Eli Lilly Buys Cancer Drug Maker ImClone; Carl Icahn Boosts Ego

Someone needs to make a movie about Carl Icahn. The all-star corporate raider is at it again. Icahn, who chairs the notorious pharmaceutical company ImClone’s board, has accepted a $70/share buyout of the company. From Reuters:

Eli Lilly and Co has agreed to acquire ImClone Systems Inc for $6.5 billion, potentially bringing to a close one of the most colorful corporate sagas in biotech history.

The deal, announced by the companies on Monday, values ImClone at $70 per share, a premium of 51 percent to ImClone’s closing price on July 30, the day before ImClone’s partner, Bristol-Myers Co, made an offer of $60 a share for the 83 percent of the company it does not already own.

The question now is whether Bristol, which later sweetened its offer to $62 a share, will come back with a counter-offer.

Bristol-Myers and ImClone have a rocky history. Bristol’s board representative, John Celentano, resigned on September 25. The two companies are also squabbling about rights ownership for the experimental cancer drug 11F8, a potential best-seller.

Lilly has a host of products whose patents will expire starting in 2011. These products include the antipsychotic Zyprexa, which was pushed and sold heavily to doctors as an anti-anxiety medication during the late 1990s. Gezmar, Lilly’s best-selling cancer drug, loses its patent in 2012.

ImClone, meanwhile, only has one main product, the cancer drug Erbitrux. However, according to the Wall Street Journal, it does posses biotech know-how and a suite of cancer drugs in the pipeline. The first will probably go online in 2013.

Analyst Dan Moskowitz, as interviewed by Reuters, thinks the deal is a shoddy idea:

“…Lilly needed to do add something to the product portfolio and the pipeline and this is the way they’re going about it. This will not be enough to offset the loss of Zyprexa in 2011, and ultimately the loss of Cymbalta in 2013…There definitely are more strategic things that need to be done. An all-cash offer (there is no financing) is going to significantly drain the company’s cash position.”

Lilly probably figures ImClone’s attractive suite of upcoming cancer drugs will boost their bottom line enough to make up for the loss of their cash stash. Meanwhile, Carl Icahn, who chairs ImClone, just added another ten feet to his ego. From the Financial Times:

The deal appears to be a victory for Carl Icahn, the billionaire investor and chairman of ImClone. Mr Icahn took control of the company in 2006 a few years after ImClone founder Samuel Waksal and Martha Stewart, the home living entrepreneur and TV personality, were jailed following a stock trading scandal.

“We feel that the Eli Lilly transaction vindicates our decision to oppose in 2006 a potential transaction in which the company would have been sold at approximately $36 per share which the prior board favored,” Mr Icahn said.

ImClone is selling at $67 today. Icahn is thumping his chest. And Bristol-Myers is having a bad day.

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  • I think we’ll be seeing many more deals like this in the future (with or without Carl Icahn). Big pharma is in some trouble when it comes to drug pipelines, so acquisitions is the easiest way to go.