ImClone To Reveal Mystery Suitor?

This post was commissioned on September 29, 2008, and it was categorized as M&A.

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According the WSJ, ImClone may reveal the buyer reportedly offering $70/share (~$6.1B) and there is some speculation that the suitor is either Pfizer or Eli Lilly (though they don’t seem to have quite enough cash in the bank).

Investing, ultimately, is about alternatives. Why invest in the stock market if you can get 10% in a savings account? Should a company build a new plant in Singapore or retrofit an already established plant in Germany? The answers to these questions are not always easy but invariably, alternatives are considered.

I ask you, mystery suitor: Is this really the best use of your $6.1B in cash?

While buying ImClone, splitting the revenue of Erbitux with Bristol-Myers Squibb and dropping tens of millions on legal fee’s for control of IMC-11F8 sounds sarcastically attractive, are you sure this is the best use of your capital. Buying ImClone may be a good investment, just not the best alternative investment. There is a subtle but important difference.

How about taking a stake in 20 innovative start-ups or licensing 100 promising compounds or buying 2 other midsize companies you already share revenue with? The possiblities are many. Explore them.

I’m sure that the mystery managment team already knows this. I’m sure all of the 100, ivy league MBAs in upper managment has calculated the NPV of each potential project and managed the risk/reward profile of each senario but riddle me this: four months ago, was ImClone on your radar screen? Did the aquisition make sense before the angry letters and accusations starting flying?

If not, move on.

Theoretically Related Posts

October 3, 2008 -- Swami Predicts ImClone’s Future (1)
September 10, 2008 -- ImClone Throws Down and Announces Additional Suitor (0)
August 4, 2008 -- Icahn Responds to BMS Offer for ImClone (0)
July 31, 2008 -- BMS Offers to Buy The Rest of ImClone (0)
November 14, 2008 -- BBM Offers to Acquire YM BioSciences for $29M (0)
August 20, 2008 -- BMS Ponies Up for Elotuzumab (0)
October 6, 2008 -- The Swami Was Right: Lilly Buys ImClone (0)
July 1, 2008 -- CoLucid Rakes in $25M for Migraine Treatment (0)
May 4, 2008 -- BMS Sheds ConvaTec for $4.1 billion (3)
February 18, 2009 -- Lilly Taps NeuroSearch For Preclinical Discovery Deal (0)

This post was constructed by

Eben Tessari

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Eben is a highly caffeinated business development associate at a small, cash sensitive pharmaceutical company somewhere in Massachusetts. He enjoys cliche-less banter, compartmentalization, non-equilibrium thermodynamics and NPV analysis. Agree or disagree with what he's posted? He encourages comments.

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