October 6, 2008 / 10:34 PM / in 9 years

Bristol says ImClone defeat may have silver lining

NEW YORK (Reuters) - Bristol-Myers Squibb Co on Monday said it exercised financial discipline by abandoning its efforts to buy cancer-drug partner Imclone Systems Inc, but is now financially better poised to pursue other deals.

Bristol-Myers, which holds almost 17 percent of ImClone stock, said it would no longer attempt to buy remaining shares of the New York biotechnology company given Eli Lilly and Co’s higher $70-a-share offer.

Bristol-Myers, which co-markets ImClone’s lucrative Erbitux treatment for colon cancer and head and neck cancer, said it was in the best interest of shareholders not to raise its previous $62 per share all-cash offer.

Bristol-Myers said it expects to realize about $1 billion from selling its ImClone stake to Lilly, which will give it more wherewithal to buy other biotech companies or drugs, and to forge licensing and partnership deals with other drugmakers.

Bristol-Myers and Lilly both need new products to replace their current top-selling medicines which will soon lose patent protection. Bristol’s blood clot preventer Plavix and Lilly’s Zyprexa schizophrenia treatment both face generic competition by late 2011 in the important U.S. market.

“The additional capital will put us in an excellent position to execute various acquisition scenarios,” said Bristol-Myers spokesman Brian Henry. “We feel like we’ll make the right moves at the right time.”

Scott Richter, a portfolio manager with Fifth Third Asset Management, said Bristol-Myers needs to do deals big enough to “move the needle” as the patent countdown continues for its $5.5 billion-a-year Plavix. It sells the medicine in partnership with French drugmaker Sanofi-Aventis SA.

“Bristol needs to double its efforts to find something else in the biotech space that might make sense,” Richter said, pointing to rival drugmaker Wyeth as a good potential choice in a so-called merger of equals.

He said Wyeth, which is reeling from the recent patent expiration on its Protonix ulcer drug, could benefit from such a merger. Moreover, he said Wyeth has the kind of biotech expertise that Bristol-Myers has been striving to develop in order to better compete with companies selling the lucrative high-tech products.

Reporting by Ransdell Pierson

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