Would a Lilly/Imclone Deal Make Sense?

Includes: BMY, IMCL, LLY
by: Derek Lowe

Word leaked out Wednesday that Imclone’s (IMCL) secret bidder is Eli Lilly (NYSE:LLY). Well, let’s revise that – so far, Lilly hasn’t made a bid for the company. And that’s the first thought I had about this business: isn’t it taking quite a while? You’ll recall that Carl Icahn told Bristol-Myers Squibb (NYSE:BMY) a couple of weeks ago that he’d been in talks with someone else. Then we were going to hear about it over the weekend. Then the name would be revealed Wednesday at midnight (of all times). Now here we are on Thursday with no official announcement.

And the delay probably doesn’t have anything to do with the situation in the credit markets, because Icahn has been sure to emphasize that the deal he’s looking at is not subject to financing. That means all this extra time is probably due to good old caution – and I don’t blame Lilly for mulling things over. There are plenty of reasons to wonder if Imclone is worth the money for an outside company, given its status with BMS. This clearly isn’t the instant-winner operators-are-standing-by deal that Imclone would like to have us believe it is.

Does a Lilly deal make sense? It might, if they could be sure that they were going to get the Erbitux follow-up. But I’m willing to bet that this is exactly the issue that things are stuck on, since BMS believes (with reason) that they have a share of it, and won’t give it up easily.

And I’d be willing to see this go through, even at a ruinous price, if it would get Carl Icahn out of the drug industry. But no such luck, I’m afraid. He’s probably still eying Biogen (NASDAQ:BIIB), and who knows what else. I spent some time Wednesday going on about how we shouldn’t blame evil MBA types for the problems in our business, but Icahn is the sort of guy I’m nearly willing to make an exception for. A pure dealmaker, I don’t see him as someone who understands scientific research or who has the patience for it. If we’re going to point the finger at managers whose only goals seem to be to make the quarterly numbers and pump up the stock price, he’s as good an example as I can think of. A dose of this stuff is exactly what we don’t need at the moment.

One more consideration: who leaked Lilly’s name, anyway? The Wall Street Journal seems to have been the first with the story, quoting "people familiar with the matter". Well, cui bono? Who has an interest in moving it along and showing that it’s a real possibility, in getting possible bidders to feel some pressure? Who indeed?