Despite its considerable efforts in recent months to find a merger partner, ImClone Systems ( IMCL) looks like it's destined to be left alone. This past January, ImClone said it was hiring an investment bank to explore a sale of the company or a merger. Management had set a late June deadline for a deal to be completed, but recently pushed back the cutoff date to mid-July, according to a CNBC report. ImClone didn't respond to a message left Tuesday, but two companies are still thought to be in negotiations with the New York-based biotech concern. However, I have a hard time fathoming why any company would sink more than $3 billion -- ImClone's current market cap -- into a one-trick pony that's facing potentially significant competition and a lawsuit that threatens to shave earnings considerably.
Sharing the Wealth
On Wednesday, a judge will hear final arguments in a lawsuit involving ImClone and Yeda Research & Development Co., the commercial arm of Israel's Weizmann Institute. Three Yeda scientists claim that they belong on the patent for Erbitux, a treatment initially approved for colorectal cancer and more recently cleared for head and neck cancer. If they prevail, ImClone may be ordered to pay royalties on the drug. Merrill Lynch analyst Eric Ende estimates that for every 1% of royalties that ImClone is ordered to pay, the impact to earnings would be 10 cents to 12 cents a share. Three outcomes are possible. If ImClone wins, it'll owe nothing. Should ImClone get a partial win resulting in divided patent ownership, some royalties would be owed to Yeda. The worst case for ImClone would be for Yeda to win sole ownership of the patent, in which case a higher royalty would have to be paid.