After rejecting Bristol-Myers Squibb's sweetened offer of $4.7 billion at $62 a share, ImClone is in advanced talks with the mystery suitor npw identified as Eli Lilly & Co, which has made an offer of $70 a share, or $6.1 billion, media reports said quoting sources.
ImClone, has been in the acquisition market, since it rejected Bristol-Myers Squibb twice and ImClone's chairman, billionaire, corporate raider and shareholder activist Carl Icahn, rejected the offer Bristol-Myers offer saying the offer had undervalued the company and said it had received a higher offer from a large pharmaceutical company but had refused to name the suitor. (See: ImClone rejects Bristol-Myers Squibb's $4.3 billion bid; cites $6.1 billion fresh offer)
Bristol-Myers Squibb, which holds a 17-per cent stake in ImClone had been trying to acquire the remaining 83 per cent of ImClone since late July, initially offering $60 a share and later raising it to $62 a share, or $4.7 billion on September 10, 2008.
Carl Icahn, said in a statement released yesterday that a large pharma company had completed due diligence and made a proposal not subject to financing or further due diligence. Negotiations between the parties are underway, he disclosed, adding the company had requested ImClone not divulge its name until negotiations are completed.
If Lily does acquire ImClone, analysts are asking how it plans to raise $6.1 billion and whether it would use the $5.2 billion in cash, cash equivalents and short-term investments that it currently has to take this deal through.
Lily, known to be a conservative company, would find it difficult to use all the money for one acquisition, more so after they acquired biotech company 'Icos Corporation' two years back for $2.28 billion.
Since more than 60 per cent of its revenue base is in drugs that faces generic competition in the future, it will have no choice but to act fast because the acquisition will help it expand into the cancer and biotech market and ImClone has five cancer drugs which are undergoing clinical trials apart from the cancer drug Erbitux which generated $1.3 billion in sales last year.
Bristol-Myers has the marketing rights to ImClone's cancer drug Erbitux for the North American region while Germany's Merck KGaA sells the drug outside the US. Under the agreement, ImClone receives almost 40 per cent in royalties on sales made by Bristol-Myers.
The Indianapolis based pharma, is not a novice in the cancer market since cancer is one of the three main areas of research focus at the company, along with diabetes and neuroscience. Although having a decent oncology business, its largest product, Gemzar, loses patent protection in 2012.
It makes business sense for Lily to acquire ImClone since Erbitux is a biologic and is good for the future on the verge of losing a number of products to generic competition over the next several years.
Analysts say that this may not be the end as Bristol-Myers had said it planned to initiate a proxy fight for control of ImClone's board. An aggressive Bristol-Myers had threatened to go directly to shareholders with Bristol-Myers chairman and CEO James Cornelius shooting off a letter to Carl Icahn, saying ''Bringing our offer directly to the company's stockholders allows them to evaluate the merits of our proposal and permits them a say in the future of their company, an approach I know you support.''