Bristol-Myers Squibb Makes $4.3 Billion Buy-Out Bid for ImClone

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In an effort to regain its prominence as a leading manufacturer of oncology-related drugspharmaceutical corporation Bristol-Myers Squibb (BMS) has approached biotechnology company ImClone Systems Incorporated with an offer to purchase the portion of ImClone that BMS does not yet own for the amount of $4.3 billion. BMS delivered the written offer, which works out at $60 per share, to ImClone’s chairman, Carl C. Icahn on Thursday 31 August while at the same time completing a U.S. regulatory filing.

Bristol-Myers Squibb (NYSE: BMY) already owns 16.6 percent of ImClone Systems (NASDAQ: IMCL) and to make the buy-out bid attractive, the offer was set at a 29 percent premium over Wednesday’s closing share price. However, most likely as a response to the buy-out bid, ImClone shares rose sharply on Thursday to $63.93, indicating that investors may expect a substantial increase in the purchase price.

Prior to 2001, New York based BMS was the world leader in sales of oncology medicines, but lost ground when its mainstay chemotherapy drug Taxol (paclitaxel) met up with competition from generic manufacturers. In 2001 BMS joined forces with New York based ImClone to market Erbitux, a drug used primarily in the treatment of colon cancer. It is thought that BMS rival Roche Holdings’ bid on 21 July to buy-out biotechnology company Genentech may have sparked the BMS/ImClone development. Large drug manufacturers are partnering biotechnology companies as a step to maintain their market position, which may be threatened as many of the patents on their leading products come to an end, making them available to generic drug manufacturers. Biotechnology drugs are engineered from living cells, in contrast to traditional drugs, which are manufactured from chemicals. Once the patent on a traditional drug has expired, generic manufacturers can market the identical chemical composition of the original product, giving it another name or using the chemical component as the market name. However, U.S. regulators have not approved the generic manufacture of biotechnology drugs, making biotechnology an attractive option for traditional drug manufacturers.

The BMS offer has not yet been accepted by ImClone and another large-cap pharmaceutical company could very well step in with a competing offer, although analysts are of the opinion that this would not be likely because of BMS involvement. With a 13 percent stake in ImClone, Carl Icahn is the next biggest shareholder after BMS. Icahn reportedly paid an average of $33.45 per share and he owns 11.67 million shares. This means that, at the current BMS offer price, Icahn could pocket $390.4 million. In light of the fact that even just the one drug, Erbitux, brought in over $1.3 billion in world-wide sales during 2007, the benefits to BMS of the acquisition of ImClone are enormous.

Investors and analysts will no doubt be very interested in developments around the BMS/ImClone bid, and it is likely that there will be a plenty of wheeling and dealing in the pharmaceutical sector in the coming months as they face challenges presented by generic manufacturers in this very lucrative market.

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