Icahn elected to ImClone board, presses for chairman's ousterLast updated: 9/20/2006 7:13:00 PM
BOSTON (MarketWatch) -- Hours after being elected to ImClone Systems Inc.'s board of directors Wednesday, activist investor Carl Icahn issued a scathing public statement demanding that the company's chairman step down.
Despite Icahn's demand, the board re-elected David Kies as chairman.
Earlier, at the company's annual meeting, shareholders of ImClone (IMCL) elected Icahn and two associates -- Neuro3d Chief Executive Charles Woler and Harvard Medical School geneticist Richard Mulligan -- to seats on its board. They join board member Alex Denner, another Icahn supporter.
The elections had been widely expected, as ImClone management had invited Icahn to join the board in August. Icahn, who holds about a 14% stake in the company, reportedly did not attend Wednesday's annual meeting.
Icahn didn't wait long to make waves, issuing a caustic public letter accusing Kies of renewing the contract of Joseph Fischer, ImClone's interim chief executive, without seeking the approval of the new board members. Icahn also blasted Kies for indicating at the annual meeting that he plans to continue as chairman.
"Now that I am becoming a director of ImClone, I am asking you again for the good of ImClone and its stockholders to give up your position," Icahn wrote Kies.
"Given what I consider the sorry record of the company under your watch, it is time for you to step aside and allow someone else to be elected," Icahn added.
In a Wednesday regulatory filing, Kies said the board welcomes "the contribution of our new directors, including Mr. Icahn, in the productive discussion of the many business matters facing the company."
Kies also voiced support for Fischer, and added that decisions are made by a majority vote.
"These 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, undermining employee morale and reducing shareholder value," Kies said in the filing.
Icahn is a longtime critic of Kies and of Fischer, who assumed the position of interim CEO earlier this year. In his letter, Icahn reiterated that he believed Fischer has too little experience in running biotech companies to remain at the helm of ImClone much longer.
Icahn also warned the chairman that if he didn't step down, "you will have thrown down the gauntlet and we will have to react accordingly."
Shares of ImClone closed up 1.2% at $29.50 on Wednesday.
Latest twist in ImClone saga
ImClone was an obscure biotech company until 2001, when then-CEO Sam Waksal and his friend, lifestyle maven Martha Stewart, were accused of illegally trading in ImClone shares amid talk that its lead drug, Erbitux, would be rejected by regulators. Both later served time in jail for the incident, along with Stewart's broker.
Since that time, ImClone has gone through a series of CEOs.
And while it did eventually win regulatory approval for Erbitux for the treatment of colon cancer, the drug has been facing increased competition. Of late, ImClone investors have been particularly fearful of a rival drug being developed by biotech giant Amgen (AMGN) .
A self-proclaimed activist investor, Icahn has historically pushed for corporate reform, include the sale of assets, in companies he is invested in, with the aim of increasing shareholder value.
Icahn also attacked ImClone management for not effectively pursuing additional clinical trials for Erbitux in order to get the drug approved to treat more conditions, thereby expanding its market potential.
Approved in February 2004, Erbitux is ImClone's primary revenue driver. Sales of the drug, which ImClone splits with partner Bristol-Myers Squibb (BMY) , amounted to $413 million in 2005.
Bristol-Myers already holds a substantial stake in the company. Over the years, many investors had hoped Bristol-Myers might buy ImClone outright. However, such hopes have waned in recent months as the drug manufacturer battles to maintain patent protection for its primary revenue driver, the blood-thinning Plavix. Bristol-Myers markets Plavix with European partner Sanofi-Aventis (SNY) .
Meanwhile, ImClone announced in January that it was open to being acquired. But the company took itself off the market in August, stating that the bids it had received were too low.
ImClone's problems have also been compounded by two ongoing patent battles over Erbitux.
On Monday, a U.S. District Court in Manhattan ruled that three scientists from Israel's Yeda Research & Development Co. are the original inventors of the technology described in a key Erbitux patent.
ImClone licenses the technology from Sanofi-Aventis, which has also claimed to be the inventor. Yeda is associated with Israel's Weizmann Institute.
Despite the ruling, ImClone said earlier this week that it does not believe the decision will have an adverse material impact on its operations in the immediate future. ImClone added it intends to appeal the decision.
ImClone's also being sued for patent infringement by Repligen Corp. (RGEN) and the Massachusetts Institute of Technology over technology used to make Erbitux.
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