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ImClone chairman hits back at Icahn as tempers rise
2006-09-21
ImClone Systems Inc.'s (Nasdaq:IMCL) chairman lashed out on Thursday at the company's newest board member, billionaire investor Carl Icahn, in what looks set to become a bitter feud at a time the company can least afford it. The New York-based biotechnology company's chairman, David Kies, criticized Icahn in a regulatory filing for calling in public for Kies's resignation, saying such debates should take place behind closed doors. On Wednesday ImClone's shareholders elected Icahn and three of his associates to the 12-member board, hoping that the activist investor, who was invited in by ImClone's management, could help stabilize a company facing potentially deadly competition to its only marketed product, the cancer drug Erbitux. Instead, the instability looks set to get worse. Hours after the shareholder meeting, ImClone's directors blocked Icahn's long-standing demand that Kies be removed as chairman. The board's decision will likely inflame Icahn and increase his determination to achieve his goal, said Mark Stevens, author of the book "King Icahn," and chief executive of the marketing company MSCO Inc. "Carl is a Chinese water torturer," Stevens said. "You don't say 'no' to Carl and he just walks away. He wears you down with the world's most potent combination of intellect, arrogance, staying power, determination and strategic know-how." Still, in the short term Icahn's hands may be tied, said Marc Weingarten, a lawyer for Schulte Roth & Zabel who deals with the investor regularly. Weingarten said Icahn's choices are limited since the company just held its annual meeting. Icahn was not immediately available for comment. NO SHORTAGE OF DRAMA The boardroom conflict is the latest in a series of management dramas to hit ImClone, whose founder, Samuel Waksal, was sentenced in 2003 for securities fraud in a scandal that later drew in lifestyle guru Martha Stewart. ImClone's shares have fallen about 65 percent since mid-2004. The American Stock Exchange Biotechnology Index (^BTK) has risen roughly 26 percent over the same period. On Thursday, ImClone's shares rose 41 cents, or 1.4 percent, to $29.91 in afternoon trade on Nasdaq. The boardroom tension could also hamper the company's attempt to find a high-quality, permanent chief executive, analysts said. Joseph Fischer, the company's current interim CEO, was appointed in January. "I'm perplexed as to why this issue wasn't resolved before the shareholder meeting took place," said Brian Rye, an analyst at Janney Montgomery Scott LLC. "The new board has not gotten off on the best possible foot and I'm not sure a top-quality CEO would want to walk into this situation." Icahn, who owns nearly 14 percent of ImClone's shares, valued at about $390.5 million, released a letter to Kies on Wednesday, during the shareholder meeting, calling on Kies "to peacefully pass the baton to a successor who will be able to bring strong leadership back to ImClone." Instead, the board reelected Kies, who released a statement on Thursday criticizing Icahn's public lambasting. Kies said that company decisions "are best made by the full, elected board, ideally in a face-to-face meeting, and not through a needlessly antagonistic and deliberately public debate that could risk harming the reputation of the company, undermine employee morale and reduce shareholder value." MANAGEMENT DISTRACTION? The antics could distract ImClone at a critical time. The company is expected to shortly face serious competition to Erbitux from a rival drug -- panitumumab -- made by Amgen Inc. (Nasdaq:AMGN). Competition from panitumumab, combined with the loss of rights to a key patent surrounding Erbitux, are likely to hurt Erbitux sales and slow the company's growth, analysts say. "The conflict the company has is that it is difficult for them to increase expenditure on their research and development given the potential deceleration of sales of Erbitux," said Patrick Flanigan, an analyst at WR Hambrecht & Co. "That's the challenge of this management team." As the management battle takes its course and investors watch to see the extent of any damage wrought by Amgen's drug, investors may be better off staying away, said Rye. "The best thing to do is pop some popcorn and watch the show," he said. (Additional reporting by Jim Finkle in Boston, Dane Hamilton in New York and Debra Sherman in Chicago)
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