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ImClone says no to BMS
NEW YORK—Using the colorful analogy "string of pearls" to describe a strategy to shift its business to biopharmaceuticals by 2013, Bristol-Myers Squibb Co. in late July attempted to add another potential gem to its chest when it offered $60 per share, or nearly $4.5 billion, to acquire the roughly 83 percent of partner ImClone Systems Inc., that it does not currently own—an offer which ImClone's board of directors promptly rejected.
The proposed acquisition was the product of a seven-year-long relationship between BMS and the oncology biopharma that resulted in the joint commercialization of Erbitux, a cancer therapy that to date has yielded $1.3 billion in worldwide sales. The all-cash offer represented a 30 percent premium over ImClone's July 30 closing stock price—a "fair, full and compelling offer," according to BMS Senior Vice President and Chief Financial Officer Jean-Marc Huet, who argued in a hastily called teleconference on July 31 that the deal would be good for both companies.
"BMS has the capabilities and resources to advance ImClone's assets over the long term, not only with respects to Erbitux, but also in terms of developing ImClone's pipeline," Huet told investors. "The combination with ImClone would allow us to optimize global opportunity by consolidating clinical development, streamlining and improving commercial execution, and [having] a more effective collaboration with Merck, which licenses Erbitux outside the U.S. and Canada."
But on Aug. 4, ImClone's board of directors issued a statement saying its preliminary view of BMS' offer was that it "substantially undervalues ImClone" in light of its contemplated separation of Erbitux from its other pipeline businesses.
"Based upon preliminary internal data, and recognizing that the pipeline products are in various stages of development, the board still believes that the company's pipeline business may be extremely valuable and significantly increase stockholder value as a separate business," ImClone stated.
ImClone's lack of enthusiasm did not end there. According to the company's statement, Carl C. Icahn, chairman of the board of directors, is "disturbed" that one of the directors on ImClone's board who is the BMS designee was privy to talks at previous meetings concerning the potential separation of ImClone into two separate components and how this restructuring might enhance stockholder value.
"Accordingly, the board is reviewing whether Bristol-Myers had access to confidential information concerning ImClone and its pipeline," ImClone stated. "Additionally, Icahn pointed out that ImClone has a pipeline antibody, IMC-11F8, under development which, if ultimately approved for sale, might have a significant competitive effect on Erbitux and that Bristol-Myers may have no rights to market that product under its agreements with the company."
Other ImClone stockholders have given statements to the press indicating their opposition to BMS' offer, but analysts seem confident that a deal will be made. Motley Fool contributor Brian Lawler says the deal "may or may not get done for much more than the $60 per share that Bristol-Myers is already offering," but "Icahn is sure to get some sort of deal done with ImClone in the coming months."
"Right now, Icahn is doing everything he can to play up ImClone's bargaining position in the buyout talks," Lawler says. "Whatever you think of his tactics, it's hard to argue that activist investor Carl Icahn hasn't done a good job of keeping things interesting for the companies he owns shares in."
Huet told investors that BMS has set aside $4.1 billion to purchase ImClone assets with no financing contingency attached to the offer and has the capabilities to buy additional assets as part of its "string of pearls" corporate restructuring plan, a strategy first announced in December 2007 that aims to boost the company's financial performance over the next five years by shifting its business to biopharmaceuticals.
"This is a proposal as it stands right now," Huet said. "Were we able to complete the deal, we would be very focused on making sure that this was a successful integration, and we would take all time required to make sure that this is a successful integration. It is not that transformational. It is more of a bolt-on/add-on acquisition. From that perspective, we will continue and take those points into account in looking at continuing to develop and execute our strategy, which includes other pearls." DDN