Bristol-Meyers Squibb vs. Imclone: Icahn Stirs Up the Pot

I haven’t mentioned the attempt by Bristol-Meyers Squibb (BMY) to buy out Imclone (IMCL) until now. The reasons for the move are unsurprising – BMS would like all the revenue from Erbitux, instead of just a share of it, and sees some value coming up in Imclone’s pipeline (such as their development drug candidate IMC-11F8, vide infra). They’ve been waiting quite a while, and apparently feel that the time is right – the only question is how much money such a move will cost them.

And that’s the question, all right, since Carl Icahn started talking this week about a mysterious preliminary offer from some unnamed other company for significantly more money ($70/share) than BMS is putting up. A lot of investors seem to have expected a sigh, a roll of the eyes, and a reach back into the pocket for more money - IMCL has been trading above the original $60/share offer. But that’s not what they’re getting, at least so far.

In a letter, Bristol-Meyers Squibb’s CEO is now reminding Icahn of a few things that you’d think would be obvious. One of them is that their offer is well-supported and requires no due diligence, as opposed to nebulous preliminary figures from companies that no one will name. The next paragraph is even more to the point:

As you know, Bristol-Myers holds the exclusive, long-term marketing rights in the United States to ERBITUX® and related compounds, including IMC-11F8. Bristol-Myers has no intention of agreeing to any modifications to these rights. ImClone also should understand that our offer is for the entire company, and any potential restructuring of the company could severely jeopardize ImClone’s value and deprive ImClone’s stockholders of the benefits of our offer.

That’s about the size of it, and I think that this message is being delivered in the way that Icahn understands best – right across the top of the head, with some good wrist action. There’s no reason for BMS to give up on their rights to Imclone’s products, except on terms that would make other potential buyers lose interest. Why would they? There is, I should add, quite a dispute between the two companies about who has the rights to that development antibody, IMC-11F8. Imclone has recently been acting as if BMS has no rights to it at all, but as that WSJ link makes clear, two years ago they clearly stated to Merck (MRK) KGaA that the antibody falls within the scope of the BMS agreement. It's hard for me to see how they'll get out of that, and even if they do, it'll take a lot of expensive wrangling.

So, if there really is a company willing to go to $70 a share for Imclone, with revenue still flowing to BMS and plenty of legal uncertainty on top of that, well, this is the time for them to speak up. I’m not sure that there is one, despite what Icahn says, but perhaps he’s hoping for one to materialize. He’s always reckoned Imclone to be worth vast amounts more than people who know anything about oncology think it is, so maybe he sees no problem with those figures. Anyone else live in the same world?

Update: Icahn has already replied, in a fashion that makes this affair look to go on a while. He says that he "doesn't understand the point" of the BMS letter, and goes on to say:

. . .With respect to a potential restructuring of ImClone, rest assured that we will act in what we consider the best interests of all our shareholders and not just Bristol.

Obviously, should you wish to make another offer which you believe we would not find inadequate, you are free to do so. Upon receipt of that offer, we will respond appropriately.

Well! My guess is that at this point BMS will sit tight and wait to see if anyone really wants to get in on all this action - betting, reasonably I think, that no one will. I would enjoy it if they raised their bid to, say, $60.25, just to steam up Icahn's windows, but I assume that they're above that. As time goes on, with no competing bids in sight, I would think that Icahn and his board-of-buddies would have to submit the BMS bid to the shareholders - wouldn't they?

Comments

[nova:]

Now, there is a new "genius" who knows what is good for ImClone shareholders and understands all legal aspects of Bristol/ImClone commercial agreements.

Merck KGaA, the other ImClone Erbitux marketing partner, also thought that they had rights to the second generation of EGVr-drugs. Unfortunately for them, the binding arbitration concluded that Merck KGaA has absolutely no rights/claims to 11F8.

At best, Bristol has very weak/marginal claims to ImClone's 11F8.

Furthermore, yes indeed, 11F8 falls under the scope of the commercial agreements since its is a competing to Erbitux drug. The same was true for Merck/ImClone agreement. However, it does not mean Bristol has any rights to 11F8.

Why? The Bristol/ImClone agreement is only for N. America (the USA and Canada), also known as "the Territory". The agreement "competing drugs" clause will expire in less than one week on Sep. 19, 2008. Until now, all 11F8 development activities were conducted in Europe or OUTSIDE the Bristol/ImClone commercial agreement Territory. Consequently, Bristol has no rights/claims to 11F8.

The same is true to ALL other Imclone pipeline candidates since all Bristol rights to them had expired 2 years ago. Note that Bristol does not make any claims to other ImClone drug candidates.

As for "the best" of ImClone shareholders, I can assure the author and him-alike that ImClone shareholders do not need Bristol $60-proposal.

ImClone is a highly successful and profitable biotechnology company with a lot of cash and outstanding new drug pipeline candidates. Success of any one out of 5 pipeline candidates presently in Phase II & III clinical trials, ImClone has all rights to, will propel ImClone market cap well above $10-12B in just 1 -2 years. Consequently, ImClone shareholders are ready to wait for a real payout day.

Presently, ImClone is highly undervalued by the Wall-Street. It should not be a surprise to anyone taking into account the Street latest poor performances when only the US Treasury and FED can keep major Wall-Street firms out of bankruptcies with endless money infusions.

As for the shareholders who think that Bristol's $60-offer is good, these shareholders had/have plenty of opportunities to sell ImClone shares at an open market well above $60 at any time.

2008 Sep 14 10:32 AM

[notsosmart:]

i saw icahn interviewed on a tv show a few years ago.he was asked about all his activities re finance.he stated that he has all the money he needs.all this is just a game to win.he should be very comfortable as in my opinion wall st has just become a kind of casino.the sheeples have no idea or clue whatsgoing on.

2008 Sep 14 01:21 PM

[turd furgeson:]

So nova, I guess your 100 shares won't be voting for the tender offer? Bummer.

If I recall, the open market placed the value of IMCL a lot less than 62.

I can't wait to hear who the mystery bidder is, and after DD they can't make a binding offer for whatever reason.

2008 Sep 23 08:03 AM