Bristol-Myers Bids For Imclone

BRISTOL-MYERS SQUIBB has made a $60-per-share offer—totaling $4.5 billion—to acquire all of ImClone Systems, its biotech company partner of seven years. Bristol-Myers already owns 17% of the company; another 14% is held by financier Carl C. Icahn, ImClone's chairman for nearly two years.

In a letter to Icahn, Bristol-Myers CEO James M. Cornelius says the deal makes "compelling business sense." He also calls it a natural fit for two companies that have worked together to develop and market the anticancer drug Erbitux. Sales of the drug, also sold outside the U.S. and Canada by Germany's Merck, reached $1.3 billion in 2007.

The relationship hasn't always been rosy. In 2001, Bristol-Myers entered a $2 billion deal for Erbitux, only to aggressively rework it in 2002 after FDA refused to consider ImClone's application for marketing approval. Soon after, ImClone founder and former CEO Samuel D. Waksal was jailed for insider trading. The drug was eventually approved in 2004.

Icahn, meanwhile, had been steadily increasing his ImClone holdings since the late 1990s. In early 2006, ImClone hired an investment bank to help it consider a possible merger, sale, or strategic alliance. Obvious buyers, such as Bristol-Myers, didn't make any public show of interest.

According to the board, however, Icahn rejected what he considered to be an inadequate undisclosed offer to buy the company for $36 per share. In October 2006, Icahn attempted to oust board members and take control of the company. ImClone's directors at first urged shareholders to reject the move but eventually gave in and made Icahn chairman.

Now it appears Icahn may be getting the value he wanted. Bristol-Myers' all-cash offer is 30% higher than ImClone's stock price on July 30, the day before the offer was made. It's also more than 40% over the average stock price during the past year.

The deal mirrors Roche's much-larger offer, revealed late last month, to acquire all of partner Genentech (C&EN, July 28, page 13). And similar to what happened after that announcement, the stock market bid up ImClone's shares above $60, reflecting expectations that Bristol-Myers might have to raise its offer.