ImClone to Go It Alone

The biotech's shares sink more than 13% after the company drops its bid to find a buyer.
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Updated from 12:03 p.m. EDT

ImClone Systems

(IMCL)

has taken itself off the block, saying it will remain an independent company after failing to find a buyer who would pay what its board felt was fair.

The biotech concern's announcement sent its shares reeling Thursday. The stock ended down $4.32, or 13.4%, at $28.05, its lowest close of the last year. Volume was five times heavier than normal.

At the same time, ImClone's directors have invited Carl Icahn, the activist investor who holds roughly 10% of the company's common stock, to stand for election to its board.

Though now its known for its successes with the cancer drug Erbitux, ImClone's name will always be linked to the insider trading scandal that ultimately led to jail time for former CEO Sam Waksal and his friend, the home and lifestyle expert Martha Stewart.

Since January, ImClone's board had been meeting with financial advisers to consider its options. Now, it's decided that "the alternatives available, including bids received for the acquisition of the company, did not match the value potential of ImClone Systems as an independent company," Joseph Fischer, the interim CEO, said in a prepared statement.

Fischer, a former ImClone board member who became interim CEO after the resignation of Daniel Lynch early this year, will remain at the helm until it finds a permanent chief.

Since there were no takers for the company, Friedman Billings Ramsey analyst Jim Reddoch downgraded the stock to underperform from market-perform. He said the company now faces "going it alone in an increasingly challenging landscape."

This past February, ImClone's Erbitux marketing partner

Bristol-Myers Squibb

(BMY) - Get Report

dispelled rumors that it might acquire the company. Bristol-Myers, which owns around a 17% stake in ImClone, said at the time it had no plans to merge, reorganize or liquidate any of its assets, but added that it would support a merger, sale or partnership between ImClone and another company.

Citigroup analyst Yaron Werber said that considering the uncertainty surrounding patent disputes and expected competition to Erbitux from

Amgen's

(AMGN) - Get Report

Vectibix, potential bidders were wary.

At any rate, ImClone says it can stand on its own thanks to its improving revenue and earnings, higher sales of Erbitux, optimistic expectations for upcoming clinical trials and its drugs currently in development.

"This decision was made in light of significant improvements in the top- and bottom-line performance of the company over the review period and from the company's numerous opportunities for growth," Fischer said.

But with Vectibix expected to enter the market in a few months, ImClone could feel pressure to ramp up its pipeline investments, Reddoch said. Accordingly, the analyst dropped his 2010 earnings guidance to $1.34 a share from $1.85, saying he would only buy the shares around $20. Reddoch dropped his price target on ImClone's shares to $25 from $34. Reddoch's firm makes a market in ImClone's stock.

Werber, who says he never expected ImClone to find a buyer, reiterated his sell and $26 target price on the stock. Citigroup or its affiliates owns 1% or more of ImClone's shares.