Drugmaker Eli Lilly & Co. reportedly is the secret suitor that's been courting ImClone Systems Inc. and is offering approximately $6.1 billion for the biotech company.
Indianapolis-based Lilly is in advanced talks about the deal, the Wall Street Journal reported Wednesday, citing people familiar with the matter. The newspaper said Lilly is the unnamed large pharmaceutical company that ImClone's chairman, Carl Icahn, has said offered three weeks ago to acquire the company for about $70 a share, pending a review of its books.
ImClone shares shot higher on the news, rising $2.95, or 4.7 percent, to $65.35, and an additional 20 cents in after-hours trading.
The deadline for the review of ImClone's books to be completed was just before midnight Wednesday, at which point ImClone said it would reveal the suitor's identity and whether there was a firm deal or the potential buyer had backed out.
Lilly spokesman Mark Taylor would neither confirm nor deny that his company is the buyer, saying it doesn't comment on "market rumors and speculation, especially if they relate to potential deals."
"This is market speculation," he said. "We're not going to comment."
The tug-of-war over ImClone started three weeks ago, when the company rejected an offer from Bristol-Myers Squibb Co., its partner in developing and marketing the blockbuster cancer drug Erbitux, and said it had a secret suitor offering $70 per share.
Bristol-Myers on July 31 had offered $60 per share for the 83 percent of ImClone it doesn't already own. The intially friendly marriage proposal turned hostile last week when it raised its offer to $62 and said it would take the offer straight to shareholders and seek to replace ImClone's board.
Icahn, a billionaire corporate raider, rejected the $62 offer from Bristol-Myers CEO James Cornelius as "absurd" and suggested Cornelius could find better ways to enrich his lawyers or draw publicity.
Bristol-Myers said it would try to buy up the 83 percent of ImClone shares it doesn't already own and threatened to seek shareholder permission to replace all five members of ImClone's board.
Last week, Lilly CEO John Lechleiter said during a speech that his company wants to expand the company's biotech portfolio so Lilly can tailor medicines to better treat disease variations or patient groups, adding that Lilly has a strong balance sheet and people should expect Lilly to "put our financial strength to work."
"We're constantly on the look-out to in-license promising molecules or even to make acquisitions that help Lilly move into new or complementary therapeutic areas," he said.
Erik Gordon, associate dean and head of biomedical industry programs at Stevens Institute of Technology, said it would make sense for Lilly to go after ImClone because oncology is the single biggest emphasis in Lilly's current research and ImClone has a number of cancer compounds in early stages of testing. Lilly, on the other hand, has about 30 cancer compounds in mid- or late-stage human testing and only seven in early human or laboratory testing, he said.
"I think if this happens it's about filling up the other end of the pipeline" for Lilly, Gordon said.
Like most large pharmaceutical companies, Lilly is facing a likely drop in revenue due to increased generic competition in the few years.
Its top-selling drug, the anti-psychotic Zyprexa, contributed more than a quarter of the company's $18.6 billion in sales last year, but loses patent protection in 2011.
In 2003, the company will lose protection for the anti-depressant Cymbalta, its No. 2 seller, plus cancer drug Gemzar and Lilly's best-selling insulin, Humalog.
Acquiring ImClone could boost Lilly in a couple ways, said George Farra, a principal with Indianapolis-based Woodley Farra Independent Investment Research and Management, which owns a "substantial number" of Lilly shares.
Erbitux would add to Lilly's existing cancer drugs, Alimta and Gemzar, and show its commitment to becoming a stronger biotech company, Farra noted.
But he said a company can always pay too much in an acquistion, and that having Icahn, a notoriously active shareholder, involved adds a complication.
"I don't know if I want him as the shareholder of my company, but he is getting value," Farra said.
Miller Tabak & Co. analyst Les Funtleyder said he had some reservations about a Lilly-ImClone deal, including whether $70 a share is the right price.
"It doesn't scream like a great deal," Funtleyder said.