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EDITORIAL: Lilly looks forward with ImClone deal: CEO Lechleiter taking bold steps

October 13, 2008

Lilly looks forward with ImClone deal CEO Lechleiter taking bold steps

It's premature to pass judgment on Eli Lilly and Co.'s $6.5 billion plan to acquire biotech firm ImClone Systems Inc., but the giant deal is one more sign that relatively new CEO John Lechleiter isn't afraid to make bold moves on Lilly's behalf.

The local drugmaker agreed Oct. 6 to pay $70 a share for New York-based ImClone, maker of blockbuster cancer drug Erbitux, outbidding an earlier offer of $62 a share by New York-based pharmaceutical giant Bristol-Myers Squibb Co. The deal would be the biggest acquisition in Lilly's 132-year history.

Lechleiter said the purchase would create a "true oncology powerhouse" by combining Lilly's cancer drugs and resources with ImClone's. Lilly's decision to jump full force into the segment seems like an obvious move. Cancer drugs are thought to get more lenient treatment from regulators, and, once approved, they don't typically require a big marketing push to generate sales.

But Wall Street observers are giving the ImClone deal mixed reviews. One analyst called the deal "an act of desperation." Others questioned how Lilly would finance such a big acquisition and whether ImClone would bring enough benefit to justify the price.

Lilly, however, is banking on ImClone's pipeline of promising drugs and its substantial biotech manufacturing capabilities. The local drugmaker needs to find new drugs to replace several of its own that will face competition from cheaper, generic copies beginning in 2011. ImClone has five experimental cancer drugs in some stage of development. One just entered Phase Three trials. Two others could enter Phase Three testing next year.

Lechleiter is proving to be much more than a caretaker for the venerable corporate giant. In just six months at the helm, he's unleashed a number of moves that show he's serious about transforming Lilly into a nimbler, more aggressive biomedical company with a deeper and more diverse range of products.

In addition to the ImClone deal, he's made major risk-sharing drug-development agreements with companies in India, forged a pioneering $1.6 billion labservices pact with Covance Inc., and announced that Lilly would become the first major pharmaceutical company to launch an online registry of its payments to physicians.

It's far too soon to tell if any of these moves will pay off, but there's no doubt Indianapolis and the local business community have a lot riding on their success.

Because of its sheer size and far-reaching impact on everything from small businesses to civic and charitable causes, what's good for Lilly is usually good for central Indiana.

That's reason enough to hope Lechleiter's judgment is equal to his courage.



To comment on this editorial, write to ibjedit@ibj.com.
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