compensation program objectives:

 

 

Each year, the Committee reviews the compensation program design for its alignment with and support of our pay-for-performance objectives, its overall efficiency and cost-effectiveness and its design and overall value relative to our peers’ practices and general trends. The Committee also discusses program design recommendations and alternatives, and approves the overall program design and specific compensation targets and guidelines for the coming year.

 

While the general mix of the elements is considered in the design of our compensation program, the Committee does not target a specific mix of pay in either its program design or 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.

 

Our performance-driven approach creates a motivational aspect to our compensation programs, since base salary increases, annual incentive payments and long-term incentive grants are performance-differentiated based on each executive officer’s overall performance rating and relative rank. We establish and use performance-differentiated guidelines for making these individual compensation recommendations.

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 potential to contribute to our future success. We generally target our base salary structure around the median of our peers. In recommending and determining individual base salaries, the CEO and Committee consider the internal and external factors described above. Base salary increases from 2006 to 2007 for our named executive officers averaged 4.5% and ranged from 2% to 9%. These increases were approved by the Committee in February 2007 as part of our annual compensation planning process. At the end of 2007, the base salaries for our named executive officers were below the market median, except for Dr. Pickett, whose base salary is between the median and 75th percentile, consistent with the criticality of his role, his depth of experience and the competitive requirements to originally attract him to the Company.

 

Annual Cash Incentives

 

We maintain an annual cash incentive program as part of our performance-based compensation. Our annual incentive opportunities, which are expressed as a percentage of base salary, are targeted near the median of our peers. The Committee reviews our annual target incentive opportunities each year to ensure they are appropriately competitive. For 2007 and 2008, our target incentive opportunities remained unchanged as a percent of base salary. Our annual target incentive opportunities are shown in the following table:

 

 

Actual incentives can range from 0% to 225% of targeted levels, as described further below, depending on the degree of Company and each individual’s performance attainment relative to pre-established goals for that year. Based on Company and individual performance and an executive’s base salary relative to market, an executive’s actual total cash compensation may be above or below market median. At the end of 2007, our named executive officers’ total cash compensation (base salary plus the actual cash incentive paid in 2007 for 2006 performance) was below the market median, except Dr. Pickett, whose total cash compensation was between the median and 75th percentile, and Mr. Mullen, whose total cash compensation was at the median.

 

The Committee establishes and approves all Company goals for the annual cash incentive plan based on recommendations made by the CEO. Executive officers’ individual performance goals are jointly developed by the executive and the CEO and approved by the Committee. Mr. Mullen’s goals and year-end assessment are also approved by the Committee, with input from the other independent directors.

 

For the 2007 annual incentive plan, we selected Company goals and assigned weights that reflected the Company’s established financial, strategic and operational objectives. Our assignment of a total of 50% weight to financial goals and 50% to strategic and operational goals reflect the importance of linking reward opportunities to both near-term and longer-term results. We believe that this set of goals and their weights effectively aligned management incentives with enhancement of long-term stockholder value. For 2007, the Committee approved the following Company goals, weighting and degree of attainment.

2007 Annual Cash Incentive Plan Company Targets and Results

 

 

 

Notes to table:

 

 

 

We determine the individual cash incentive payments 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 each Company goal and the Company Multiplier as a whole, and from 0% to 150% for the Individual Multiplier. If maximum performance were achieved on both the Company Multiplier and an Individual Multiplier, a payout of 225% of target (150% x 150% = 225%) would be made. If either the Company Multiplier or the Individual Multiplier is 0%, there is no payout. The Individual Multiplier reflects the assessment of the individual performance goals approved by the Committee; each executive’s Individual Multiplier thus reflects his or her overall performance rating and ranking as part of our performance assessment process, as discussed earlier in this section.

 

Based on the results described in the 2007 Annual Cash Incentive Plan Targets and Results table, a 104% Company Multiplier was approved by the Committee for the year ended December 31, 2007. Based on performance against their individual goals (which determines the Individual Multiplier) and the 104% Company Multiplier, our named executive officers received incentive awards for 2007 that ranged from 94% to 135% of target. The actual incentive payments are included in the Summary Compensation Table.

