BOSTON (Reuters) - Eli Lilly and Co has agreed to acquire ImClone Systems Inc for $6.5 billion, potentially bringing to a close one of the most colorful corporate sagas in biotech history.
The deal, announced by the companies on Monday, values ImClone at $70 per share, a premium of 51 percent to ImClone’s closing price on July 30, the day before ImClone’s partner, Bristol-Myers Co, made an offer of $60 a share for the 83 percent of the company it does not already own.
The question now is whether Bristol, which later sweetened its offer to $62 a share, will come back with a counter-offer.
“Bristol is very keen on acquiring this company,” said Eric Schmidt, an analyst at Cowen & Co. “I think the Lilly thing probably came to them out of left field and I’m not sure that they are going to take it lying down.”
Bristol declined to comment.
Whoever is the ultimate buyer, an acquisition of ImClone will mark the end of a corporate soap opera that included the jailing of founder Samuel Waksal and style guru Martha Stewart in a stock trading scandal.
It also represents a satisfying victory for Carl Icahn, the billionaire investor and chairman of ImClone’s board, who took control of ImClone in 2006 at a time many investors had written the company off and almost no analysts were recommending the stock.
Investors who stuck with ImClone since Bristol took its stake in the company seven years ago — for $70 a share, no less — have seen ImClone’s shares fall as low as $6 and rise as high as $87.
For Lilly, the deal comes as it faces generic competition to some of its biggest drugs, including its schizophrenia blockbuster Zyprexa.
“An all-cash offer is going to significantly drain the company’s cash position,” said David Moskowitz, an analyst at Caris & Co. “I think it is a deal being done out of weakness.”
Lilly said it will incur a one-time charge to its earnings, but it is premature to say what that charge will be. The company expects the transaction to be accretive to earnings on a cash basis in 2012 and on a net basis in 2013.
Cancer is one of the three main areas of research focus at Lilly, along with diabetes and neuroscience. But its main cancer drug, Gemzar, loses patent protection in 2012.
Erbitux, which is approved to treat colon cancer and head and neck cancer, is ImClone’s only marketed product, and generated $1.3 billion in sales last year.
Part of the future value of ImClone may hinge on an experimental follow-on product to Erbitux, known as 11F8. Bristol-Myers has said it has the rights to that product, but ImClone disputes that.
The deal is not subject to any financing conditions and is expected to close in either the fourth quarter of 2008 or the first quarter of 2009.
ImClone markets Erbitux in the United States with Bristol and elsewhere in the world with Merck KGaA of Germany.
Additional reporting by Lewis Krauskopf; Editing by Maureen Bavdek