UPDATE 3-Eli Lilly in talks to buy ImClone-sources
(Adds background, analysts' comments in paragraphs 3-6, 12-18)
By Jessica Hall
PHILADELPHIA, Oct 1 (Reuters) - ImClone Systems Inc IMCL.O is in talks to be acquired by Eli Lilly and Co (LLY.N), sources familiar with the situation said on Wednesday, after ImClone had rebuffed a sweetened takeover offer from Bristol-Myers Squibb Co (BMY.N).
Eli Lilly has offered to buy ImClone, which makes the cancer drug Erbitux, for $6.1 billion, or $70 a share, topping Bristol-Myers's offer of $62 per share for the 83 percent of ImClone it does not already own, The Wall Street Journal reported.
A $70 per share offer would mark a 7.1 percent premium over ImClone's closing stock price of $65.35 on Wednesday.
"The strategic fit isn't obvious, other than Lilly has a decent cancer franchise and is trying to get more into biotech," said Les Funtleyder, analyst for Miller Tabak & Co.
Cancer is one of the three main areas of research focus at Eli Lilly, along with diabetes and neuroscience. Eli Lilly's has a robust oncology business, but its largest product, Gemzar, loses patent protection in 2012.
Like other major pharmaceutical companies facing competition from generic drug rivals, Eli Lilly also faces the risk of slower growth due to the pending patent expiry of its schizophrenia drug Zyprexa.
"The fact that Erbitux is a biologic is good for the long term in terms of patent protection and Lilly is poised to lose a number of products to generic competition over the next several years, so I think they're doing what they need to do," said David Moskowitz, an analyst for Caris & Co.
ImClone and Bristol-Myers declined to comment. Eli Lilly could not be immediately reached for comment.
If a takeover of ImClone is successful, it would mark the end of one of the most colorful corporate sagas in biotech history, complete with the jailing of founder Sam Waksal and his friend Martha Stewart, the style guru caught for lying to investigators over her suspicious trading in ImClone stock.
Investors who have stayed along for the ride have seen the company's shares swing as low as $6 and as high as $87. They endured a protracted boardroom battle as billionaire investor Carl Icahn and his associates ousted the company's previous board and revived the company's tattered relationship with Bristol-Myers, which markets Erbitux in the United States.
Icahn, however, had called Bristol-Myers' sweetened offer of $62 per share "absurd." Bristol-Myers originally offered $60 per share.
Icahn had said a "mystery bidder" was in talks to acquire ImClone and would make a formal offer on Wednesday or walk away.
At $70 a share, Eli Lilly would be "paying a pretty hefty price tag," said Moskowitz. "I think Bristol will come back and try to make another go at it, so I'm not even sure if Lilly will get it in the end."
"Remember, Bristol already owns a piece of Imclone and gets a significant amount of the economics, so it's just easier for Bristol to pony up that money," Moskowitz said.
Icahn has some loose ties with Eli Lilly already. Icahn has owned shares of Amylin Pharmaceuticals Inc, which has a partnership with Eli Lilly on the diabetes drug Byetta, Funtleyder said. Amylin could not be immediately reached for comment.
After Icahn floated the notion that a "mystery bidder" was eyeing ImClone, several names of potential suitors were cited by analysts.
Germany's Merck KGaA MRCD.DE has said it would not bid on its own for ImClone, but it may consider taking part in a potential approach for ImClone, Merck's Chief Executive Karl-Ludwig Kley said on Tuesday.
Merck KGaA bought the development and marketing rights to Erbitux outside the United States from ImClone 10 years ago.
"Anyone who wants to take Erbitux further would be well advised to talk to us," Kley said. (Reporting by Toni Clarke, Jessica Hall, Bill Berkrot and Deena Beasley; Editing by Tim Dobbyn and Carol Bishopric)
