Eli Lilly & Co. agreed to buy ImClone Systems Inc., the biotechnology company controlled by billionaire Carl Icahn, for $6.5 billion, ending one of the most colorful chapters in the industry’s history.
Investors in ImClone, maker of the cancer drug Erbitux, will get $70 a share, $8 more than Bristol-Myers Squibb Co. had offered in a hostile bid it will drop, the companies said Monday. The spotlight fell on ImClone after a 2002 insider trading scandal led to jail time for then-Chief Executive Officer Sam Waksal and his friend, homemaking guru Martha Stewart.
Lilly has been eyeing acquisitions in preparation for its antipsychotic drug Zyprexa, which generates $4.76 billion in annual sales, to be copied by generic brands arriving on the market in 2011. Bristol-Myers, ImClone’s biggest shareholder and its marketing partner for Erbitux, will sell its stake in the New York company but co-market the drug, ImClone’s only product, in the United States.
“This is an act of desperation on the part of Eli Lilly,” said David Moskowitz, an analyst for Caris & Co. in Washington. “Lilly will drain substantially all of its cash on the deal.
“Lilly is already bidding outside the range of what you think would be rational, but these companies are losing big products early next decade.”
Lilly’s cash offer is a 51 percent premium over ImClone’s share price on July 30, the day before Bristol-Myers announced an initial offer of $60 a share. (It later raised it to $62.) The deal is expected to close in the fourth quarter of 2008 or the first quarter of 2009.
The acquisition will be Lilly’s biggest, and will add to earnings in 2013, the company said.
Lilly, based in Indianapolis, isn’t deterred by ImClone’s entanglements with Bristol-Myers, Lilly CEO John Lechleiter said Monday. Erbitux, once doubted to ever reach the market, is approved for both colon cancer and head and neck tumors. It generated $1.3 billion in sales last year.
“We look forward to partnering with Bristol-Myers,” Mr. Lechleiter said. “We think the combination of Bristol-Myers and Lilly promoting Erbitux is going to make a big difference in the history of this product.”
Mr. Icahn, the second-biggest ImClone shareholder with 13 percent of the stock, engineered his election as chairman of ImClone in October 2006 after doubling his holdings. The sale may bring him and the hedge funds he manages at least $815 million in proceeds.
The deal “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 while also giving a nod to Waksal, who received a seven-year prison sentence and a $3 million fine after pleading guilty to charges of insider trading. Ms. Stewart served a five-month prison sentence for lying to prosecutors.
“While it is easy to hurl stones, all stockholders owe a debt of gratitude to Sam Waksal without whose dedication and perseverance neither Erbitux nor our great pipeline would exist,” Mr. Icahn said.
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