Carl Icahn Blasts ImClone's Board

A customer enters a Macy's department store, Wednesday, Sept. 27, 2006, in Cincinnati, Ohio. Federated Department Stores Inc. has been notified that activist investor Carl Icahn, known for challenging the management of various corporations, wants to acquire up to $500 million in additional shares of the retailer. (AP Photo/Al Behrman) (Al Behrman - AP)

NEW YORK -- Billionaire investor Carl Icahn wants to oust half of ImClone Systems Inc.'s board of directors, whose performance he described as "deplorable."

In a phone interview with The Associated Press, Icahn, who owns almost 14 percent of ImClone, blasted the board for its failure to aggressively develop cancer drug Erbitux, losing a patent challenge over the medicine, and its inability to find a suitable CEO.

"The big problem is the current board over the last three years had done a deplorable job," Icahn said.

Icahn filed a proxy statement on Thursday that seeks shareholders' consent to remove six of ImClone's 12 board members and add one replacement, pediatric surgeon Dr. Peter S. Liebert. Icahn wants to remain on the board along with three other new members.

One member of the board is appointed by Bristol-Myers Squibb Co, which owns a stake in ImClone and is contractually allowed representation. In addition, Icahn said he believes one of the longer term board members has a realistic idea of what ImClone requires so he isn't seek to replace him.

In a statement, ImClone's chairman David Kies said that Icahn was trying to seize control of the company without paying a premium to ImClone shareholders. He urged shareholders not to act until they have received further information from the company regarding Icahn's proposal.

"It would be a significant mistake to dismiss half of the directors elected by shareholders less than ten days ago, as each of them has made valuable contributions during their tenures as representatives of all of our shareholders," Kies' statement said.

But CAM North America LLC, a subsidiary of Legg Mason that holds about 11.14 percent of ImClone, sent Kies a letter on Thursday saying it agrees with Icahn's conclusions and supports his actions. CAM North America said it was concerned about the patent loss and Erbitux's competition.

Chief among Icahn's complaints is ImClone's failure to test Erbitux as a first line therapy for colorectal cancer. The drug is approved as a secondary treatment for the disease, and studies testing Erbitux as a primary therapy are being conducted, though not by ImClone, Icahn said.

Icahn also believes ImClone is not aggressive enough in testing Erbitux as a treatment for other types of cancer. It is also approved for head and neck cancer.

Earlier this year, ImClone announced it was exploring various options for its future including selling itself to another company. It has since decided to remain independent.

Icahn said the move to put itself up for sale was foolish and lead to an exodus of talented professionals.

He said the missteps have made it difficult to attract a suitable CEO. He said the last four CEOs, including current interim chief executive Joseph L. Fischer, haven't had any biotech experience.

"I don't think the board is capable of getting a good CEO any longer," said Icahn. "They've made the same mistake four times now. It seems they pick the favorite son."

Earlier this month, ImClone lost a patent challenge to Erbitux but said it is appealing the decision. Icahn said the loss spurred other talented individuals to leave the company.

Icahn said he hopes the vote on his motion to remove half the board will be finished within the next two months but said he didn't know what he would do if his challenge failed.

Icahn's motion comes a day after Amgen Inc.'s rival drug to Erbitux was approved by federal regulators.

ImClone shares fell 24 cents to close at $28.51 on the Nasdaq Stock Market.