Bristol-Myers Offers $4.5 Billion For Cancer Drug Maker ImClone

Bristol-Myers Squibb offered to buy its biotech partner ImClone Systems for $4.5 billion in cash yesterday, seeking to return to its days as a top cancer drug producer and to transform itself into a next-generation biopharmaceutical company.

Bristol, which already owns about 17 percent of ImClone and has teamed with the New York biotech to develop a cancer drug, delivered its proposal to ImClone Chairman Carl C. Icahn. Bristol, which is also based in New York, proposed purchasing the remaining ImClone stock at $60 a share, a 30 percent premium over Wednesday's closing stock price.

"We believe this is a fair, full and compelling offer," said James M. Cornelius, Bristol's chairman and chief executive, in an investor conference call yesterday.

ImClone issued a one-sentence statement saying it had received the offer. ImClone and Icahn, who owns 14 percent of ImClone, did not respond to messages seeking comment. The offer price of $60 a share could almost double Icahn's investment, according to Bernstein Research analyst Tim Anderson.

In the fall of 2006, Icahn won control of ImClone in a proxy battle that led to the resignation of chief executive Joseph L. Fischer and the departure of a handful of board members. The billionaire activist investor forced the company to appoint him chairman and set about shoring it up and improving what he called poor management. Shares of ImClone, whose 2001 insider trading scandal sent founder Samuel Waksal and his friend Martha Stewart to prison, rose about 38 percent to close at $63.93. Bristol stock dipped nearly 2 percent, closing at $21.12.

Bristol is about to close the sale of its wound-care products division, ConvaTec, for $4.1 billion -- nearly the price of the ImClone stock.

As the company enhances its oncology portfolio, acquiring all of ImClone was the logical, predictable next step, analysts said.

In a note to clients yesterday, analyst Barbara Ryan of Deutsche Bank predicted Bristol will have to pay more to satisfy Icahn, but not past $65 a share. And Anderson said in his research note that buying ImClone makes Bristol "a more sellable company itself."

Bristol's proposal is the latest in a wave of consolidation in the drug industry through high-price deals. Just this month, Swiss drug maker Roche made a $43.7 billion bid to purchase the outstanding stock that it does not already own in Genentech, based in South San Francisco, Calif.

And last year, U.S. merger and acquisition deals -- driven by British drug giant AstraZeneca's $15.6 billion acquisition of Gaithersburg's MedImmune -- rose 87 percent to reach an all-time high of more than $33 billion, according to Ernst & Young's annual global biotechnology report released in June.

"When you start to see a pickup in deal activity, it becomes a competitive response," said Les Funtleyder, a health-care analyst with Miller Tabak. "You see competitors being more aggressive. They don't want to be left behind."

Big drug firms are poised to strike new deals with biotechs as the patents for best-selling drugs expire. Generic competition will grab an estimated $67 billion from big companies' annual sales, as more than three dozen drugs lose patent protection between 2007 and 2012, according to the Ernst & Young report.

Bristol will soon lose patent protection on its blockbuster blood thinner Plavix, as well as Avapro, a hypertension treatment, and Abilify, a treatment for schizophrenia, bipolar disorder and major depressive disorders.

Jean-Marc Huet, Bristol's chief financial officer, acknowledged in the conference call that a merger with ImClone would secure the company's growth beyond 2013.

"This deal is not about the short term," he said.

Cornelius called the proposal an "evolutionary transaction," as Bristol chucks non-core assets and acquires biotech drugs to become a biopharmaceutical company.

Bristol was once best known for its cancer medication Taxol. But in 2001, the drug faced steep competition from cheaper generic versions. So Bristol partnered with ImClone to market Erbitux, a colon-cancer drug, that year.

Erbitux costs about $10,000 a month per patient, generating more than $1.3 billion in global sales last year. It now also treats head and neck tumors, and Bristol and ImClone have been testing it against other cancers to expand its use. Since the partnership, Bristol has used Erbitux to launch into a new line of cancer products.