So, it turns out that Imclone doesn't actually own a key patent covering uses of its only money-maker, Erbitux. This case has been dragging on for years in one form or another, a bizarre story well chronicled here at Fortune. This is another case of prior art invalidating a patent:
The trial is the culmination of a strange 20-year saga. It pits three distinguished scientists from Israel's Weizmann Institute against ex-colleague Joseph Schlessinger. . .The scientists accuse Schlessinger of absconding with their idea of combining a monoclonal antibody with chemotherapy, taking it to a corporate predecessor of Sanofi-Aventis, and secretly applying for a patent on it. While the application was pending, Aventis licensed the rights exclusively to ImClone. (Schlessinger denied impropriety and claimed credit for the antibody and the combination.)
ImClone had reason to question who the inventor was as early as 1994, when the U.S. Patent Office rejected its application on the grounds that the Weizmann scientists had published an article describing the combination idea before Aventis filed for the patent. ImClone told the patent office it would provide support for its claim, then dropped the application. The company later refiled, and the patent office relented.
Imclone was never able to back up that claim in the end, so out goes their patent. (The Israeli scientists, as Yeda Research and Development, still have a valid patent of their own which they just licensed to Amgen). This is the sort of thing that I don't think should be patented to start with - I have a big problem with broad method-of-treatment claims - but the prior publication makes that a moot point in this case as far as Imclone's concerned. Analysts are estimating that this loss could cut Imclone's earnings by 10 to 20 per cent, which they certainly don't need.
Carl Icahn, the company's largest individual shareholder (behind Bristol-Meyers Squibb), has seen enough. He was elected to the board of directors today, and lost no time sending an open letter calling for the CEO's head. Icahn's no fool as an investor, but I have to question his judgment in hanging on to his Imclone position with such tenacity. Not that Big Carl cares, but I've been telling people to sell the stuff for a long time now, because I don't like their prospects.
I didn't count on this patent loss, though - I just had them downrated in general. And it seems this opinion is shared by others in the industry. Back earlier this year Imclone announced with great blasts of trumpets that it would entertain offers to be bought. Reaction to this opportunity didn't meet their expectations, though, because in August they took themselves off the block, saying that the offers they'd received had been inadequate. It's especially notable that Bristol-Meyers Squibb didn't see fit to buy them out, especially considering that many of Imclone's stockholding fanatics have always seen that as a safety net.
So if BMS, who know Imclone inside out, doesn't want them, why does Carl Icahn? The stock did make it back to $40 per share after I last stuck my tongue out at it around $34. But now it's at $29. . .
Update: as per the comments, here's an excellent and detailed summary of this litigation from PatentBaristas. There are a lot of odd features to the case - check out the part where the Imclone scientist had a suspiciously good memory of a key conversation from twenty years ago. . .