Changes Proposed in ImClone Agreement
Bristol-Myers Squibb on Tuesday proposed “fundamental” changes in its $2-billion deal with ImClone Systems, moving closer to a showdown with the small biotechnology company.
Bristol-Myers, in a news release, proposed that it assume control of the regulatory approval process for Erbitux, ImClone System’s experimental cancer drug.
The Food and Drug Administration rejected ImClone’s application to market the drug in December, leading to a massive sell-off of ImClone shares.
ImClone is under congressional investigation for allegedly misleading investors about prospects for the drug. Bristol-Myers acquired 19.9% of ImClone in October as part of a $2-billion deal to acquire marketing rights to Erbitux. Bristol-Myers has written off more than half of the $1.2 billion it has invested so far.
An ImClone representative couldn’t be reached for comment.
Bristol-Myers, in its release, said it wanted other modifications in its relationship with ImClone systems. It said it wants changes in ImClone senior management until Erbitux receives FDA approval, expanded rights to ImClone’s intellectual property related to Erbitux and fewer restrictions on Bristol-Myers’ ability to sell its ImClone shares.
Analysts said that Bristol-Myers’ decision to negotiate by news release suggested that it had already presented its demands to ImClone and had been turned down.
“Bristol-Myers is under pressure to look good to its shareholders and look like it is doing something,” said Jim McCamant, an analyst with Moors & Cabot Dakin in Berkeley.
The brothers who founded ImClone, Chief Executive Samuel Waksal and Harlan Waksal, chief operating officer, aren’t likely to step aside for Bristol-Myers, McCamant said.
“I can see them stepping aside on Erbitux, but not from the entire company,” he said. “They are not the type to back off when threatened.”
McCamant said that Bristol-Myers’ announcement, while bad news for ImClone’s management, confirmed the value of the drug, because Bristol-Myers appears willing to fight for broader rights to it.
Under its agreement with ImClone, Bristol-Myers agreed to pay the company an additional $800million in two installments as Erbitux makes its way through the FDA approval process.
Analysts expect the drug, a treatment for colon cancer, will be approved, but that outcome is not assured.
Bristol-Myers stood to receive 40% of profit from Erbitux in the United States and Canada, where it would co-market the drug with ImClone. The company planned to market the drug in Japan with Merck of Germany.
Bristol-Myers had expected the FDA to grant marketing approval of Erbitux by April and anticipated sales to reach $1.5 billion by 2005. Analysts now say that problems with the Erbitux data that ImClone submitted to the FDA could delay the launch of Erbitux until 2004, by which time it is likely to face competition from similar drugs now in development.
