ImClone Under Siege

How often do you see a pharmaceutical company's drug receive marketing approval and then watch a rival's shares end up in positive territory for the day as well? Not very often, but shares of ImClone Systems (Nasdaq: IMCL  ) did just that yesterday. This happened despite news of FDA regulatory approval for Amgen's (Nasdaq: AMGN  ) colon cancer drug, Vectibix, which will compete directly with ImClone's only marketed drug, Erbitux.

ImClone's share increase was prompted by a regulatory filing by shareholder and board member Carl Icahn, which proposed removing six of the twelve company board members elected to the board last week, thus giving Icahn control of the board.

As you'll recall, Icahn owns 14% of ImClone shares and has been involved with the company ever since its failed attempt to sell itself earlier in the year. Last week, Icahn and three of his allies were elected to the board and immediately called for the resignation of the board chairman and the interim CEO.

Icahn's proposal to remove the board members does have some chance of success. A shareholder holding 11% of ImClone shares supported Icahn's proposal yesterday.

Whatever Icahn does to turn ImClone around, he'll have to do it fast. Amgen's Vectibix will go on sale next month and will be priced at a 20% discount to Erbitux. With Vectibix's similar mechanism and perceived improved safety profile, ImClone could be in for some major declines in revenues if doctors and patients switch over to Vectibix immediately.

Further compounding the bad news for ImClone was a report that the company's chief financial officer had resigned. Whenever an officer resigns unexpectedly for "personal reasons," it usually does not reflect well on some aspect of the company. I'm not saying this officer's resignation signals any malfeasance, but with ImClone there has historically been more to the story than what gets issued in the press release.

ImClone's chairman of the board, David Keis, said yesterday, "We are disappointed that Carl Icahn, a minority shareholder and director, is trying to seize control of the Company." Looking at how ImClone's shares responded to the news of his possible departure, it appears many shareholders might disagree with him.

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Fool contributor Brian Lawler does not own shares of any company mentioned in this article. The Fool has a disclosure policy.