 

For 2008, in addition to our annual cash incentive plan, the Committee approved a special performance-based cash retention incentive program to assist the Company in retaining key employees through the current period of business uncertainty arising from activist stockholder activity. Other than Mr. Mullen, who declined to participate in this special bonus, each of our executive officers (including the named executive officers other than Messrs. Adelman and Kellogg) is a participant in this program. The program provides an additional bonus opportunity based on the Company’s performance in 2008 relative to our revenue and EPS goals, which are given equal weight. The named executive officers participating in this program have a target bonus opportunity equal to their annual base salary. The actual amount of the bonus may range from 0% if the Company does not achieve threshold results for revenue and EPS to 150% if the maximum performance level is achieved or exceeded on both goals. If the Company achieves only the threshold level of results on both goals, the bonus paid to these individuals will equal 50% of their target bonus opportunity. Bonus payments are contingent upon continued employment through the payment date in March 2009 or sooner if the executive officer experiences an involuntary employment action following a corporate transaction or corporate change in control, or is terminated as a result of death or disability. Adopting a retention bonus for executive officers is common in similar situations and our target bonus opportunity reflects competitive practice for this type of program.

 

Long-term Incentives

 

Our long-term incentive (LTI) program provides performance-based reward opportunities that further align compensation with stockholder interests and reinforce our goal to retain top talent. Each year, the Committee determines the types of awards to be used for delivering long-term incentives. In doing so, the Committee considers the effectiveness of each award type in achieving our compensation objectives (such as employee performance, retention, motivation and attraction), the needs of the business, competitive market practices, dilution and expense constraints, and tax and accounting implications.

 

During 2006, the Committee evaluated various program designs for 2007 that were jointly developed by the Company’s Compensation and Benefits group and Watson Wyatt. Based on the review of these detailed recommendations, including competitive practice among our peers, the Committee approved a program that awarded stock options and restricted stock units to our executive officers. In this program, the total grant date value of each annual merit award and each promotional award is divided evenly between stock options and restricted stock units. During 2007, certain other grants were made fully in restricted stock units, including special grants to Messrs. Clancy and Hamm as part of our initiative to retain key and high-performing employees, and our performance-based grants to Dr. Pickett, which are described below. Stock options promote alignment with our stockholders and qualify as performance-based pay under Section 162(m). Our stock option grants vest annually

over the four-year period following grant. We grant restricted stock units to reflect competitive practices and to promote retention by providing 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 process vest annually 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 our stockholders.

 

To help in assessing the external market, Biogen Idec sponsored (and Watson Wyatt administered) a custom survey of LTI in which most of our peers participated. To augment this data, the Committee reviewed publicly available data for our LTI compensation 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, the Committee approved target LTI grant values for 2007 that were between the median and 75th percentile of our peers in terms of dollar value.

 

The Committee approved targeting 2008 LTI grant values at the 60th percentile of our peers. This decision reflects the importance of LTI as an element of our total compensation framework and our decision to not maintain a pension plan or a defined benefit plan.

 

We significantly differentiate LTI grants based on individual performance and position level through our use of LTI grant guidelines. The 2007 LTI grant guidelines approved by the Committee were segmented by overall performance rating, ensuring that top performing employees receive noticeably larger grants than those with average performance. Specifically, our 2007 LTI grant guidelines for our middle-performing employees ranged from 70% to 130% of the target grant value, the guidelines for our highest-performing employees ranged from 130% to 210% of the target grant value, and LTI grant guidelines for our lower-performing employees ranged from 0% to 70% of the target grant value. This approach, which we have continued in 2008, allows us to meaningfully reward and effectively retain those employees who have the potential to make the greatest contributions to our long-term success and to differentiate their rewards from those received by other employees. The value realized from these LTI grants is furthered leveraged by the Company’s performance and its effect on the price of our stock.

 

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 LTI custom survey 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. Our stock options have an exercise price equal to the closing price of Biogen Idec stock on the date of grant.

