PharmExec Blog

Lilly Puts Up $6.5 Billion for ImClone

Lilly broke the news Monday morning that ImClone had accepted its offer to acquire the biotech firm for $6.5 billion or $70 per share—Lilly’s largest acquisition ever.

With this purchase Lilly gains control of ImClone’s blockbuster, targeted cancer agent Erbitux, which is marketed for second- and third-line colon cancer and refractory head and neck cancer.

ImClone also has five monoclonal antibodies in clinical development—including one in Phase III and two currently moving out of Phase II trials. The acquisition will help Lilly meet the challenge of patent expiration that it will see in the next decade and bolster its 13 oncology drugs currently in development.

One sticking point will be how the deal affects ImClone’s co-marketing pact with Bristol-Myers Squibb in the United States. BMS currently pays a 39 percent distribution fee to ImClone for Erbitux and owns 17 percent of ImClone stock. In an investor call this morning, Lilly said it could not comment on the situation.

Last month, BMS offered $4.5 billion for ImClone. ImClone chairman Carl Icahn shot down the offer stating that it undervalued the company and that a second mystery suitor had made an offer for $70 per share. After more than a week of whispers and second-guessing, Lilly announced that the boards of both companies have approved a definitive merger agreement.

Lilly expects the income stream of Erbitux and the success of one additional drug to cover the cost of ImClone. The company will cover the cost with a combination of cash and debt.

Moody’s Investors Service announced this morning that it was considering the possibility of lowering Lilly’s Aa3 long-term debt rating (the company’s Prime-1 short-term rating would remain unchanged).

“The long-term success of the acquisition will be dependent on receiving expanded approvals for Erbitux as well as favorable execution of other products in ImClone’s pipeline, both of which remain uncertain at this time,” stated Michael Levesque, Moody’s senior vice president.

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One Comment

  1. Posted October 7, 2008 at 8:43 am | Permalink

    Despite being an “old-guard” pharma company, Eli Lilly is showing the capacity to change with the times. While selling off a number of plants to Covance and then sliding under the radar to snap up Imclone from under BMS, the company is positioning itself not only to survive, but to suceed.

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