Dueling Begins Over Bristol's ImClone Bid
Icahn Questions
If Suitor Had Access
To Private Talks
By RON WINSLOW
August 5, 2008; Page B3
Jousting over Bristol-Myers Squibb Co.'s unsolicited bid to buy ImClone Systems Inc. began in earnest Monday, as ImClone and its chairman indicated they oppose the $4.5 billion offer and suggested the target company might be worth more to shareholders if it were split in two.
ImClone's board appointed a committee to review last week's $60-a-share offer, but the biotechnology company said the board's "preliminary view is that offer substantially undervalues ImClone." Chairman Carl Icahn not only issued a similar assessment, but questioned whether Bristol-Myers may have had access to confidential information about ImClone before offering to acquire the 83% of shares it doesn't already own.
The response escalated a buyout battle between the two New York companies, which as partners over the past seven years have developed ImClone's biologic cancer drug Erbitux into a $1.3 billion franchise. Some analysts believe that despite the rhetoric, a deal ultimately is likely, albeit at a higher price.
Deutsche Bank analyst Barbara Ryan said, "From where I sit, I would assume this is the typical back-and-forth posturing of a negotiation" that would eventually result in a deal.
ImClone said its board has recently discussed restructuring the company into two businesses -- one for Erbitux and another for its promising drug-development pipeline -- as a strategy to increase shareholder value. In a statement issued by ImClone, Mr. Icahn said he was "disturbed" that Bristol-Myers's designated member of ImClone's board "was privy" to discussions about the restructuring. As a result, ImClone's board is reviewing whether Bristol-Myers had access to confidential information about ImClone and its pipeline.
John Celentano, a Bristol-Myers senior vice president, joined ImClone's board in May, one of several of the pharmaceutical company's executives to serve in such a post since the company acquired its 17% ImClone stake in 2001. Still, as a board member, Mr. Celentano's loyalties are to ImClone's shareholders, not Bristol's.
"The guy's obligation is to keep the information in the board room," says Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware.
A Bristol-Myers spokeswoman said Mr. Celentano wasn't available to comment on the matter. She said the company "was not privy to any confidential information" from an ImClone board meeting about potential restructuring plans, and has measures in place to insure that such information doesn't pass between the companies.
"We believe we have made a full and fair offer, and we look forward to a response from ImClone's board on that offer," the spokeswoman said. In making its bid last Thursday, Bristol-Myers said that if a deal doesn't go through, it may sell its ImClone stake.
Bristol-Myers's bid, coming less than two weeks after Swiss drug maker Roche Holding AG made an unsolicited $44 billion offer for full ownership of biotech concern Genentech Inc., reflects the pharmaceutical industry's growing reorientation toward biotech.
In addition to Erbitux, ImClone has five cancer drugs in development; one just entered late-stage human tests and another is set for such studies next year.
"I'm a big fan of ImClone's pipeline," says Eric Schmidt, biotech analyst at Cowen & Co. "Everyone wants to be in cancer and everyone wants to be in biologics." But separating pipelines from a successful drug's revenue stream hasn't worked in other cases, and he is skeptical that ImClone's plans are far along.
"I suspect this is more posturing," Mr. Schmidt said. "I think this is heading toward a deal between these two companies. The question is, what price."
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