 

We employ performance-vested LTI when we believe it is the most appropriate approach for achieving strategic objectives. At present, we employ performance-vested restricted stock units as a key component of Dr. Pickett’s total equity awards, consistent with his specific goals of advancing our pipeline and research and development (R&D) efforts during the time from his hire through 2010. Dr. Pickett was granted the opportunity to earn up to 30,000 performance-based restricted stock units for the 2007 calendar year, and three separate grants to earn up to 30,000 performance-based restricted stock units (RSUs) in each of 2008, 2009 and 2010. Each year’s plan provides for a maximum vested award of 30,000 restricted stock units, with any unearned RSUs in a given year forfeited.

 

Based on the CEO’s recommendations, in 2007 the Committee approved goals for Dr. Pickett’s performance grant which included pipeline goals and R&D organizational objectives. His results relative to these goals were approved by the Committee in 2008.

 

 

Based on complete attainment of some goals and partial attainment of other goals, the CEO recommended, and the Committee approved, that Dr. Pickett receive 90% of the 30,000 (that is, 27,000) restricted stock units for the 2007 performance period. These 27,000 units vested on February 12, 2008, which was the date of Committee approval. The balance of 3,000 units was forfeited.

 

Benefits

 

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

 

 

Retirement Plans

 

The Company does not maintain a pension plan or a defined benefit plan.

 

The Company maintains 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 ($225,000 in 2007) receive a Company-paid “restoration match” on the portion of their base salary and annual cash incentive that exceeds this limit; the restoration match equals six percent of this 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 limit. In addition, participants in the SSP who are senior

director level or higher, or who are designated as eligible by the Committee, may make voluntary 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 is made from the SSP.

 

Prior to December 31, 2007, our SSP provided that participants became vested in the restoration match at a rate of 25% per year, until fully vested after four years of service. On December 31, 2007, concurrent with adopting immediate vesting under our 401(k) plan, we accelerated vesting for all SSP participants, so that all current participants are fully vested and all new participants are immediately vested in the restoration match. We made this change to immediate vesting based on our review of peer practices, which indicated an increasing trend toward this plan design.

 

SSP accounts are maintained for each participant. Accounts include employee and employer contributions and reflect 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. In 2007, this rate of return was 8%. The excess of the interest rate paid on the fixed rate option above 120% of the applicable federal long-term rate (compounded quarterly) earned by our named executive officers under the SSP during 2007 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 the case of Messrs. Mullen and Pickett, if they terminate for good reason) or following a corporate transaction or a change in control. The benefits they receive depend on their position (or, in the case of Messrs. Mullen and Pickett, are included in their employment agreements). 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, this 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.”

 

Tax-Deductibility of Compensation

 

Section 162(m) of the Internal Revenue Code limits to $1 million the amount a company may deduct for compensation paid to its CEO or any of its other three named executive officers (excluding the Chief Financial Officer). 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 tax 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 2007, all stock option grants, our annual cash incentive plan and Dr. Pickett’s performance-based restricted stock unit grant were designed to meet the requirements for tax-deductible compensation under Section 162(m).

 

Beginning in 2007, the Company adopted changes to our annual cash incentive plan that enable us to maximize tax deductibility of plan-based awards paid to our named executive officers. Maximum cash incentive awards under the 2007 plan year were determined for each named executive officer based on our non-GAAP net income for the year. The actual award to each executive was less than this maximum amount based on the degree of attainment of Company and individual performance goals set in the annual cash incentive plan described above. Dr. Pickett’s performance-vested restricted stock unit plan was similarly structured to ensure a maximum funded value that was based on objectively determined measures.

 

Under the management incentive plan approved by the Company’s stockholders in 2003, we limit tax deductible performance-based incentive payments to a total of $3,500,000 per executive per year. We are proposing in this proxy statement for stockholder approval of a new management incentive plan that will permit us to continue to structure and provide performance-based awards that are tax-deductible.

 

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,

 

William D. Young, Chairman
Marijn E. Dekkers
Alan B. Glassberg
Lynn Schenk

 

The following table shows the compensation paid to or earned by the named executive officers during the fiscal years ended December 31, 2006 and December 31, 2007.

 

 

 

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, 2007.

 

 

Notes to 2007 Grants of Plan-Based Awards Table

 

 

 

 

The following table summarizes the equity awards that were outstanding as of December 31, 2007 for each of the named executive officers.