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DBL%20Hendrix%20small.png College chemistry, 1983

Derek Lowe The 2002 Model

Dbl%20new%20portrait%20B%26W.png After 10 years of blogging. . .

Derek Lowe, an Arkansan by birth, got his BA from Hendrix College and his PhD in organic chemistry from Duke before spending time in Germany on a Humboldt Fellowship on his post-doc. He's worked for several major pharmaceutical companies since 1989 on drug discovery projects against schizophrenia, Alzheimer's, diabetes, osteoporosis and other diseases. To contact Derek email him directly: derekb.lowe@gmail.com Twitter: Dereklowe

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In the Pipeline: Don't miss Derek Lowe's excellent commentary on drug discovery and the pharma industry in general at In the Pipeline

In the Pipeline

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October 2, 2008

Eli Lilly and Imclone: Sensible? Real?

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Posted by Derek

Word leaked out yesterday that Imclone’s secret bidder is Eli Lilly. Well, let’s revise that – so far, Lilly hasn’t made a bid for the company. And that’s the first thought I had about this business: isn’t it taking quite a while? You’ll recall that Carl Icahn told Bristol-Myers Squibb a couple of weeks ago that he’d been in talks with someone else. Then we were going to hear about it over the weekend. Then the name would be revealed Wednesday at midnight (of all times). Now here we are on Thursday with no official announcement.

And the delay probably doesn’t have anything to do with the situation in the credit markets, because Icahn has been sure to emphasize that the deal he’s looking at is not subject to financing. That means all this extra time is probably due to good old caution – and I don’t blame Lilly for mulling things over. There are plenty of reasons to wonder if Imclone is worth the money for an outside company, given its status with BMS. This clearly isn’t the instant-winner operators-are-standing-by deal that Imclone would like to have us believe it is.

Does a Lilly deal make sense? It might, if they could be sure that they were going to get the Erbitux follow-up. But I’m willing to bet that this is exactly the issue that things are stuck on, since BMS believes (with reason) that they have a share of it, and won’t give it up easily.

And I’d be willing to see this go through, even at a ruinous price, if it would get Carl Icahn out of the drug industry. But no such luck, I’m afraid. He’s probably still eyeing Biogen, and who knows who else. I spent some time yesterday going on about how we shouldn’t blame evil MBA types for the problems in our business, but Icahn is the sort of guy I’m nearly willing to make an exception for. A pure dealmaker, I don’t see him as someone who understands scientific research or who has the patience for it. If we’re going to point the finger at managers whose only goals seem to be to make the quarterly numbers and pump up the stock price, he’s as good an example as I can think of. A dose of this stuff is exactly what we don’t need at the moment.

One more consideration: who leaked Lilly’s name, anyway? The Wall Street Journal seems to have been the first with the story, quoting "people familiar with the matter". Well, cui bono? Who has an interest in moving it along and showing that it’s a real possibility, in getting possible bidders to feel some pressure? Who indeed?

Comments (6) + TrackBacks (0) | Category: Business and Markets


COMMENTS

1. Merger on October 2, 2008 7:52 AM writes...

My understanding of these processes is that they do take significant time. My guess is that Lilly has hired one of the big consulting firms (McKinsey or BCG) to perform "due diligence" on ImClone. For a smaller company this typically takes 2 weeks of intense work. However for a deal of this magnitude I would not be surprised if it took longer, especially with the BMS caveat.

I would find it hard to believe that Icahn is making everything up. My guess is that the due diligence is complete and it showed that Lilly SHOULD buy ImClone. If that is the case another analysis is probably being conducted as to what that price should be and if its higher than the original 70 a share price then are there other companies of equal worth that are better options.

PS if you are a pharma person thinking of switching careers and enjoy business and people look into consulting. These companies are actively seeking advanced degree candidates (PhD) to join and help their health care branches. Thats what I am doing.

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2. Indy on October 2, 2008 8:08 AM writes...

It's confirmed: Eli Lilly is the bidder.

See

http://www.biospace.com/news_story.aspx?NewsEntityId=111647&Source=TopBreaking

Permalink to Comment

3. Hap on October 2, 2008 10:02 AM writes...

Does Imclone have a good enough research infrastructure that Lilly would be willing to engage in a bidding war for it with BMS? If not, this deal would likely only benefit the people with stock options and the lawyers who will argue over who owns Erbitux2.

Permalink to Comment

4. satan on October 2, 2008 3:50 PM writes...

I wanted to say something sarcastic, but then I realized that the current M&As display a lack of foresight that is truly frightening.

Permalink to Comment

5. Indy on October 3, 2008 8:05 AM writes...

I wonder how solid this move is for both Lilly and ImClone since BMS is claiming ownership on the next generation of Erbitux: IMC-11F8.

See

http://seekingalpha.com/article/95269-ownership-of-erbitux-follow-on-is-central-to-imclone-takeover

Any thoughts?

Permalink to Comment

6. toothbrush sanitizer reviews on April 11, 2012 7:31 AM writes...

Jean-Philippe

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