Icahn expected to squeeze more blood from Bristol

BOSTON (Reuters) -- Drugmaker Bristol-Myers Squibb Co (BMY.N) and biotechnology company ImClone Systems Inc IMCL.O could be gearing up for a game of "chicken."

Bristol-Myers has threatened to sell its 17 percent stake in ImClone should that company not accept Bristol's $60 a share offer to buy the ImClone shares it does not already own.

"To me it's a bit of a weak threat," said Eric Schmidt, an analyst at Cowen & Co. "But it's probably the only leverage they have."

Bristol made its offer to ImClone on Thursday in the form of a telephone call by Bristol's chief executive to Carl Icahn, who took control of ImClone after a bitter boardroom battle and is now its chairman.

Bristol said that if it could not acquire the shares it wants, it might sell a portion or all of its own stake, a statement one hedge fund manager described as "a bit of posturing."

So far, ImClone, which makes the cancer drug Erbitux, has not given an official response to the Bristol offer, but few investors expect billionaire investor Icahn to accept the bid as is.

"I'm sure Icahn will drive a hard bargain because ImClone has a lot of assets, including a strong pipeline and a state-of-the-art manufacturing facility," said Han Li, an analyst at Stanford Group.

Investors pushed ImClone's shares up as high as $65 following the news, betting Icahn will call Bristol's bluff.

"If I were ImClone's management, I'd say: 'Go ahead, do what you have to do,'" said Michael King, an analyst at Rodman & Renshaw.

How much more Icahn could extract from Bristol, which has commercial rights for Erbitux in the United States, would likely depend on how competitive the process became.

"I think it's plausible other buyers will come in, though I don't think they are beating down the doors," said Brian Rye, an analyst at Janney Montgomery Scott.

But Cowen's Schmidt said he would be surprised if other companies weren't at least considering rival bids, particularly Merck KGaA (MRCG.DE) of Germany, which markets Erbitux in Europe.

"I would be shocked if Merck KGaA is not running the numbers today," he said, "and I would not be too surprised if Pfizer (Inc (PFE.N)) or someone else who wants a greater presence in biologics didn't come in."

Merck said Bristol's offer "shows the confidence other companies have in Erbitux," but declined to say whether it was interested in making a bid itself.

Bristol says its bid represents a "full and fair" offer; but a person familiar with the situation said that though the company would be "disciplined" in any discussions over price, it might be open to negotiation.

While rival bidders could be put off by Bristol's U.S. control over Erbitux, which is currently approved for colorectal cancer and head and neck cancers, ImClone also has what many consider an attractive pipeline of experimental cancer drugs and a biologic manufacturing facility.

Bristol's offer, which values the company at $5.2 billion and represents a 30 percent premium to ImClone's closing share price on Wednesday, leaves room for improvement when considered in the context of other recent biotechnology company deals.

Japanese drugmaker Takeda Pharmaceutical Co Ltd (4502.T) agreed to buy Millennium Pharmaceuticals for a 53 percent premium; Celgene Corp (CELG.O) acquired Pharmion for a 46 percent premium; and Anglo-Swedish drugmaker AstraZeneca Plc (AZN.L) offered a 53 percent premium to acquire biotechnology MedImmune Inc, a deal also engineered by Icahn.

On the lower end of the spectrum was Eisai Co Ltd's (4523.T) acquisition of MGI Pharma Inc for a premium of 23 percent.

Bristol's shares fell 1.1 percent to $21.28 in afternoon trading on the New York Stock Exchange. ImClone's shares were up 37.4 percent to $63.80 on Nasdaq after rising as high as $65 earlier in the day.

(Additional reporting by Lewis Krauskopf and Dane Hamilton in New York and Eva Kuehnen in Frankfurt, editing by Gerald E. McCormick)