BMS moves to buy ImClone

Bristol-Myers Squibb has proposed to enter into an agreement to acquire ImClone Systems for US$60.00 per share in cash, or a total payment of approximately US$4.5 billion. BMS currently owns approximately 17 per cent of all outstanding shares of ImClone. BMS' all-cash offer, which is not conditioned on the receipt of financing or on the conduct of due diligence, represents a premium of approximately 30 per cent over ImClone's closing stock price on 30th July, a premium of approximately40 per cent over the average closing price of ImClone's stock during the most recent one-month period and a premium in excess of 40 per cent for the average closing stock prices of ImClone stock during each of the most recent three- and 12-month periods.

James M Cornelius, BMS' Chairman and Chief Executive Officer, stated that the transaction represents an evolutionary development in the companies' seven-year-long relationship. BMS is the natural partner for ImClone as it possesses the knowledge base and resources to advance the company's growth over the long-term, not only with respect toErbitux (cetuximab), which the companies jointly commercialise, but also in terms of developing ImClone's pipeline assets.

ImClone's Board of Directors has formed a committee to study the acquisition offer and to retain advisors to assist it in determining the appropriate course of action. However, the Board's preliminary view is that the offer substantially undervalues the company. ImClone pointed out that its Board has been discussing the possibility of separating the company into its Erbitux and its pipeline businesses in order to maximise the value of the company.

Chairman of ImClone's Board, Carl C Icahn, has stated that he was disturbed that one of the directors on the ImClone Board who is the BMS designee was privy to the information discussed at previous meetings concerning the potential separation of ImClone into two separate components and how this restructuring might enhance stockholder value. Accordingly, the Board is reviewing whether BMS had access to confidential information concerning ImClone and its pipeline. Additionally, Icahn pointed out that ImClone has a pipeline antibody, IMC-11F8, under development which, if ultimately approved for sale, might have a significant competitive effect on Erbitux and that BMS may have no rights to market that product under its agreements with the company.

If BMS gained control of all the Erbitux revenues it would fill a long-term hole caused by the loss of patent protection, starting in 2012 and 2013,surrounding the company's heart disease drug, Plavix (clopidogrel),and antihypertensive, Avapro (irbesartan). Erbitux is indicated for use in the treatment of patients with metastatic colorectal cancer and in the treatment of squamous cell carcinoma of the head and neck. Under the agreement between BMS and ImClone, which expires in September2018, ImClone receives a distribution fee based on a flat rate of 39 per cent of Erbitux net sales in North America. This agreement was amended in July 2007 to provide for additional development funding for certain indications.

Merck KGaA is also a partner in the co-development and co-commercialisation of Erbitux in Japan and other markets outside of the US. As such, it could perhaps emerge as the most likely competitor for ImClone. It would make sense for Merck to protect its investment in the drug, since it was the company's own clinical trial that finally persuaded the FDA to approve Erbitux, and a new Merck trial has shown it to be efective in fighting lung cancer as well.

Matthew Dennis - Editor, Cancer Drug News