Imclone Systems: No Shame, No Gain

Just a quick reminder to all that Bristol-Myers (BMY) acquired 14.4M shares of Imclone Systems (IMCL) for $70.00 cash back in 2001. The current $60.00 cash offer is $10.00 less and seven years later. Apparently BMY is not ashamed to publicly admit that it overpaid for IMCL shares back in 2001.

There are a ton of analysts throwing around all sorts of numbers as to what fair value should be. For example; Michael King at Rodman & Renshaw pegs it at $72.00 and Yaron Werber at Citigroup comes up with $73.00.

Big deal! Three dollars in seven years does not detract from the fact that BMY overpaid on the first round. In fact, all the analyst's are accomplishing is proving that the original transaction was based on assumptions that did not pan out.

For this reason alone it is fairly safe to say that the $60.00 offer is final and that BMY is in no rush to conclude a deal. IMCL still needs BMY more than BMY needs IMCL.

Disclosure: No conflicts.

 

Comments

[Zack:]

nice approach. it's not often big companies admit mistakes.

2008 Aug 07 09:53 AM

[nova:]

"IMCL still needs BMY more than BMY needs IMCL." Why? What for? Merck KGaA tells everybody that they were and are ready to buyout Erbitux franchise from BMY at any time.

For the last 6 yrs, BMY did not execute any single Erbitux registration quality clinical trial. None. All Erbitux high quality clinical trial were executed by Merck KGaA.

BMY's marketing of Erbitux is a total disgrace:
- It highly overpriced Erbitux following its approval in America. Merck KGaA priced Erbitux at half of BMY price and sells much more Erbitux than BMY. Merck KGaA expects that its Erbitux sale in two years will exceed $2B.
- IMCL had to create and engage its own sale force to move Erbitux sale.
- The latest clinical trials indicate that Erbitux efficacy in wild-Kras metastatic colorectal patients is much more superior to Avastin but BMY has done nothing to bring this message to medical and patients communities.

IMCL likes to get rid off BMY. Hopefully, it will happen soon.

2008 Aug 08 01:06 AM

[CrossProfit:]

nova,

"IMCL likes to get rid off BMY. Hopefully, it will happen soon"

So are we going to see IMCL offer BMY to buy back 14.4M shares at $60.00? How's about a 'you by me out or I buy you out' pricing? What do you think IMCL would offer? For that matter, how much would Merck offer both?

No matter how you cut it, you are still at the 60 mark, just BMY beat MRK to the punch line. If the BMY offer was so under priced then MRK would have jumped by now.

As an aside, Icahn was annoyed that BMY may have used inside information regarding how management was looking for ways to CREATE shareholder value. Reading in between the lines this means that IMCL wasn't going to get there on its own and there is a need to get creative!

Not saying that IMCL is a bad company or anything close to that, just the valuation has to be real this time, no hype. Patents are like options, the clock doesn't stop ticking and you can be sure that the likes of TEVA is watching the clock. As time goes on, the value drops as there is less time left etc.

As stated, BMY is in no rush to conclude a deal.

CrossProfit

2008 Aug 08 02:20 AM

[nova:]

In spite of the media and some analysts claim that Carl must sell IMCL now, it is not true. Why in world will Carl sell IMCL for $60 thinking he can get much more later?

1.5 yrs ago, Carl was accused of preventing a sale of ImClone to Sanofi for $36. Now, Carl gets a new offer from BMY for $60.

Again Carl can successfully claim the BMY offer is not adequate as it was 1.5 yrs ago. Therefore, Carl has a strong hand in this game.

Speaking about Merck KGaA.
One year ago, Merck lost 11F8 arbitration to ImClone. 11F8 is a fully-human, second-generation EGFr-drug, potentially more superior to Erbitux. Merck has no claims to it in its territory. Presently, Merck pays 9.5% of Erbitux revenues to ImClone and expect Erbitux revenues in excess of $2B in just 2 years.

If Merck alone or together with BMY participates in a hostile takeover of ImClone then chances for a future kiss up with ImClone are zero.

Now about BMY.
BMY is a loser. Its stock lost a half of its value in the last 12 months. Two weeks ago, BMY and Sanofi lost Plavix's patent in EU. Consequently, BMY might go to low teens. So, nobody wants BMY stock. BMY has $4.4B in cash following selling some of its assets. It is all what BMY can afford to spend on buying IMCL.

What is ImClone real value? Nobody really knows before seeing Crystal, OPUS, 099 as well as pipeline clinical trials to be available in the next 4-8 months.

If the results are good, IMCL's market cap will be well North from $10B or well over $120+ PPS.

I am ready to wait. What will Carl do? I don't know but he has a lot of these clinical data already!

2008 Aug 08 11:45 PM

[User 244644:]

Hopefully, Merck Kgaa will enter the picture to make a bid. IMCL would be better off --even if it was at a lower price. They have a proven track record in getting things done.


On Aug 08 01:06 AM nova wrote:

> "IMCL still needs BMY more than BMY needs IMCL." Why? What for? Merck
> KGaA tells everybody that they were and are ready to buyout Erbitux
> franchise from BMY at any time.
>
> For the last 6 yrs, BMY did not execute any single Erbitux registration
> quality clinical trial. None. All Erbitux high quality clinical trial
> were executed by Merck KGaA.
>
> BMY's marketing of Erbitux is a total disgrace:
> - It highly overpriced Erbitux following its approval in America.
> Merck KGaA priced Erbitux at half of BMY price and sells much more
> Erbitux than BMY. Merck KGaA expects that its Erbitux sale in two
> years will exceed $2B.
> - IMCL had to create and engage its own sale force to move Erbitux
> sale.
> - The latest clinical trials indicate that Erbitux efficacy in wild-Kras
> metastatic colorectal patients is much more superior to Avastin but
> BMY has done nothing to bring this message to medical and patients
> communities.
>
> IMCL likes to get rid off BMY. Hopefully, it will happen soon.

2008 Aug 17 10:08 AM