From todays NY Times:
ImClone Board Said to Be Discussing Bristol's Request
By ANDREW POLLACK
he board of the biotechnology company ImClone Systems (news/quote) met yesterday to consider a
demand from Bristol-Myers Squibb (news/quote) that it drastically alter the terms of their $2 billion
partnership to develop and market a cancer drug. ImClone did not announce its decision last night.
Last week, Bristol-Myers demanded that payments it must make to ImClone be sharply cut, a demand analysts
expected ImClone to reject. Bristol-Myers also demanded that it take control of the regulatory processes
surrounding the drug and that ImClone's two top executives step aside until the drug won approval.
The board began its meeting in the morning in New York and it appeared the meeting was stretching into the
evening, though spokesmen for ImClone would not say whether the meeting was in progress. Bristol- Myers,
which has two representatives on ImClone's board, would not comment.
The length of the meeting could indicate that ImClone was not going to reject the demands summarily. Rather,
analysts said, it suggested that the board was weighing the demands carefully, or perhaps trying to reach a
compromise, something that would please many shareholders of both companies.
But Eric M. Hecht, an analyst at Merrill Lynch (news/quote) who follows ImClone, said his recent discussions
with the company "have strongly led me to believe they will reject the proposal." He said he had heard that the
company was flooded with support from shareholders. "I think they'll say that Bristol has been a good partner
and put it back to Bristol," he said.
Frank Borriello, an analyst at BB Biotech, a European investment fund that
owns 4 percent of ImClone, said: "What I really wish is that they'd all learn to
work together. That's the ideal thing to enhance shareholder value."
In September, Bristol agreed to pay up to $1 billion for 19.9 percent of ImClone
and another $1 billion for the marketing rights to the cancer drug, Erbitux. It
was the highest price ever paid by a pharmaceutical company for a single
product of a biotechnology company.
But in December, the Food and Drug Administration refused even to review
ImClone's application to sell the drug. At first, ImClone's top executives,
Samuel D. Waksal, the chief executive, and his brother Harlan W. Waksal, the
chief operating officer, said the problem was that the application was missing
some documentation and that it might be possible to file the application again
relatively quickly.
Since then, however, details have come to light suggesting that the F.D.A. has
more extensive concerns and that new trials might be required. ImClone's
shares have plunged, its executives are under investigation by Congress and
federal regulators for possibly having misled shareholders about the status of
the drug and the relationship with Bristol-Myers has deteriorated.
By making its demands, Bristol- Myers apparently believes that it should take
over the F.D.A. filing. It also seems to believe that the Waksal brothers might
be too distracted by shareholder lawsuits and the investigations to concentrate
on the drug. Samuel Waksal, in particular, has drawn scrutiny because of his
expensive lifestyle and active social life, something not that usual for biotechnology executives.
But the board of ImClone in the past has seemed loyal to the Waksal brothers, who founded the company in
1984.
Although saying he favored a compromise, Mr. Borriello of BB Biotech said he did not think ImClone should
agree to terms that would reduce the return to its shareholders. He said the existing agreement provides for
numerous contingencies, including for more clinical trials to have Erbitux approved. He said that Bristol- Myers,
which has access to information about Erbitux that other ImClone investors do not, should not ask to revise the
deal.
"For Bristol to come back and say they want to rewrite it even though they had preferential treatment sounds to
me like sour grapes," he said. He also said the Waksals had long experience with the drug so they should not
step aside.
"At this point, I don't see how it can help getting Erbitux approved," he added.
Still, Mr. Borriello said he hoped that ImClone would agree to something, because rancor between the two
partners and possible lawsuits would only delay the drug's progress.
By making its demands so publicly, Bristol-Myers has given itself little room to back down without losing face.
So if ImClone rejects its offer, Bristol might have to pull out of the agreement, which would mean losing the $1.2
billion it has already spent. ImClone might choose to sue Bristol- Myers if Bristol-Myers does not sue ImClone
first.
Still, ImClone cannot afford to reject Bristol-Myers outright, some analysts said. ImClone does have the money
to conduct new clinical trials and win approval for the drug. But investors might worry if ImClone tried to go it
alone given its track record so far.
Bristol-Myers, which has a huge sales force, would be an important asset in selling the drug, especially because
other companies like AstraZeneca (news/quote) and Genentech (news/quote) are expected to be selling
competing drugs within the next two years.
Bristol-Myers officials said the companies expected to meet with the F.D.A. late this month to see what must be
done to get the application back on track.
That Bristol-Myers made its demands without waiting another few weeks for the meeting suggests it thought
that the existing application could not be rescued and that new trials would be required. That would hurt the
drug's potential sales, making it less valuable to Bristol-Myers and prompting its demand that it reduce its
payments to ImClone, including forgoing $800 million it still must pay if the drug wins approval. The company
also wants to cut the royalty it pays roughly in half.
fred |
